Merck provides update on accelerated strategic actions for growth at 32nd Annual J.P. Morgan Healthcare conference

Merck (NYSE: MRK), known as MSD outside the United States and Canada, today will report on the strategic and operating actions it is taking to drive short- and long-term growth, including sharpening its focus in core markets and therapeutic areas, advancing its innovative pipeline and unlocking the value in non-core areas of its business. In October 2013, Merck announced a multi-year initiative to resource opportunities that offer the greatest potential return on investment, improve the company’s performance in the short term and create long-term value.“We’re taking significant and decisive action to make Merck a more competitive company, better positioned to drive innovation and growth,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “We’re pleased with the solid progress we have already made against each of our key areas of focus, and we are quickly moving ahead to build on this momentum to make Merck a leaner, more agile company focused on the best opportunities to create value and advance global health.”

As part of the initiative announced last October, the company expects to realize a net reduction of annual operating expenses of approximately $2.5 billion by the end of 2015 with 40 percent, or $1.0 billion, to be realized by the end of 2014. These savings are off of the company’s full-year 2012 expense levels.

The company continues to make progress on its innovative pipeline and in 2014 expects to complete its regulatory application for MK-3475, the company’s anti-PD-1 immunotherapy, in patients with advanced melanoma who have previously been treated with ipilimumab; as well as applications for odanacatib for osteoporosis; and suvorexant for insomnia. The company may also receive regulatory approvals for multiple promising candidates, including V503, the company’s 9-valent HPV vaccine candidate; vintafolide in the European Union for use in platinum-resistant ovarian cancer; vorapaxar for the reduction of atherothrombotic events when added to standard of care in patients with a history of heart attack and no history of stroke or transient ischemic attack; NOXAFIL IV for fungal infections; vaniprevir in Japan for the treatment of chronic hepatitis C virus (HCV) infection; and the allergy immunotherapies AIT-Grass and AIT-Ragweed.

Core Markets and Commercial Therapeutic Area Focus

The company has taken steps to significantly sharpen its focus on select core markets and commercial therapeutic areas. Progress since the October announcement includes:

• Increasing focus on the key markets of the United States, Japan, France, Germany, Canada, United Kingdom, China, Brazil, Russia and Korea.
• Intensifying its portfolio assessment process and recently announcing the divestiture of a portion of the company’s U.S. ophthalmics business and the sale of the U.S. marketing rights for SAPHRIS.
• Consistent with Merck’s new emphasis on its diabetes, acute hospital care, vaccines and oncology businesses, the company established its integrated oncology business unit and is recruiting external talent with deep scientific and commercial experience in oncology to promote Merck’s existing portfolio of products, as well as the future launch of MK-3475.

Prioritized Pipeline in Focus

Merck continues to prioritize its R&D efforts and focus on candidates that it believes represent breakthrough science that will make a difference for patients and payers, with increased emphasis on externally sourced programs. Progress since the October announcement includes:

• Initiated the rolling submission of a BLA in the U.S. for MK-3475 in patients with advanced melanoma who have previously been treated with ipilimumab. A rolling submission allows completed portions of the application to be submitted and reviewed by the FDA on an ongoing basis. Merck expects to complete its application in the first half of 2014.
• Started additional MK-3475 clinical trials and now has 10 trials in more than 10 cancers, including a collaboration with GlaxoSmithKline to evaluate MK-3475 in combination with pazopanib in advanced renal cell carcinoma.
• Received Breakthrough Therapy designation for MK-5172/MK-8742, the company’s chronic HCV combination regimen, and advanced the combination into Phase IIB in a diverse range of chronic HCV patients.
• Filed vaniprevir (MK-7009), an investigational protease inhibitor for the treatment of chronic HCV infection, in Japan.
• Initiated Phase III trials for its BACE inhibitor for Alzheimer’s disease, MK-8931.
• Received priority review status for NOXAFIL IV.
• Plans to divest Sirna Therapeutics, Inc. to Alnylam.

Unlocking Value in Non-Core Areas

The company is continuing to evaluate all aspects of how it operates as a business and has adopted a streamlined operating model to ensure improved allocation of resources to the most critical business areas. The company’s goal is for each of its priority business areas to be industry leaders. The company assesses on an ongoing basis whether particular assets are core to its strategy, if they provide strategic advantage and whether they would generate greater long-term value as part of the company, or not. Progress since the October announcement includes:

• Exploring strategic options for its Animal Health and Consumer Care businesses to determine the most value-creating option for each and could reach different decisions about the two businesses. The company expects to complete the process and take action, if any, in 2014.
• Over the last four months of 2013, the company announced plans to close or sell manufacturing operations at Swords, Ireland; La Vallée, France; Arecibo and Barceloneta, Puerto Rico; and completed the sale of its active pharmaceutical ingredient (API) operations at Oss, the Netherlands; and announced closure of the Summit, N.J. site.