Company introduction
Company founded in Germany
In 1668, German pharmacist Friedrich Jacob Merck bought a pharmacy in Darmstadt, Germany, and later renamed it “Merck Angel Pharmacy”, which was the predecessor of Merck in Germany. At that time, China was still in the seventh year of Kangxi, and the Qing dynasty government had just reiterated the ban on overseas trade.
After more than 200 years, under the management of the Merck family, the small pharmacy gradually developed into a pharmacy, and then expanded into a pharmaceutical factory, and the company E. Merck AG was established in 1827. In 1891, George Merck established the American branch of Merck (ticker: MKKGY) in New York – Merck in the United States. In 1903, Merck’s first factory in the United States was completed in New Jersey, replacing the original import business with production.
Assets confiscated by the U.S. government
After World War I, the U.S. government regarded Merck as an enemy asset and confiscated it. It was not until 1919 that George Merck signed an agreement to “sever ties” with the German head office that it regained full control of Merck. In 1953, Merck & Co. merged with Philadelphia-based Sharp & Dohme, Inc., becoming the largest U.S. drugmaker. The combined company kept the trade name Merck in the United States and Canada, and as Merck Sharp & Dohme (MSD) outside North America.
Rise in two world wars
The 20th century was one of the most important turning points in global medicine, during which two major plagues and two world wars broke out, resulting in countless deaths and diseases. However, at that time, the means of scientifically identifying pathogens and treating diseases had not reached the corresponding level, which also provided opportunities for many pharmaceutical companies. Merck of the United States is no exception. Taking advantage of the economic rise of the United States after the two world wars, it has entered the fast lane.
Features of the company
Heavy investment in research and development
Who is the pharmaceutical giant most willing to spend money on research and development today? Merck (ticker: MRK) must occupy a place.
In 2022, the research and development expenses of the top ten pharmaceutical companies in the world will be 104 billion US dollars. Among them, Merck overtook Pfizerticker: PFE) with US$13.548 billion, ranking third. In terms of the proportion of R&D investment in revenue, Merck is also among the best.
Enter China by hepatitis B vaccine
As of now, Merck’s total market value is 289.6 billion US dollars. Although in the past three years, Pfizer, which relied on the fire of the new crown drug, has been in the limelight. In 1986, Merck developed the first gene-recombined hepatitis B vaccine in humans, and then used a nearly “free gift” method to free hundreds of millions of Chinese from the plague of hepatitis B virus.
Once the largest pharmaceutical company in the world
Merck has been the world’s largest pharmaceutical company for 15 consecutive years, and has been awarded the title of “Top Ten Most Admired Companies in the United States” by the US “Fortune” magazine 16 times. How did this well-known pharmaceutical company with hundreds of years of history come about?
History of MSD in the United States
George W Merck’s contribution
George Merck’s son, George W Merck, played a pivotal role in Merck’s growth into a global pharmaceutical giant.
George Merck graduated from Harvard University with a major in chemistry and took over as the head of Merck in the United States in 1926. With a high degree of education, he paid great attention to drug innovation and research and development, and then he invited Tishler, who taught at Harvard, and Richard, a well-known pharmacologist at the University of Pennsylvania, and established the first laboratory in Lowe, New Jersey, recruiting researchers and scientists.
World War II and Antibiotics
World War II was an opportunity, because the fields of war tropical diseases, infectious diseases, nutrition, and blood supply have attracted much attention. Merck of the United States has successively developed short-acting anesthetics such as Vinethene, cortisone, benztropine, and hydrochlorothiazide. Among them, the Ukrainian-Jewish microbiologist Waxman, through unremitting experiments and tests, screened out the antibiotic streptomycin that can cure tuberculosis. The medicine is in the bag. Waksman also won the Nobel Prize in 1952.
Streptomycin made Merck famous
After World War II, tuberculosis became a pandemic in Japan, and Merck also passed on patent fee-free streptomycin to Japan, which aroused heated discussions around the world. In 1950, Merck made the famous statement known to all the world that “drugs are made for human beings, not for profit… As long as you stick to this belief, profit will follow, and always will come… …”.
If streptomycin made Merck famous in the first battle in the United States, then cortisone launched in 1944 pushed the company to a new height. “The New Yorker” once wrote, “The number of diseases that cortisone can treat It’s almost astronomical.” The drug was so expensive in 1951 that Merck needed a newspaper article explaining that the company wasn’t hoarding it.
On August 18, 1952, Merck appeared on “TIME” with the title “medicine is for people, not for profits”.
Hand over to professional managers
Unlike other family businesses, Merck is unconventional on inheritance issues. After Merck, from 1950 to 1964, Merck was replaced by James Kerrigan and John Connor as CEOs. During the two executives, the company developed mediocrely.
M&A and diversification
In 1965, under the wave of diversification of many companies around the world, the new head Henry Gadsen also started the road of diversification through mergers and acquisitions or the formation of companies. The territory covers chemical manufacturing, eye drops production, industrial refrigeration equipment and other fields. The new business not only did not bring much profit to the company, but neglected the pharmaceutical business.
Until Gadsen stepped down as CEO of Merck in 1976, the company had almost no blockbuster products in innovative drugs except Sinamet.
Bet on the vaccine
However, Merck has never stopped in vaccine research and development. Under the leadership of scientist Hilleman, Merck has developed more than 40 vaccines including mumps/hepatitis A/varicella/meningitis vaccines since the 1960s. In the subsequent development of Merck, the first recombinant hepatitis B/Ebola virus/HPV vaccine, cervical cancer vaccine, and rabies vaccine were mostly based on the achievements of scientists such as Hilleman.
Back to pharma
Subsequently, John Honran, who was born in the legal department, became the CEO of Merck. He was the fifth CEO after the establishment of Merck. During his ten-year tenure, Merck ushered in another peak period.
Honran not only returns Merck’s core development strategy to pharmaceuticals, but also focuses on marketing. While focusing on research and development, the company launched timolol, enalapril, cefoxetine and other products, and at the same time opened up the subdivided drug market through cooperation with pharmaceutical companies such as Astra and Shionogi. From 1981 to 1985, the average annual growth rate of Merck’s sales reached 9%.
Become world’s largest pharmaceutical company
Ascend to the throne
Around 1985, Merck had developed into the world’s largest pharmaceutical company. Vagelos, who joined Merck in 1973, contributed a lot. He was the main leader in the development of innovative drugs during Honran’s time in power. In 1985, Merck launched Enalapril, and in 1988, the drug became the first product in the company’s history to break through $1 billion in sales.
Vagelos focuses on R&D
Vagelos took over the leadership from Honran in 1986, and his development philosophy is two words: research and development. In his view, only R&D is the future. The R&D strategy for innovative drugs is to “pick the winners”. It is against this background that Tan et al. came out. Since he became CEO of Merck, the company’s R&D investment has increased from US$570 million in 1987 to US$1.23 billion in 1994.
In addition, Vagelos is Merck’s successor in the humanitarian cause. In 1981, Merck’s recombinant hepatitis B vaccine was approved for marketing. In the early 1990s, Merck, under the control of Vagelos, transferred the vaccine technology to China for US$7 million. According to the agreement, Merck promised to provide China with a full set of technology and train the Chinese side personnel. From research and development to successful clinical trials of innovative drugs in the biopharmaceutical industry, the time and cost are astronomical. When converted, the $7 million requested by Merck is almost equivalent to a “free gift”.
Vagelos also supported and agreed to Merck’s research and development of ivermectin, and provided the drug to the African region free of charge for the treatment of river blindness. In addition, after the AIDS outbreak in the United States in the 1980s, Vagelos shared Merck’s research results on HIV drugs with his opponents in 1987 to jointly fight AIDS.
Continue to dominate
In the 1970s and 1980s, the two CEOs, Honran and Vagelos, predicted Merck’s plan and the global pharmaceutical industry, which quadrupled the company’s sales. From 1974 to 1990, the company’s drug sales increased from 1.197 billion US dollars rose to $5.211 billion. Since around 1985, Merck has dominated the sales list of global pharmaceutical companies for 15 consecutive years by virtue of its efficient research and development of innovative drugs.
Losing the throne and reformation
Consolidation to tackle the patent cliff
Since the 1990s, the R&D cost of innovative drugs has been rising year by year, and all core innovative drugs of world-renowned pharmaceutical companies are facing a patent cliff. The two strategies of buying, buying, buying and strong mergers have become the first choice for pharmaceutical giants to break through the difficulties. Novartis (US stock code: NVS), AstraZeneca (US stock code: AZ), GlaxoSmithKline (US stock code: GSK), etc They were all established during this period, and even Pfizer chose to break through the bottleneck through major acquisitions.
Wrong strategy and was overtaken
However, Gilmartin, the new head who took over Vagelos in 1994, insisted on the strategy of “doing it alone”. He misjudged the global pharmaceutical situation, which directly led to Merck being overtaken by Pfizer in the millennium.
In 2000, Pfizer and GlaxoSmithKline surpassed Merck in prescription sales of $23.15 billion and $22.04 billion, respectively. This year, Merck lost its title of “the world’s number one pharmaceutical company” and has never returned to its peak.
The new head is a medical equipment supplier, and soon exposed his shortcomings in the development of innovative drugs. Although relying on the R&D pipeline left by his predecessor during his tenure, 15 innovative drugs were launched from 1995 to 1999, but when a series of blockbuster products faced a patent cliff, they did not move, leaving Merck behind at the key node of the reshuffle of pharmaceutical companies.
Turbulent times
Merck hardly made any big moves in the first decade of the 21st century. On the contrary, its drugs have also gotten into trouble due to safety issues. In order to quell the successive lawsuits and investigations, Merck spent nearly US$5 billion in compensation and sold its distributor Medco for this purpose.
The following year, Gilmartin resigned, and Richard T. Clark, the former chairman of Medco, took over Merck. After taking office, Clark re-set the direction for Merck, not only increasing the research and development of anti-tumor drugs, but also joining the team of investment and mergers.
Acquisition of Schering-Plough
At that time, Merck was not only behind rivals such as Pfizer and GlaxoSmithKline, but even Sanofi (US stock code: SNY), Novartis, etc. also stepped on the former boss. In 2009, Merck spent US$41.1 billion to acquire the pharmaceutical giant Schering-Plough, which to some extent fired the first shot of Merck’s recovery, and the company’s sales grew rapidly.
Start reform
Two years later, Merck changed coaches again, and Fuweize, who had a legal background, succeeded Clark. After taking office, he continued to seek cooperation, actively invest in mergers and acquisitions, and increase research and development.
In 2014, Merck’s Keytruda (hereinafter referred to as “K drug”) was approved by the FDA for marketing, and its generic name is pembrolizumab. It is the first approved targeted therapy drug that blocks PD-1 and is used for cancer immunotherapy. Humanized Antibodies. K medicine can now bring Merck over 10 billion U.S. dollars in annual sales revenue. In 2022, its sales will reach 20.937 billion U.S. dollars, a record high, breaking the previous generation of “drug king” Humira (a product owned by AbbVie). A record set in 2021.
Back on the right track
In 2022, Merck’s revenue and net profit will both increase, and the rebound will be obvious.
In 2021, Fuwei Ze retired, and Chief Financial Officer Robert M. Davis took over the leadership. Drug K has not only brought hope of recovery to Merck, which has been in decline for more than 10 years, but has also become one of the most important potential products in the history of Merck’s development.
Although in the long enough history of Merck, a series of key figures have achieved success and some have failed. Fortunately, Merck, a big ship, has shown signs of recovery in the continuous change of the head.
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