Despite failing expectations to deliver new medicines, Merck Chief Executive Officer Karl-Ludwig Kley said the company is committed to its pharmaceutical business.
In an interview at the World Economic Forum in Davos, Switzerland, Kley said the pharmaceutical unit is integral to Merck’s strategy. “The pharma business is an integral part of our strategy going forward... We are working hard to get the early stages up to the pipeline, but the payback on these investments will not be in the next two years.”
The new cancer treatments and drugs being developed by Merck are expected to show concrete results in the next 12 to 18 months, while early-stage pipeline medicines under development could pay off in about three years or more. Merck’s last major cancer drug approval is over a decade old (Erbitux, approved in 2003).
The company’s $18.2 billion acquisition of Serono, a Swiss biotechnology company, has also yet to pay off. Merck also acquired biotechnology equipment supplier Millipore in 2010 for an estimated $6 billion. Aside from overhauling its healthcare business management, the company also expanded operations with its acquisition of AZ Electronic Materials SA, a specialty chemicals supplier for the electronics industry.
Sales of drugs like Erbitux, treatment for multiple sclerosis Rebif, and fertility drug Gonal-f have remained stable even in the face of competition from rivals, according to Merck’s CEO.
“We have in place a very sound agenda to defend or even slightly increase our biotech franchise, which is still 60 percent of our business... Putting these aspects together I do see a solid year for the pharmaceutical business going forward.” he said.
Merck stock closed at its highest since 1995 on 1/21/14, establishing a value of $39.2 billion for the company. Merck has given returns of 17% per year in the last five years.