Merck's new CEO Vows tough innovation spending, faster drug decisions. Merck & Co.'s.

Merck's New CEO Vows Tough Innovation Spending, Faster Drug Decisions. Merck & Co.'s (Whitehouse Station NJ) Chief Executive Officer Kenneth Frazier, who took over the top leadership role on Jan. 1, said the company will make "tough" research spending decisions while developing innovative products. Merck, the second-biggest U.S. drugmaker, will halt development of less promising drugs more quickly, Frazier said last week at a Goldman Sachs Group Inc. (New York) investor conference. Merck is changing compensation to scientists to prevent expensive late-stage development of weak commercial prospects, he said. Merck is developing new drugs to replace revenue as it faces generic competition that began last year to blood-pressure pills, Cozaar and Hyzaar, with combined 2009 sales of $3.6 billion. The company is awaiting final-stage test results for experimental medicines to prevent blood clots, increase beneficial forms of cholesterol and treat migraine headaches. "The only way you can sustain a business like this is through innovation; that doesn't mean you can just throw money at things," Frazier said. "Historically, our successes haven't required us to think as tough about resource allocation." Merck hosts regular symposia where its finance experts teach scientists how to seek better return on invested capital, Frazier said. The three-year return is now tied to researchers' compensation, he said.

Pharmaceutical companies face increasingly difficult standards for U.S. approvals for novel drugs. Last year was the first time in a decade that Pfizer Inc. (New York), the world's largest drugmaker, as well as Merck, Eli Lilly & Co. (Indianapolis IN) and Bristol-Myers Squibb Co. (New York), each failed to win regulatory backing for a new molecular compound. Merck secured approval for its Dulera asthma inhaler, which combines two previously approved treatments, and won the right to market drugs for wider indications, said Steve Campanini, a spokesman for Merck. The company said last week that it received an accelerated six-month review for its experimental hepatitis C treatment. Merck shares closed the week up $1.31, or 4%, at $37.35. The stock has declined 1.6% in the past 12 months.