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MERCK

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Ishaan Acharya James Roarty. Robert Lake Brandon Theinert. Nick ... The company is situated in Whitehouse Station, New Jersey. President and CEO is R.T. Clark. ... – PowerPoint PPT presentation

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Title: MERCK


1
MERCK CO., INC.
  • BT-101 Company and Industry Analysis
  • Courtney Geddis Lowden Charles
  • Ishaan Acharya James Roarty
  • Robert Lake Brandon Theinert
  • Nick Mitros

2
OUTLINE
  • COMPANY INFORMATION
  • MISSION STATEMENT
  • PRODUCTS
  • MARKET GEOGRAPHIC/CONSUMER
  • LEGAL AND COMPLIANCE
  • FINANCIAL DATA
  • INVESTING IN MERCK
  • INDUSTRY BACKGROUND
  • MARKET BREAKDOWN

3
OUTLINE (contd.)
  • INDUSTRY STRUCTURE
  • COMPETITION
  • ECONOMIC GROWTH AND PROFITABILITY
  • TECHNOLOGY TRENDS
  • E-BUSINESS TRENDS
  • ENVIRONMENTAL TRENDS
  • GOVERNMENTAL REGULATIONS
  • GLOBALIZATION AND FOREIGN TRADE

4
COMPANY INFORMATION
  • Merck and Co. is one of the leading
    pharmaceutical companies in the world. Founded
    in 1891, it provides prescription drugs
    throughout the United States and the world.
  • The New York Stock Exchange Symbol for Merck is
    MRK. The company is situated in Whitehouse
    Station, New Jersey
  • President and CEO is R.T. Clark.

5
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.

6
PRODUCTS
  • Merck is a major player in the pharmaceutical
    market.
  • The best selling drug for Merck in 2005 was
    Zocor, a cholesterol-lowering medication.
  • In fact, Zocor was the second-highest selling
    cholesterol lowering drug in the world in 2005.
  • The top six selling products in 2005 for Merck
    were as following
  • Zocor (4.3 billion)
  • Zetia ( 1.4 billion)
  • Vytorin( 1.0 billion)
  • Cozaar/Hyzaar (3.0 billion)
  • Singulair (3.0 billion)
  • Fosamax (3.2 billion)
  • Other medications for Merck include
  • Propecia (male pattern hair loss)
  • Proscar (benign prostate enlargement)
  • Candidas (antifungal)
  • Crixivin Stocrin (HIV)
  • Arcoxia (arthritis and lower back pain)
  • Maxalt (migraines)
  • Cosopt Trusopt (glaucoma)
  • Comvax Recombivax (hepatitis B)
  • Vaqta (hepatitis A)
  • M-M-R II (measles, mumps, rubella)
  • Pneumovax (pneumococcal diseases)
  • Varivax (chicken pox)

7
MARKET GEOGRAPHIC
8
CONSUMER MARKET
  • Health care providers
  • Large sales force influences physicians to write
    prescriptions using the companys drugs
  • Free samples
  • Billions of dollars are spent on distributing
    free samples to doctors offices
  • Consumer-targeted drug ads
  • Promote few specific medications, including
    allergies, menopause symptoms, and urinary tract
    infections

9
CONSUMER MARKET
10
LEGAL AND COMPLIANCE
  • Merck went and is still going through legal
    issues due to one of its most popular products in
    2004.
  • The medication Vioxx, an arthritis and pain
    medication, was found to cause an increase in
    risk for cardiovascular problems.
  • By June 30, 2006, over 14,000 lawsuits had been
    filed in relation to Vioxx.
  • By mid-July 2006, only seven trials had occurred
    and Merck had won four of them.
  • Standard and Poor believes that these trials will
    not have extreme consequences for Merck due to
    its substantial cash flow and its current
    financial state. (In 2005, Merck had a cash flow
    of 6.3 billion)

11
FINANCIAL DATA
  • Over the past five years, Mercks revenues have
    been on the decline.

12
INCOME STATEMENT
13
INVESTING IN MERCK
  • The price per share in Merck as of October 3,
    2006 was 42.10.
  • Investing in Merck right now is somewhat risky.
  • Earnings per share have been declining for the
    past five years straight.
  • However, in 2006, they have seen somewhat of a
    rise with consecutive quarterly earnings per
    share at 0.69.
  • Even with the loss of the patent on Zocor,
    Standard and Poor estimate the earning per share
    at the end of 2006 will be 2.45.
  • The lawsuits themselves should not affect Merck
    too much monetarily since they have so far won
    more lawsuits than they have lost and they have
    money stored away for an occasion like this one,
    but rather the extreme amount of negative
    headlines that could come up in the future thanks
    to these lawsuits.
  • Even though Merck does have money stored away,
    though, there are still more than 14,000 cases
    that still have to be either settled or taken to
    court, meaning there is a possibility for these
    cases to take a large amount of money from the
    company.

14
INDUSTRY BACKGROUND
  • The pharmaceutical industry includes all those
    companies that research, develop, produce, and
    sell chemical or biological substances for
    medical or veterinary use, including
    prescription, generic and over the counter drugs.
  • The industry market cap is currently 1.170
    billion. Every year, the market grows by nearly
    ten percent, largely due to the increasingly
    competitive pharmaceutical companies in Latin
    America and Asia-Pacific.
  • The United States market makes up around 41
    percent of the industry while Europe and Japan
    make up another 39 percent.

15
MARKET BREAKDOWN
  • The pharmaceutical market is broken down into
    several major segments
  • Biotechnology
  • 300 drugs currently in development, targeting 200
    diseases including Aids, diabetes, cancers, heart
    disease, and arthritis
  • Total value of publicly traded biotech companies
    was 311 billion as of April 2005
  • As of 2004, there were 1,473 biotechnology
    companies in the U.S.
  • 17.9 billion spent on research alone
  • Generic Drugs
  • Equivalent to brand name drugs in strength and
    contains same active ingredients
  • Same dosage, use, safety, and route of
    administration
  • Less cost to create drug than original innovators
  • When can a drug can be reproduced?
  • patent has expired
  • Generic company proves an existing drugs patent
    is invalid
  • Drugs which never held patents

16
INDUSTRY STRUCTURE
  • The pharmaceutical industry is constantly under
    pressure to expand and become more efficient
  • Tough price competition as well as a faster, more
    technologically advanced economy force companies
    to reduce manufacturing cost while creating more
    successful drugs
  • Management must react to capacity and demand with
    analysis based on labor hours

17
COMPETITION
  • In 2005, the pharmaceutical market was worth over
    600 billion and even though Standard and Poor
    expect a decline in pharmaceutical sales in the
    world in 2006, they expect a 7 increase in the
    United States in 2006.
  • Merck is one of the top ten pharmaceutical
    companies in the world, its top competition comes
    from
  • AstraZeneca PLC
  • Forest Laboratories
  • GlaxoSmithKline
  • Lilly (Eli)
  • Novartis AG
  • Novo Nordisk A/S
  • Pfizer Inc
  • Sanofi-Aventis
  • Schering AG
  • Schering-Plough
  • Wyeth

18
COMPETITION
19
ECONOMIC GROWTH
  • Global sales of branded prescription, generic
    drugs, and over-the-counter (OTC) medication top
    300 billion annually.
  • The pharmaceutical industry faces challenges from
    government regulations such as the Medicare
    prescription drug benefit to the expiration of
    patents.
  • Patent expiration has a direct effect on the
    continued mergers and acquisition activity that
    has recently seen Pfizer buy Pharmacia.
  • One solution has always been to extend patents
    via legal action and get low-cost manufacturers
    to halt production on cheaper drugs by the same
    method.
  • Secondly, companies have been building a larger
    drug pipeline that can mitigate the loss of
    revenue when large sellers go off patent.
  • Inorganic growth such as mergers and acquisitions
    is seen as the other key growth option for
    pharmaceutical companies.

20
TECHNOLOGY TRENDS
  • The pharmaceutical industry is an industry that
    expects high efficiency and consistent growth.
    It is able to achieve those goals due to
    advancements in technology.
  • For example, in 2005, a record 51.3 billion was
    invested industry wide in research and
    development.
  • One of the technology products used most
    frequently in the industry is Lab Ware.
  • This system uses advanced technology to organize
    work flow and coordinates the development of a
    new drug. It tracks the progress the drug is
    making in the research and development process.

21
E-BUSINESS TRENDS
  • Pharmaceutical companies are recognizing that, in
    addition to business and strategic advice, they
    need sound technology advice because IT can help
    or hinder their ability to address their business
    challenges. Indeed, most organizations have
    shifted their thinking from technology being the
    source of their problems to technology being the
    source of their solutions.
  • IT is used in pharmaceutical companies in the
    following divisions
  • Compliance
  • FDA Reporting
  • Data Warehousing
  • Clinical Research
  • Statistical Analysis
  • Consulting Services
  • Clinical Trial Support

22
ENVIRONMENTAL TRENDS
  • Three specific aspects of the worldwide
    demographic show promise for the industrys
    future.
  • The aging of the population in the largest
    markets
  • The lengthening of average life expectancy
  • A rise in the occurrence of chronic diseases.
  • Another environmental trend affecting the
    industry is the expiration of patents on major
    drugs. As these drugs lose their patent
    protection, generic competition and the reduction
    of prices are inevitable.
  • The beginning of increased generic competition
    started in 2005 when Pravachol, Bristol-Myers
    Squibb Co.s cholesterol-lowering drug, became
    unguarded by its expired patent. This prompted
    generic drug companies to compete against the
    drug and offer cheaper alternatives to consumers.
  • Other major drugs open to generic competition
    include Merck Co.s cholesterol-lowering Zocor,
    and Pfizer Inc.s Zoloft, an antidepressant.
  • It is expected to increase further when 12 of the
    worlds 35 top drugs lose patent protection by
    2009.

23
GOVERNMENTAL REGULATIONS
  • The pharmaceutical industry is kept under control
    by the regulatory oversight of the Food and Drug
    Administration (FDA).
  • Before drugs are able to be put up for commercial
    sale, the FDA puts them through extensive testing
    to prove that the companys products are not only
    safe, but effective as well.
  • They put each drug through a three phase process
    which efficiently tests the safety and
    effectiveness with each stage.
  • Ultimately, it is estimated that only one of 20
    drugs speculated are actually approved for
    marketing.

24
GLOBALIZATION FOREIGN TRADE
  • Globalization is a very important aspect of the
    industry. Because of the industrys importance
    everywhere in the world, large American companies
    look to expand their market to nations outside of
    the United States.
  • Europe, the second largest pharmaceutical market,
    is a promising prospect for many companies
    looking to expand. It is, however, much more
    difficult to be approved in the markets outside
    of the US. In Europe, companies must file for
    regulatory approval through a centralized
    European Union, or on an individual country
    basis.
  • Japan, the third largest pharmaceutical market is
    even more difficult to commercialize drugs in.
    Usually, the drug must be prominent in both
    European and US markets before it can enter the
    Japanese market.

25
APPENDIX A
26
References
  • ABPI Pharmaceuticals
  • http//www.abpi-careers.org.uk/htm/why.htm
  • Business and Company Resource Center
  • http//galenet.galegroup.com/
  • Business Report (2005)
  • http//www.busrep.co.za/index.php?fSectionIdfArt
    icleId2616894
  • Yahoo
  • www.finance.yahoo.com
  • Merck and Company Annual Report
  • http//www.merck.com/finance/annualreport/ar2005/i
    ndex.html
  • Merck and Corporate Philosophy
  • http//www.merck.com/about/
  • Professional Access
  • http//www.professionalaccess.com/hchome.htm
  • Standard and Poor/Net-advantage
  • http//www.netadvantage.standardpoor.com/NASApp/Ne
    tAdvantage/showIndustrySurvey.do?codehep

27
Are there any questions or comments???
  • Thank you!
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