CEO on the hot seat: Richard Clark, Merck
It's not just Vioxx -- patent expirations are a big threat. Clark is cutting costs and focusing research efforts to compensate.
By Jon Birger and David Stires, FORTUNE

NEW YORK (FORTUNE Magazine) - Much of Merck's future will be determined in court: The company has reportedly set aside nearly $700 million to cover just the legal fees associated with the flood of lawsuits blaming Vioxx for heart-related ailments and deaths.

And the basic business has big problems of its own: Merck is facing the loss of patent protection on several key drugs over the next five years, including the $4-billion-a-year cholesterol drug Zocor -- with few potential blockbusters coming along to replace them.

Opportunities

CEO Richard Clark laid out his recovery plan in December. He'll cut $5 billion in costs by 2010 and get more aggressive about strategic acquisitions.

He'll focus R&D efforts on nine priority areas, including Alzheimer's, diabetes, cancer, and vaccines.

Stock outlook

Given the uncertain Vioxx liability and the murky outlook for earnings -- Goldman Sachs doesn't expect any growth until 2009 -- we wouldn't buy the stock today.

But if it fell below $30, we'd be tempted by Merck's (Research) dividend ($1.52-a-share) and the potential for a breakthrough drug launch (Gardasil, a vaccine for cervical cancer now awaiting FDA approval, may be Merck's best hope). Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.