A Call For Merck to Cut R&D

This is just what people working in R&D at Merck don't want to see. According to FiercePharma, a prominent analyst is urging the company to get its finances in line with its competitors. . .by cutting R&D. Seamus Fernandez at Leerink Swann says that Merck should reduce their expenditures in that area by around a billion dollars, which is at least 8 times deeper than the new R&D head, Roger Perlmutter, has talked about. Here's the whole analysis, which includes this: We believe a major restructuring at MRK is necessary; movement here likely would be well-received. As pressure builds on MRK mgmt to: (1) improve R&D productivity, (2) maintain top-tier operating margins, and (3) continue returning cash to shareholders, we believe a deep restructuring should be seriously considered in light of the relatively lackluster 2013 top-line performance, disappointing Ph III/ registrational pipeline evolution (odanacatib, suvorexant, Bridion U.S.), and overall industry challenges. We estimate that every $1B reduction of operating expenses would add $0.25/share to MRK's bottom line, and would bring MRK's absolute R&D spend closer to PFE's (MP) ~$6.5B but still be in line with several of its diversified competitors' spend at ~14% of sales. A 10% cut in overall operating expenses would equate to ~$2B of annual cost reductions. If you read the rest, you'll see that the reasons Fernandez has for optimism are all on the financial side of the company: how much cash the company has on hand, its...
Source: In the Pipeline - Category: Chemists Tags: Business and Markets Source Type: blogs