Corporate Strategy Case Study

Merck: The Cost of Going Alone

OR

Abstract:
For generations, Merck & Co was considered the jewel of the pharmaceutical industry. However, it was under Roy Vagelos, who became the CEO in 1985, that the company produced many breakthrough drugs. While the company emerged as the icon of consumer healthcare, Vagelos was dubbed as the 'Jack Welch of the pharmaceutical industry'. Particularly, Merck's overwhelming research power left many rival companies struggling. However, the mid-1990s sent most of the pharma majors in the US into a dry spell due to expirations of patents. Even for Merck, the year 2000 meant the expiration of five of its blockbuster drugs and the company had no new drugs in its research pipeline. While most of the pharma companies either merged or bought ideas from small biotech firms to fill their pipeline, Merck remained stuck to its ideal of developing its drugs in- house.

Pedagogical Objectives:

• To facilitate discussion on how Merck, under Vagelos, became the world-leader in consumer healthcare
• To discuss why Merck was reluctance to look for a merger partner, when most of the pharma majors have benefited from the synergies of mergers.

Keywords : Ray Gilmartin; Roy Vagelos; Zocor; Corporate Strategies Case Study; Patent-expiration; Streptomycin; Schering-Plough; Vioxx; Mevacor; Pfizer; Vasotec; Pharma mergers