NEW YORK (Reuters) - Merck & Co (MRK.N) President Kenneth Frazier will succeed Richard Clark as the U.S. drugmaker’s chief executive officer, with the enviable task of bringing to market an array of experimental drugs deemed second to none by many industry analysts.
Frazier, 55, initially made his name at Merck as general counsel by steering the company safely through daunting litigation over Vioxx, its widely used painkiller that was withdrawn in 2004 after being linked to heart attacks.
More recently, Frazier played a significant role in Merck’s $41 billion acquisition a year ago of U.S. drugmaker Schering-Plough Corp and has overseen the combined company’s research, manufacturing and marketing operations.
The Vioxx withdrawal raised concerns Merck would be tangled for years in litigation and eventually have to shell out $10 billion or more to thousands of plaintiffs.
But Frazier’s legal strategy led to a $4.85 billion settlement in 2007 that largely ended the Vioxx crisis and allowed the company and Wall Street to refocus on its pipeline of experimental medicines.
His promotion, effective Jan 1, has been expected since the 18-year Merck veteran was named president in April, after having served since 2007 as head of the company’s high-profile global pharmaceuticals division.
Clark, who in March turns 65, the mandatory company CEO retirement age, will continue as board chairman.
A rapid-fire talker who is apt to quickly dispense with formalities — “Call me Ken” is an oft-used greeting — Frazier stays ship-shape with five-mile runs and has a penchant for history when time allows for outside reading.
“I do try to stay active in terms of running, although my knees are telling me I need to find an alternative,” said Frazier, whose energy and high-wattage personality will be put to the full test when he takes helm of Merck and its global operations.
The company is in the process of reducing its workforce by 15 percent, or about 15,000 jobs, to achieve $3.5 billion in planned annual cost savings by 2012 from the merger. By closing more than a dozen research and manufacturing sites, Merck hopes to strengthen its finances before the company’s $5 billion-a-year asthma drug Singulair faces generic competition in two years.
Frazier joined Merck in 1992 as general counsel of the company’s joint venture with Swedish drugmaker Astra, and within two years became Merck’s head of public affairs. He became the drugmaker’s senior general counsel in 1999, and took charge of global pharmaceuticals in 2007.
In this role, according to Merck, Frazier helped design a new sales model and redeployed resources to emerging markets, where the drugmaker is targeting future growth.
“I don’t think there will be any major immediate changes at Merck because Ken has helped put into place the current plan,” said Deutsche Bank analyst Barbara Ryan. “Now he will execute on that plan.”
At a time when Merck and its rivals are girding for costly patent expirations on their biggest drugs, the Schering-Plough deal gave Merck numerous drugs in late-stages of testing that are deemed potential blockbusters.
They include a blood clot preventer and a promising treatment for hepatitis C. Merck has itself been developing a medicine to raise “good” HDL cholesterol that analysts believe could fetch annual sales of $5 billion or more.
Frazier, who will become the only black CEO among large U.S. and European drugmakers, also sits on the board of Exxon Mobil Corp (XOM.N) and Pennsylvania State University.
Clark became CEO in 2005, when the company was reeling from the Vioxx withdrawal.
As Merck’s head of manufacturing, Clark was a fairly obscure figure when he was picked to replace then-CEO Ray Gilmartin in 2005.
But he emerged as one of the industry’s most aggressive CEOs, controlling the Vioxx fallout and leading a cost-cutting and efficiency drive at the drugmaker.
“When Clark became CEO, the company was like a broken shoestring, but he mended it back together,” said Barclays Capital analyst Tony Butler.
Merck shares were down 19 cents at $34.50 in afternoon trading on the New York Stock Exchange.
Reporting by Lewis Krauskopf and Ransdell Pierson; Editing by Derek Caney, Dave Zimmerman