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October 19, 2011
Reorg at Merck? (And a Complaint about Wall Street)
I haven't had any chance to verify this, but I've heard from a source that I have no reason to doubt that Merck may be announcing details of a reorganization in R&D later this week. Anyone else heard the same?
And on a similar topic, here's a post from John LaMattina asking what many people have at one point or another: how come Wall Street analysts get so much influence over how much a drug organization spends on R&D? His examples are Merck, Lilly, and Amgen, and his take is:
Now, I am all for monitoring R&D budgets to maximize the returns from these investments. And I am all for accountability – asking the R&D organization to deliver new candidates to the pipeline, having formal goals with rigorous deadlines, and for running clinical trials as expeditiously as possible while keeping a close eye on costs. But for Wall Street to reward a company for lowering R&D spending and attack those that want to commit to R&D is absurd. Like it or not, R&D IS the engine that powers a pharmaceutical company. It is also a high-risk endeavor. Furthermore, given all of the hurdles that now exist especially with regard to ensuring safety and having sufficient novelty to justify pricing, R&D is more expensive than ever. But, if you want to succeed, you have to invest – substantially. There are no short cuts.
Wall Street's answer, which may be hard to refute, is that if you want the access to capital that the stock market provides, then you have to accept the backseat driving as part of the deal. But do we get the same degree of it as other industries, or more?
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