Merck chief pays with his job for scandal over Vioxx drug

Click to follow
The Independent Online

Raymond Gilmartin, the chairman and chief executive of the embattled pharmaceuticals giant Merck, has quit a year before his scheduled retirement to allow a strategic shake-up at the group he has headed for 11 years.

Raymond Gilmartin, the chairman and chief executive of the embattled pharmaceuticals giant Merck, has quit a year before his scheduled retirement to allow a strategic shake-up at the group he has headed for 11 years.

Investors have been demanding changes since last year's catastrophic withdrawal of Vioxx, Merck's blockbuster painkiller which has been linked with thousands of heart attacks and over which the company is facing 2,300 lawsuits.

However, there was disappointment yesterday at the appointment of an insider to take over the chief executive post, and confusion over the management structure that is being put in place.

Mr Gilmartin said he was resigning with immediate effect, although he will stay on as a consultant until his retirement date in March 2006. The company had previously said only that a successor would be identified this year.

"In no way did we push him out. He is doing this graciously, turning the reins over," said Lawrence Bossidy, who will chair a three-man executive committee to support the new chief executive.

Mr Gilmartin said: "I've been very public and very clear, when you are the retired chief executive you get out of the way. The arrangement we worked out here is totally consistent with the way I see the succession unfolding. Once we came to the decision we moved. This was my choice."

Mr Gilmartin's tenure has been marred by the debacle over Vioxx and the loss of Merck's crown as the world's largest drug maker. It is now third behind Pfizer and GlaxoSmithKline, both the product of a string of mega-mergers.

Mr Gilmartin has argued that large acquisitions would only distract the company from the task of developing new drugs, but investors are now demanding that merger and acquisition activity is put high up the company's agenda.

There are also calls for other forms of commercial partnerships. Some of Merck's problems stem from its refusal for many years to partner in any significant way with other companies, particularly biotechnology companies that are developing many of today's promising new medicines.

Richard Clark, the president of Merck's manufacturing division, has been appointed as Mr Gilmartin's successor, although the refusal to give him the additional title of chairman and the creation of the new executive committee reflects an understanding that the market had been hoping for an outside candidate.

Analysts also believe he was not the company's first choice. "The bottom line is that Clark is not a drug guy, and Merck is a drug company," said Trevor Polischuk, an analyst at OrbiMed Advisors. "He's like Pope Benedict. He's a caretaker until Merck establishes where it wants to go."

One of Mr Clark's first challenges will be to establish a pipeline of new drugs to replace Vioxx and its top-seller, Zocor, an anti-cholesterol pill which loses patent protection next year.

"We will be focused on internal growth as well as external growth through licensing of products from other companies," Mr Clark said. "You have to remember I was born and raised at Merck, and understand that scientific excellence is the future of the company."

Comments