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Another $1B in cost cuts at Merck
CEO says the company must act with sense of urgency; Vioxx-related litigation swells to 9,200 cases.
December 15, 2005: 1:41 PM EST
By Aaron Smith, CNN/Money staff writer

WHITEHOUSE STATION, N.J. (CNNMoney.com) - With Vioxx-related lawsuits increasing, Merck said at an analyst meeting Thursday that it has added up to $1 billion worth of projected cuts to its multibillion dollar plan to slash costs through 2010.

Merck (up $0.38 to $29.58, Research) plans to slash up to $5 billion in costs over the next five years, up from the previously stated $4 billion. The drug giant has also said it would eliminate 7,000 jobs and close or sell five plants. (Full story)

"Merck will remain a research-driven pharmaceutical company, but we need to change our approach to virtually every aspect of the business, and we must act with a sense of urgency," said Chief Executive Officer Richard Clark in a prepared statement just prior to the meeting.

As part of this, Clark said the company was going to lower spending per brand by 15 to 20 percent by 2010.

Sales plan

Merck also outlined a plan for growing sales based on three new drugs it hopes to file with the Food and Drug Administration in 2006. The drugs are Januvia, a treatment for type 2 diabetes; Vorinostat, a treatment for cancer; and MK-517, a intravenous medicine to treat chemotherapy-induced nausea and vomiting.

The company said that its new products will drive sales at a compound annual growth rate of four to six percent from 2005 through 2010. This figure also includes sales from joint ventures.

"For Merck, this will mean a new generation of achievement and accomplishment and will once again make Merck a leader of the industry," Clark said.

In addition, Merck expects to glean more sales out of the three vaccines they filed with the FDA last year, including Gardasil for cervical cancer, Zostazax for shingles and Rotateq for rotavirus in children and babies.

The company's vaccine president Margaret McGlynn said the vaccine market is expected to expand to $18 billion in 2009 from its current size of $8 billion, with Merck as a prime driver.

McGlynn said launching new vaccines is a "top priority across the organization."

Vioxx fight

Merck also said that the number of Vioxx-related lawsuits has swelled to 9,200. This includes 4,050 lawsuits consolidated as part of federal multidistrict litigation, and 3,000 filed in state court in New Jersey, where the company is based in Whitehouse Station.

Regarding the ongoing Vioxx litigation, Ken Frazier, senior vice president and general counsel, said the company would resist all attempts from Judge Carol Higbee to consolidate cases in New Jersey.

"We think it's highly inappropriate to try all these cases on a joint basis," said Frazier. "I can't imagine why people think a jury can sift through three plaintiffs and keep all that information straight."

A federal judge declared a mistrial Monday in the latest Vioxx lawsuit against Merck. The company lost its first case and won its second. (Full story)

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Read the lawsuit filed against Merck by Evelyn Plunkett, the most recent Vioxx case to go to trial.

Will the Vioxx mistrial change Merck's fortunes or will it falter in the face of thousands of lawsuits? Click here for more.  Top of page

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