While some big pharma companies are in the midst of buying up biotech firms, Merck decided that it could to the job itself, announcing on Tuesday that it will establish a biologics division called Merck BioVentures.  

The new biotech division will take advantage of the GlycoFi technology that Merck purchased in 2006 for $400 million. Glycoengineering allows scientists to produce proteins using yeast. The company is currently working on a follow-on version of Amgen’s anemia drug Epogen, and expects to have about five additional candidates in Phase III trials by 2012. To make sure everything goes smoothly, Merck plans to put $1.5 billion into the division by 2015. 

“Merck BioVentures is uniquely positioned for success as a result of the humanized GlycoFi yeast platform, which has the potential to provide us with a competitive advantage at a time when the patents on many marketed biologic therapeutics are set to expire,” said Peter Kim, executive vice president and president of Merck Research Laboratories.


This news comes less than a week after the company announced that it would be lowering its 2009 outlook in the midst of a huge restructuring plan and an economic downturn. Last Thursday, Merck CEO Richard Clark told investors that it was downgrading its outlook for 2009 to between $3.15 and $3.30 per share. 

The company expects to see two new candidates for migraine and acute heart failure in 2009, and plans to continue pushing Januvia despite the potential for competition. Meanwhile, Merck’s blockbuster HPV vaccine Gardasil might see a decline in first dose vaccines because it’s running out of people to vaccinate. The company said it might be difficult to penetrate the remaining non-users. Rather, the plan is to seek approval to raise the age limit that women can be vaccinated, and receive approval to vaccinate men. 

“While we expect weakness in Merck’s shares because the ‘miss’ relative to expectations, the operating components of the P&L are largely in line. Hence, we view this weakness as a buying opportunity,” Deutsch Bank analyst Barbara Ryan said in a statement last Friday.

One of the topics not brought up was the possibility of further layoffs. Merck has cut approximately 7,200 positions in preparation for patent expirations. “We are focusing our resources on the highest value activities, while outsourcing more transactional work,” Clark said Tuesday. “We are also bringing in new talent with the new skills and expertise we need to complement the strong talent and experience we already have. And we will continue to invest in developing the strong leaders we need to carry out our plans.”

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News Analysis

At its annual business briefing, Merck surprised analysts with the announcement that it would be launching a new business in the biologics sector in an effort to create generic biotech drugs.

Merck Introduces New Strategy: BioVentures

With only weeks left before the end of the year, industry is working in overdrive to decrease costs anywhere it can. Sadly, the pharma worker is bearing the brunt of cutbacks. Lilly and Sanofi-Aventis have all announced layoffs ranging from 650 to 30 employees since Thanksgiving, and people are speculating how many more jobs will be lost before Christmas. 

One of the areas under fire continues to be sales representatives. On Monday, 

 reported that Lilly would shed nearly half of ImClone’s 70-person sales force. Lilly purchased the biotech for $6.5 billion in October after a bidding war with Bristol-Myers Squibb. ImClone’s key cancer drug Erbitux is currently co-marketed by BMS. 

Meanwhile, Sanofi-Aventis confirmed that it will let go an unspecified number of sales reps as part of its continuing restructuring program. While an actual number has not been given, reports suggest that the company is trimming nearly 10 percent of its 6,500-person salesforce. This announcement comes days after former GSK executive stepped up as CEO of Sanofi-Aventis.  

“As part of this realignment, we've identified areas where we've needed to increase sales support, and others where reductions were necessary,” Sanofi spokesman Marc Greene told Dow Jones last week. “We're currently in the process of ensuring placement for as many people as possible where reductions were necessary.”

It's beginning to look a lot like layoffs. Lilly and Sanofi-Aventis announce sales rep cuts amid an economic downturn and the holiday season.

Pharmaceutical Executive-12-10-2008

Merck Introduces New Strategy: BioVentures

Industry Cuts Deep Between Holidays