(Recasts to add background, analyst comment, shares)
By Vrinda Manocha
March 27 Merck & Co Inc appointed Baxter
International Inc executive Robert Davis as chief
financial officer, as it looks to cut costs and focus on drugs
that are more likely to be approved by regulators.
Merck - struggling with slowing sales, delays in new drug
approvals and failures of experimental drugs - said in October
it would cut 8,500 jobs and chop annual operating costs by $2.5
"The main thing for Davis to focus on is trying to make
Merck's structure more flexible so that it can move more quickly
to areas that have good returns," Morningstar analyst Damien
He said a key decision Davis would have to help make related
to the company's plans for its animal healthcare and consumer
Reuters reported in February that Merck was in discussions
to sell its consumer healthcare business, as part a plan to
narrow its focus to its pharmaceutical products with the best
chance of winning regulatory approval.
Davis, 47, was the CFO of Baxter for four years until May
2010. Since then, he has been running Baxter's medical products
business and oversaw the integration of the medication delivery
and renal businesses, along with manufacturing and research and
"(Davis) will be an asset to us in implementing a
significantly streamlined, more flexible cost structure and
operating model, while enabling us to focus on our
highest-potential growth opportunities," Merck CEO Kenneth
Frazier said in a statement on Thursday.
Faced with patent expiries and competition from generics,
Merck and its peers, including Pfizer Inc, AstraZeneca
Plc and Teva Pharmaceutical Industries, have
aimed to bolter growth by slashing jobs and costs.
Merck is facing slowing sales growth for its biggest
franchise, the diabetes drugs Januvia and Janumet which have
combined annual sales of $6 billion. Sales of its asthma drug,
Singulair, have plunged since its went off patent in 2012.
A year back, Merck brought back one of its veterans to head
research and development after setbacks to some of its most
important experimental drugs.
"We will be closely listening to any comments around further
restructuring and divestitures with a new CFO coming in,"
JPMorgan analyst Chris Schott wrote in a note.
Davis will take on his new role in Merck on April 23,
replacing Peter Kellogg, the company's CFO since 2007.
Kellogg, who was previously CFO at Biogen Idec Inc,
will leave the company on May 16.
"I don't think there was any negative sentiment towards the
outgoing CFO," Morningstar's Conover told Reuters. "He'd really
done a good job with integrating Schering-Plough and a lot of
the cost cutting plans initially."
Davis joined Baxter in 2004 after more than 14 years at Eli
Lilly and Co. The news of his appointment comes on the
same day that Baxter said it would spin off its biotechnology
operations and focus on its core medical technology
Merck's shares were down slightly at about $55.85 in
afternoon trading on the New York Stock Exchange.
(Editing by Rodney Joyce and Savio D'Souza)