Biotech Values

[DewDiligence]

MRK Closes Former Organon Labs

http://blogs.forbes.com/sciencebiz/2010/07/merck-shutters-productive-labs/

›July 8, 2010
By Matthew Herper

This morning Merck took a difficult and necessary step in trying to wring cost savings out of its $41 billion purchase of Schering-Plough: closing research labs and manufacturing plants. Such closures are unavoidable. It doesn't make financial or scientific sense to keep all the laboratories both companies were running.

But at least three of the research sites being shut down stand out: those that were originally part of Organon, the pharmaceutical-making arm of the Dutch chemicals giant Akzo Nobel. Their closure is emblematic of the continuing struggle of drug researchers to invent medicines during a constant wave of mergers that can disrupt their work.

Schering-Plough purchased Organon in 2007 for $14.4 billion with the express purpose of refilling the company's pharmaceutical pipeline [#msg-17791687]. That's 36% of what Merck eventually paid for Schering. The deal increased Schering's total sales by 50%, to $15 billion, and, more importantly, gave it five new medicines that were in the late stages of clinical development, including an antipsychotic, a fertility drug, and a new antidote for a common anesthetic that many doctors said would be a breakthrough.

The antipsychotic, Saphris, is approved in the U.S. and Europe. The fertility drug, Elonza, is approved in Europe, as is the anesthesia antidote, sugammadex, though it ran into trouble with U.S. regulators. That's a pretty good track record. But among the labs Merck is shuttering are the Newhouse, Scotland, operation that invented both Saphris and sugammadex and the Oss, Netherlands, site that Schering had kept as the center of its fertility drug business. Two other Netherlands sites are being shut as well, meaning that labs that were purchased three years ago because of their productivity will no longer exist. The women's health research located at Oss will be moved to the U.S., according to Merck.

A Merck spokeswoman emphasizes that though the physical sites are closing, the important research will continue or even expand. Chief executive Richard Clark said in the press release that the decisions were "difficult" but necessary. The company remains committed to achieving its goal of saving $3.5 billion annually in 2012, with the merger restructuring accounting for $2.7 billion to $3.1 billion toward that target.‹