March 27, 2014 / 12:50 PM / in 4 years

UPDATE 2-Merck names Baxter exec as CFO

(Recasts to add background, analyst comment, shares)

By Vrinda Manocha

March 27 (Reuters) - 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 billion.

“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 Conover said.

He said a key decision Davis would have to help make related to the company’s plans for its animal healthcare and consumer business.

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 development.

“(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 business.

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)

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