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More Merck jobs go £400m boost to STEM


Emma Dorey


In yet another big pharma restructure, US giant Merck plans to slash its workforce and sharpen its commercial and R&D focus. In October 2013, the company announced the loss of about 8500 jobs, on top of the 7500 previously earmarked to go – a total decrease of about 20% of Merck’s global workforce of 81,000 employees. By redesigning its operating model and reducing its cost base, the company hopes to save approximately $2.5bn/year in operating expenses by the end of 2015. The move, which follows re-structuring at


Pfizer, AstraZeneca and GlaxoSmithKline in the past few years, is part of a huge transformation in the industry, says Warwick business school professor John Lyon, a venture capitalist and former global vice president of US drug development company Covance. ‘Pharmaceutical companies can no longer rely on the blockbuster model of developing drugs and searching for revenues in excess of $1bn/ year, so they need to look at innovative ways of generating new products,’ he says. According to Lyon, pharma firms like Merck need to adopt a more flexible structure and become more innovative. ‘I would suggest large pharmaceutical companies like Merck need more


of the entrepreneurial mind-set,’ he says. Despite an $8bn R&D budget, Merck’s late- stage pipeline has been considered by many as high risk. This year alone, the US Food and Drug Administration rejected Merck’s anesthesia- reversal drug Sugammadex and the insomnia drug Suvorexant, and Merck delayed its regulatory submission of osteoporosis drug Odanacatib. In an effort to make itself more competitive,


Merck will focus resources on areas of highest- potential growth opportunities, including oncology, diabetes, acute hospital care and vaccines. As well as building biologics capabilities, Merck will prioritise certain R&D programmes, including for anti-PD-1 cancer immunotherapy (MK-3475), its BACE (beta secretase) inhibitor for Alzheimer’s disease, next generation hepatitis C virus and its 9-valent human papilloma virus vaccine. The company also plans to bolster its pipeline through increased in-licensing, while discontinuing or out- licensing late-stage clinical programmes that no longer fit its new focus. ‘These actions will make Merck a more competitive company, better positioned to drive innovation and to more effectively commercialize medicines and vaccines,’ said Merck ceo Kenneth Frazier.


However, Alex Arfaei, pharmaceutical analyst at BMO Capital Markets, cautions that the longer-term growth prospects of the company are questionable. ‘Although the announced restructuring has positive near-term impact for the stock, it makes us more cautious about Merck’s pipeline and revenue growth prospects,’ he says.


Although MK-3475 is promising, initial data suggest it is fairly similar to comparable drugs developed by BMS and Roche. Moreover, Merck does not have a strong track record in oncology, points out Arfaei. ‘As for the other programmes, we believe they are either too risky (BACE in Alzheimer’s) or areas where Merck is significantly behind (HCV),’ he says. On 10 October 2013, Teva Pharmaceutical Industries (Jerusalem) announced acceleration of a similar


restructuring programme, targeting $2bn/year cost savings by the end of 2017, by slashing 10% of its global workforce or 5000 employees, increasing organisational and manufacturing efficiency and divesting non-core assets.


teaching


As part of the UK government’s spending review for 2015-16, which earmarks money for the first year of the new parliament, £200m has been allocated to teaching capital for science and engineering subjects in UK universities. The money will be administered through the Higher Education Funding Council for England (HEFCE) and is expected to be matched by the universities, bringing the total investment to £400m. The additional investment comes at a time


when there has been the significant reduction in capital funding in both teaching and research. At the same time, the numbers of students studying science A-levels in schools is on the up, despite the hike in tuition fees. According to Chris Millward, associate director at HEFCE, the government accepts that for the UK to remain competitive in these areas, universities will need to invest in their science and engineering teaching infrastructure. ‘This will ensure that universities can give students an experience that compares with the best in the world and delivers the kinds of programmes that will maximise the employability of their graduates,’ he says. With most universities charging the same tuition fees across all subjects, inevitably the returns in the cheaper subjects are higher than for science and engineering, explains Millward, so there is a need to provide incentives for science and engineering subjects. HEFCE is currently putting together the criteria that universities will need to meet to bid for funding. An announcement is expected at the end of 2013, once the government has confirmed what other capital funding HEFCE will receive for all subject areas for teaching and research. The government has made clear, however, that universities will need to show a commitment to equality and diversity, including getting more women to study these subjects to degree level. The Athena Swan award has been mooted as one possible factor for a successful bid. Initially, Millward says, to get the money into universities quickly, HEFCE may ask universities to provide a self-assessment of where they are and where they want to be in terms of attracting more women to study STEM subjects and how this relates to their broader equality and diversity goals.


Chemistry&Industry • November 2013 7


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