Expectations for 2004
Interview: Merck---Gilmartin, Raymond---Chief Executive Officer
>> welcome back. merck’s c.e.o. preston martin under pressure after a series of drug disappointments met with analysts and investors today at the company’s headquarters in new jersey. a short time ago our matt nesto spoke with the chairman, president, chief executive officer, raymond gilmartin at their analyst day in white house station, new jersey. gilmartin began by addressing the challenges facing the company in recent months.
>> we’ve been hit by patent expirations of major products for the past three years, and in fact, 2001, 2002, and now in 2003, the earnings were affected by two significant changes that we made. one is a change in our whole sailer distribution program, which hits earnings this year and revenues, but also the fact that restructuring charges, which is part of the program of reducing 4,400 positions in the company. now, this sets us up in 2004 for growth.
>> there we go. not the history. we need to know what you’re going to do to get the excitement back, get wall street reinterested and excited about marc, the second-largest drug company in the world.
>> this is a growth industry, merck is a growth company, and the way you get excitement back into the company is to grow. we intend to do that by continuing to back fully the key franchises we have that are in large and growing markets worldwide and have very strong competitive positions and by two new products we filed with the f.d.a. this year or submitted to the f.d.a. one is for cholesterol-lowering, and the other is a drug for arthritis and pain, which is our second entrant into that class.
>> do you think the market has misinterpreted the lows you’re going through, the fact you’re the third-worst performing stock in the dow and among the worst performers in the drug index, which is up this year?
>> as i say, the key to one stock price is how fast you grow and how profitable you are, and we’re quite a profitable company and will be resuming growth.
>> so, is the market wrong? are they missing something?
>> i think what the market wants to see is we start resuming growth and that will start occurring in 2004.
>> so, today there was an announcement that you’re going to file for four new products, two, three years down the line. is that the exciting angle that is going to get people buying merck shares again?
>> i think investors are probably very focused on the two products that we have submitted to the f.d.a. this year, the ones i mentioned before, the cholesterol-lowering drug as well as the drug for pain and arthritis. i think―and that will impact the near term. i think investors will also be focusing on vaccines like our human papilloma vaccine, which has very significant potential since human papilloma virus basically causes cervical cancer, which affects a large number of women. so, i think that―and beyond that, a very important diabetes drug we’ll be filing in 2006. then other vaccines in the interim period of time. so, as we’re doing these filings of these significant new products, i think that’s going to generate a lot of attention as well.
>> so, you’re not worried about zocor coming off patent in 2006? you’ll be able to replace that revenue?
>> in 2006, zocor going off patent, that will have a significant impact on us. our goal is to show growth during that period of time, but since the market is forward looking, investors really concentrate in this industry on how quickly and how strongly is our growth rebound, and that’s why these filings of the human papilloma virus vaccine are important and why these two drugs i talked about are earlier as well to be off on a strong launch.
>> we have about 30 seconds left. but 2006 will also mark your retirement, 12 years in the top three jobs at merck.
>> yes.
>> what about your successor and your legacy management? you’ve been going through a hard period here, three hard years in a row. well, first of all, a priority for us so to make sure we have in place a successor from within the company, and certainly i’ve been working on it with the board on that for some time. you don’t decide, you know, with 2 1/2 years to go, to start working on that. so, i feel quite confident that we have people with full potential to succeed and that’s what we’ll be able to accomplish. as far as my legacy is concerned, basically my focus is on growing this company.
>> ok. we’re going to have to leave it there. i appreciate it. folks, we’ve been talking to raymond gilmartin, the chairman, chief executive, and president of merck.
>> matt nesto with raymond gilmartin. shares of merck are down almost 19% year to date. well, at&t wireless said it has fixed some problems that delayed transfers of customers’ numbers to other cell phone providers, blaming the delays partly on federal regulators saying number portability has not been smooth because the f.c.c. did not provide adequate guidelines. the rule allows customers to keep cell phone numbers when changing carriers. the company said it feared worse than other carriers in complying with the rule. when we come back, south korea’s biggest credit card company is selling shares to raise funds. but analysts say the l.g. card raised only part of what it hoped to get the sales.
