Drugs shares
Interview: Rochdale Investment Management---Abella, David---Analyst
>> welcome back to the “world financial report.” merck, maker of such well-known drugs as zocor and vioxx, is the second biggest drug company in the u.s. the stock has dropped 2% over the past year, underperforming the overall market . raymond gilmartin is here to discuss what is ahead for the company and the industry. welcome, sir. you have underperformed. investors wait to see what your strategy is for the new drugs you have in the pipeline. can you tell us how you are going to make money in the coming quarters and what you are going to do particularly with the drugs and joint venture with schering-plough.
>> the skwroeupt venture is proving to be very successful. we had a successful launch of the drug that was dissolved by schering-plough that is now part of the joint venture called zedia, a drug that inhibits the absorption of cholesterol. we have on file with the f.d.a. a combination of that drug along with zocor, our drawing that controls the production of cholesterol. so the combination has proven to be extremely effective in lower the bad cholesterol, l.d.l. in fact, bakely it’s superior to the market leader lipitor across the entire range of dosage. we are excited about the potential of that product.
>> you are still planning to sell zocor separately. how does that work with the joint venture?
>> the joint venture has its own sales force. also we as a company at merck have dedicated salesmen that will represent only zedia and the zedia-zocor combination. schering-plough has a representative that covers the product as well. it’s a formidable lineup that is dedicated completely to the joint venture and will give every one in the market a fair degree of competition or a lot of competition including zocor.
>> we understand going into this year you plan to lower staffing levels. any of that coming from the sales side? how would that impact earnings?
>> oh, we’re not affecting our sales side at all. it’s important we keep up the level of promotion behind the growth drugs we have, plus the new drugs we expect to introduce this year. we are also increasing significantly the number of scientists that we have. the reductions in positions have occurred really in the administrative side, sort of the infrastructure side. that’s been true around the world. we’re really allocating our head count from sort of overhead to more scientists and to also be in a position to provide more promotion as well.
>> one of the questions that people are asking is what your interest might be in acquiring or being acquired as m&a activity picks up. we are seeing a lot of it in the pharmaceutical area.
>> well, we have been very clear about this over the years. and i think that our view now is even more widely shared in the industry. large-scale mergers don’t add anything in the way of research productivity. in fact, it may hinder it. secondly, they don’t really offer any competitive advantage in the marketplace because competition is therapeutic category by therapeutic category. large-scale merger as far as we’re concerned would have to add to our pipeline or constreubt to long-term growth. there’s no large scale merger out there that would beat those criteria. and, you know, these mergers that are just short-term in earnings with a penalty of long- term growth don’t create shareholder value.
>> last time i talked to you in switzerland you saw the medicare law coming into effect as an opportunity for your company. do you still feel that way? how will you attack that?
>> we see it as an opportunity. we have to compete for that opportunity. it’s based on a private market delivery system that will be delivered through health plans. we think we have a chance to be successful or a high probability of being successful in competing with that opportunity because of strong positions with managed care and preferred positions in formularys with our key drugs. about half of our drugs are used by people over 65 or half our sales rather. and people without insurance only utilize our drugs at half the rate they would otherwise utilize them. we do see that there is significant opportunity, but as i said at outset, we have to compete for that opportunity.
>> we are skipping around here. i only have one minute left. i have to ask you after what happened with disney in the past couple of weeks, do you have a succession plan in place? you are scheduled to retire in 2006.
>> definitely we have a succession plan in place. bakely our commitment is to have a successor come from inside the company. it is fair to say that the board and i have worked on a succession for several years. basically to have a successor in place, you have to develop people early on and move them up through the ranks and on to the management commit which we have been successful in doing. the task over the next couple of years is to build the qualifications and the track record of these executives so that when it comes to my retirement that they’re well positioned to take over. these people certainly have that potential.
>> all right. thank you very much. chairman and chief executive of merck. we’ll have you back to disclose the name sometime soon. silver prices rising above $7 an ounce for the first time in years. we talk to the largest u.s. silver producer about what is ahead for the commodity and his company.
