Vaccines spared as Merck takes ax to R&D

Merck ($MRK) once again reached for the ax this week, outlining plans to lay off 8,500 staff in a bid to save $2.5 billion a year. The reorganized company will focus R&D dollars on four areas, one of which is the vaccines business.

Merck CEO Kenneth Frazier

Unlike previous Merck restructurings, the latest round of cuts will have a major effect on R&D, with half of the job losses expected to come from drug development teams. Merck is also considering dropping or outlicensing drugs it has already advanced into late-phase trials. Details are still being worked out, but early signs are that Merck will cut in areas it now views as noncore, allowing for increased investment in the vaccines, diabetes, oncology and hospital care divisions. 

"We're not doing indiscriminate cuts in research and development, we're doing surgery around where we should invest," Merck CEO Kenneth Frazier told Reuters, "and by attacking our cost bases, we will free up resources for mergers and acquisitions and business development." Merck's support of its Gardasil successor--a 9-valent human papillomavirus vaccine named V503--is secure, with the drugmaker highlighting the product as an area of focus. A Phase III trial comparing V503 to Gardasil is ongoing.

While building on the success of Gardasil--which generated sales of $1.6 billion last year--is logical, some analysts are concerned Merck is tying its fate to the success of a small pool of clinical candidates. "Overall, today's announcement makes us more cautious about the potential of Merck's pipeline," BMO Capital Markets analyst Alex Arfaei wrote in a note seen by Reuters.

- read Reuters' article
- here's Merck's release
- check out FiercePharma's take

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