Merck R&D adopts its rivals' game plans in global overhaul

When Merck announced back at the beginning of October that it was triggering a massive shakeup of its R&D operations after a 7-year blockbuster drought, the pharma giant ($MRK) left out any pesky details on just what the final picture of the new, slimmed-down organization would look like. But Wall Street Journal writers Peter Loftus and Jonathan Rockoff have come up with some of the first key brushstrokes of what they termed a "radical overhaul."

This is one R&D blueprint, though, that borrows heavily from the widespread restructuring efforts that have come before it at other global R&D organizations.

First, Merck will take a page from the playbook at Johnson & Johnson ($JNJ) and set up new "innovation hubs" in Shanghai, London, San Francisco and Boston, where company scouts would be based to seek out new research projects. That global structure follows J&J's geographic game plan for its own innovation hubs in exact detail while closely resembling similar efforts at GlaxoSmithKline ($GSK), a U.K. company which has recently been setting up new R&D bases of its own in San Diego and Boston.

Like J&J's groups, these new Merck teams will be focused on bringing in a stream of new deals as it opens up to outside influences, something that Merck has been slow to do in recent years, falling far behind industry leaders like J&J, GlaxoSmithKline and Novartis ($NVS).

In addition, the Journal reports that the troubled giant has begun to identify programs that it intends to sell off as it narrows and focuses its R&D organization, another strategy employed by Pfizer ($PFE) and others as they went through their own restructuring. Big Pharma's decision to spin out programs became so common that some entrepreneurs set up new companies--like Amgen ($AMGN) spinoff Atara--designed to pick up the most promising castoffs. In Merck's case the "for sale" sign is going up on experimental therapies for glaucoma and antipsychotics, and a male fertility drug.

Perhaps most compelling is the Journal's roster of new execs being lured into Merck by new R&D chief Roger Perlmutter, who had been squeezed out at Amgen. The Journal notes that Merck hired Amgen's former head of external R&D, Iain Dukes, with Roy Baynes replacing a retiring Barry Gertz as head of global clinical development.

Innovation hubs, narrowing and focusing R&D while spinning out assets that no longer fit the new structure, and bringing in new talent with a long record are all now standard features of Big Pharma restructuring. For Merck it is a radical departure from its insulated past, where "tradition" dictated that the company already had just about everything it needed to succeed. It's anything but new, though.

Merck and Perlmutter will now have to see if this engine they're building can actually move fast--a long and arduous task. That should be visible in about three years. -- John Carroll, Editor-in-Chief. Email me at [email protected]