Merck & Co., Inc.

Merck Case

by jc2rhyme | studymode.com

MERCK & CO., INC.

_Presented By:_ THE FACILITATORS:

James Chung

Janelle Courtright

Greg Eckinger

Josh Kilgore

Mabel Lui

Date: November 27, 2007

Bus Adm 799

Joseph Testa

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MISSION STATEMENT:

The mission of MERCK is to provide society with superior products and services by developing innovations and solutions that improve the quality of life and satisfy customer needs, and to provide employees with meaningful work and advancement opportunities, and investors with a superior rate of return.

EXECUTIVE SUMMARY:

INTRODUCTION AND BACKGROUND

Merck & Co., Inc. ("the Company") is one of the largest companies within the pharmaceutical industry. It was founded in 1891 by George Merck and became public as of May 1946 trading on both the New York and Philadelphia Stock Exchanges. Currently, it has over 70,000 employees in 120 countries and 31 factories worldwide. As of 2006, it was ranked 9th with sales around $22,636 million compared to $22,012 million in 2005. Merck's primary line of business is to discover, develop, manufacture, and market a wide array of products to help improve the health and length of survival for both humans and animals worldwide. The company is research driven and spends millions of dollars on research and development related expenditures. For example, it spent around $4,783 and $3,848 million in both 2006 and 2005, respectively for research and development (R&D). Within the industry, it is very important for companies to spend vast amounts of capital on R&D to develop new vaccines and medicines that will help humans with particular diseases, cancer, and other life/non-life threatening illnesses.

Merck's core focus is "…to try never to forget that medicine is for the people [and]…not for the profits. The profits follow, and if…remembered they have never failed to appear." The company lives by these words expressed by their founder and aligns them within all of its disciplines. For example, after the development and successful approval of one of its medicines Mectizan that treats onchocerciasis (river blindness), it started to donate it globally, especially in areas of Central and South America and sub-Saharan Africa. Merck's goal is to donate as much as necessary to completely eliminate this illness. More recently, the company's donation efforts led it to completely eliminate this health problem in Columbia.

OVERVIEW OF CASE

The pharmaceutical industry is growing rapidly. According to experts the market will reach $767 billion by 2010. The market ranges from small to large firms. However, within the last decade firms have merged and acquired other companies thereby increasing size structure of companies within the industry.

A large focus within the industry is research for new drug development. Currently research is the primary expenditure of pharmaceutical companies. New drug development requires at least 8-10 years before a drug is fully developed. In order to reduce time, large pharmaceutical companies are creating joint ventures with biotech firms. The biotech firms are highly specialized in the area of research and development of new drugs, which allows the pharmaceutical companies to focus on where they should expend additional research dollars for potential new drugs. It will also allow the companies the ability to concentrate on the marketing and sales of new and existing drugs.

Pharmaceutical companies rely heavily on patents. As soon as a potential new drug is in the beginning phases, a patent is obtained. This protects the drugs for 20 years, a large portion of these years are the research and development phase. Once patents begin expiring, generic drugs start invading the market thereby decreasing profits of the patented drugs.

Sales and marketing play an important role in the pharmaceutical industry. Large forces of sales reps call on doctors and other influential health care workers in order to promote their drugs. Free samples are given to doctors to allow distribution of new drugs to patients. TV and magazine ads have increased consumer awareness of available drugs for treatment of common diseases. Consumers now ask their doctors about new drugs they have heard of through this advertising which also increases drug sales.