Merck Case Study

Topics: Generic drug, Pharmaceutical industry, Mergers and acquisitions Pages: 11 (3527 words) Published: April 30, 2012
Merck & Company Inc.|
Case 1|


Introduction of the Company
Merck was established in 1891 to improve human and animal health through the development of innovative products. Merck currently has two reportable segments, the Pharmaceutical Segment and the Vaccines and Infectious Diseases Segment. Merck sells products through several channels including wholesalers, retailers, hospitals, clinics, government and managed health services providers. In the 1980’s the Merck was very successful in producing 10 major new drugs and had a very healthy pipeline. In later years, Merck has entered into joint ventures with many other pharmaceutical companies in order to expand its pipeline. In the last several years Merck has experienced a decline in revue do to several of their exclusive drugs going off-patent. Merck is currently the eighth largest pharmaceutical firm in the world. In 2009, Merck plans to further expand through a merger with Schering-Plough. This will make Merck the second largest pharmaceutical company in the world. Mission Statement Analysis

“The mission of Merck is to provide society with superior products and services by developing innovation 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.” Merck’s mission statement touches on many of the key factors that a mission statement should embody. The mission statement mentions providing society with superior products. In the pharmaceutical industry, Merck’s customers are anyone in society that may benefit from one of its products. The mission statement focuses on the people their business may affect including customers, investors and employees. Although Merck is a well known company, the mission statement does not describe the nature of the business in which they operate. As the statement mentions their business os to improve the quality of life, this could describe many businesses and products. The statement also neglects to mention the focus and market segments in which they compete. Internal Assessment

* Diversified Business Segments – Merck has business segments in Pharmaceuticals, Vaccines, Animal Health and Consumer Health. This allows Merck to diversify its revenue streams. The consumer health division allows Merck to compete outside the prescription drug market. Merck continually works o diversify its portfolio through internal and external ventures. In 2008, Merck focused on new Bio Ventures Division, which uses a unique technology platform for new and follow-on biologics. (Merck 2008 10K) * Strong Research and Development – Merck spent an average of $4.8B on research and development over the last three years. Their research and development efforts not only work to create new products that will help better their customers’ living, but also work to find additional uses for existing drugs which will extend the patent life and preserve existing revenue streams. * Increased presence in emerging markets through the merger with Schering-Plough. As Merck is seeing a decline in domestic revenue, due to the expiration of patents, such as Flosamax in 2006, they are concentrating more on growth opportunities in emerging markets. * Increased pipeline in vaccines and biologics through the merger with Schering-Plough. As two of Merck’s most profitable drugs are coming off patent in the next four years, accounting for 35% of forecasted revenue, by merging with Schering-Plough, Merck’s revenue from expiring patents is reduced to 21%. * Distribution Channels – Merck has well established distribution channels in which the company’s professional representatives communicate the effectiveness and value of their products. They market and sell though a variety of channels including drug wholesalers, hospitals, physician distributers and government entities. Weaknesses...

References: David, Fred R. Strategic Management Concepts and Cases. 13th ed. Print
Merck. (2008). Form 10-K for the fiscal year ended December, 2008. Retrieved from
Merck. (2011). Form 10-K for the fiscal year ended December, 2011. Retrieved from
Pfizer. (2008). Form 10-K for the fiscal year ended December, 2008. Retrieved from
Glasko Smith Klein. (2008). Form 10-K for the fiscal year ended December, 2008. Retrieved from
Appendix 1: A Summary of Key Financial Ratios
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