Merck's Plan to Win Has Company Poised to Reclaim Position as Industry Leader, Chairman and CEO Tells Stockholders
"The results of 2006 show that we are on the right course and that we have not just a plan to win, but also the skill and the will to win back our position as a leader in this important industry," said Mr. Clark today at Merck's Annual Meeting of Stockholders. "The five new medicines we launched in 2006 also made important contributions both to Merck's bottom line and to public health. We expect them to drive results for 2007 and beyond."
Mr. Clark reviewed for stockholders the Company's current performance and promising drug candidates, and updated progress on Merck's Plan to Win.
Sustaining Momentum Through 2007
Merck's 2006 financial results showed solid revenue growth, with earnings per share (EPS) of $2.52, excluding restructuring charges and other one-time items. Additionally, the Company's full-year reported EPS, which includes restructuring charges and one-time items, were $2.03.
These results were driven by strong performances across a range of products, particularly SINGULAIR, which remains the number-one prescribed product in the U.S. respiratory market, and VYTORIN and ZETIA, Merck's joint-venture products with Schering-Plough.
The momentum built in 2006 carried into 2007 with strong financial results for the first quarter of 2007. As announced last week, Merck's EPS were $0.84, excluding restructuring charges related to site closures and position eliminations, and reported EPS were $0.78. Novel vaccines and medicines -- including GARDASIL, the first vaccine to protect against cervical cancer, and JANUVIA, the first medicine in its class for the treatment of type 2 diabetes -- made strong contributions early in 2007 to the strong revenue base of Merck's more established products.
"Our strong first-quarter performance gives me confidence that we are now even more firmly on track to deliver double-digit compound annual EPS growth by 2010 from our 2005 base, excluding charges and one-time items," said Mr. Clark. "Our ability to deliver medicines and vaccines that provide value to patients that they cannot find elsewhere is critical to our delivering that growth."
At last year's Annual Meeting of Stockholders, Mr. Clark reviewed Merck's Plan to Win, a comprehensive five-part strategy to achieve success. Components of the Plan to Win include: advancing the product pipeline; using end-to-end lifecycle management to optimize the value of every product and therapeutic franchise; developing and executing an industry-leading commercial model; creating a lean and flexible cost-business model; and creating a high-performance organization.
In 2006, Merck exceeded its cycle-time reduction goal by reducing late-development cycle-time by more than 10 months. Mr. Clark believes that the Company is on target to further reduce pipeline cycle-time, reaching a total 12-month reduction by the end of 2007. This cycle-time reduction helped to accelerate the development and launch of JANUVIA by as much as four years.
Mr. Clark credits some of Merck's success in discovering and developing new products to the Company's commitment to identifying partnering opportunities that can complement internal research efforts and expand the pipeline. In 2006, Merck completed 50 licensing transactions and acquired three biotech companies. One company, Sirna Therapeutics, is at the forefront of developing new therapeutic products using RNA-interference technology (RNAi). RNAi has the potential to radically change how disease is treated by targeting and shutting off genes in human cells that trigger specific diseases. Merck also acquired GlycoFi, Inc. and Abmaxis, Inc. to enhance the Company's expertise in vaccines and biologics.
Additionally, Merck has established global commercial franchises to manage products in key therapeutic areas and strategically allocate resources. Further, the Company has aligned research and development and its commercial operations to ensure that key decisions are driven by customer needs. Merck was able to launch its five newest products by redirecting sales representatives to new vaccines and finding more efficient and effective ways to reach customers, without any increase in the number of professional representatives. The five novel medicines and vaccines launched in 2006 include GARDASIL; JANUVIA; ZOSTAVAX, to help prevent shingles; ZOLINZA, for the treatment of cutaneous T-cell lymphoma (CTCL); and ROTATEQ, to help prevent rotavirus gastroenteritis.
Mr. Clark cited several key milestones since the inception of the Plan to Win last year, which include capturing significant procurement savings; closing or selling excess facilities; achieving hundreds of millions of dollars in inventory reduction; making Merck a Six Sigma company; and implementing a new product-supply process.
"In 2006, we made solid progress, but we aren't done yet. While we still have many challenges before us, we are eager to take them on. Over the course of this year, and the years to follow, we at Merck look forward to fully realizing our potential as a force for improving the health of people around the world," Mr. Clark concluded.
While Mr. Clark looked ahead, he also recognized two longtime members of Merck's Board of Directors who are retiring today, William G. Bowen and Lawrence A. Bossidy. Dr. Bowen has been a Merck director since 1986, while Mr. Bossidy has been a Merck director since 1992. In addition, Dr. Samuel O. Thier, a Merck director since 1994, was appointed the Board's lead director.
In other business, the Merck Board of Directors elected Mr. Clark as chairman of the Board, effective today.
Merck's Pipeline Addresses Common Diseases With Unmet Medical Needs
During the meeting, Peter S. Kim, Ph.D., president of Merck Research Laboratories (MRL), provided an overview of Merck's pipeline and the therapeutic areas the Company is pursuing, and summarized several key areas in which MRL achieved success in 2006.
According to Dr. Kim, it was an outstanding year for research and development at Merck, highlighted by five new drug approvals, the continued growth of Merck's pipeline, and new partnerships that will strengthen its internal research and development capabilities.
"The five new products we launched last year - three new vaccines and two new medicines - have added to Merck's long record of success in preventing and treating disease," Dr. Kim told stockholders. "As we look at our late-stage development pipeline, we see many important new products and investigational medicines. Our pipeline today is the latest chapter of a long and respected story of success in developing novel medicines that make a difference."
Merck's late-stage development pipeline includes three compounds that are in Phase III and another that is expected to move into Phase III later this year; two that the Company expects to file with the U.S. Food and Drug Administration (FDA) this year; and two that are currently under FDA review.
The four compounds currently in, or anticipated to enter Phase III in mid-2007, target four common disease areas with significant unmet medical needs: atherosclerosis, obesity, migraine and osteoporosis. In addition, Merck plans to file applications for ISENTRESS, which is on track to be the first drug in its class for the treatment of HIV infection, and MK-0524A, which combines Merck's extended-release niacin with MK-0524, a compound that reduces a common side effect of niacin therapy, flushing. Merck anticipates FDA action on both ARCOXIA and EMEND for Injection in the second quarter of 2007.
Looking Back, Looking Ahead
Dr. Kim concluded with a review of four major accomplishments from 2006 and early 2007, and offered his perspective for Merck's future. Highlights of the past 16 months included: approvals of six new products that have the potential to make countless lives healthier; a robust late-stage pipeline; leveraging new technologies through strategic acquisitions and partnerships; and a strong early-stage pipeline that is advancing faster than ever with a greater probability of success, while targeting areas of great need coupled with real scientific potential.
"The progress we made in 2006, and the potential we are realizing in 2007, have only served to strengthen my belief in this Company and in its future," added Dr. Kim. "Looking ahead, I have every confidence that the successes of the recent past will one day be seen as merely a prologue to what will be an even brighter future for Merck and for the patients we serve."
Merck & Co., Inc. is a global research-driven pharmaceutical company dedicated to putting patients first. Established in 1891, Merck discovers, develops, manufactures and markets vaccines and medicines to address unmet medical needs. The Company devotes extensive efforts to increase access to medicines through far-reaching programs that not only donate Merck medicines but help deliver them to the people who need them. Merck also publishes unbiased health information as a not-for-profit service. For more information, visit www.merck.com.
This press release, including the financial information that follows, contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include statements regarding product development, product potential or financial performance. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this press release should be evaluated together with the many uncertainties that affect Merck's business, particularly those mentioned in the risk factors and cautionary statements in Item 1A of Merck's Form 10-K for the year ended Dec. 31, 2006, and in its periodic reports on Form 10-Q and Form 8-K, which the Company incorporates by reference.
Merck & Co., Inc.
Amy Rose, 908-423-6537
Graeme Bell, 908-423-5185
Posted: April 2007