This week, another pharmaceutical executive has stepped down, Elmar Schnee, head of the pharmaceutical division of Merck KGaA (Darmstadt, Germany). His departure follows other high-profile changes among the pharmaceutical executive ranks, namley Jeffrey Kindler leaving as head of Pfizer (New York) and Richard Clark turning over the helm of Merck & Co. (Whitehouse Station, NJ). These former executives and their successors face an all-too familiar challenge—the pressure for successful product development in light of looming patent expirations and the need to implement new strategies for revenue growth.
Schnee suffered two recent product setbacks while at Merck KGaA. In September 2010, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) issued a negative opinion regarding the marketing authorization application for cladribine tablets as an oral treatment for relapsing-remitting multiple sclerosis. Cladribine was approved in Russia in July 2010 and in Australia in September 2010 and is under regulatory review in the US. Also, in November 2009, CHMP issued a negative opinion for Merck KGaA’s Erbitux (cetuximab) in combination with platinum-based chemotherapy for treating non-small-cell lung cancer. Erbitux is approved for other cancer indications, colorectal cancer and squamous cell carcinoma of the head and neck. The drug posted 2009 sales of EUR 697 million ($932 million). Analysts had projected both drugs as potential blockbusters with sales in excess of EUR 1 billion ($1.3 billion), according to a recent Wall Street Journal article.
Merck KGaA named Stefan Oschmann, former president of emerging markets of the US-based Merck & Co., as the new head of Merck KGaA’s pharmaceutical division. The move is seen by many as an interest by the German chemicals and pharmaceutical company to further internationalize its pharmaceutical operations. Merck Serono is the key piece of Merck KGaA’ pharmaceutical business, which posted sales of EUR 5.3 billion ($7.1 billion). The company also has a consumer healthcare business.
Although vastly different in size, the recipe for change was similar at Pfizer when the company announced earlier this month that it had appointed Ian C. Read, formerly head of the company’s global biopharmaceutical operations, as president, CEO, and director, succeeding Jeffrey B. Kindler. Read has led Pfizer’s worldwide biopharmaceutical businesses since 2006 and also has international experience. Read joined Pfizer in 1978 and assumed positions of increasing responsibility in Latin America. In 1996, he was appointed president of Pfizer’s International Pharmaceuticals Group, with responsibility for Latin America and Canada. He was named corporate vice-president in 2001, and assumed responsibility for Europe. Pfizer also appointed George A. Lorch, who has served as an independent director since 2000, as nonexecutive chairman of the board of directors.
Under Kindler’s tenure, Pfizer acquired Wyeth for $68 billion in 2009. He leaves Pfizer as the number one global pharmaceutical company, but with revenue uncertainty in light of looming patent expirations. The key challenge for Read in taking over the helm of Pfizer will be to contend with the patent expiration of Lipitor, the company’s and the pharmaceutical industry’s top-selling drug. Lipitor had 2009 sales of $11.4 billion, accounting for approximately 23% of Pfizer’s 2009 global sales. Pfizer’s difficulty in replacing that loss with new products, exemplified by the late-stage failure of torcetrapib, the hoped-for Lipitor replacement, has raised concerns. Other blockbluster drugs are slated to lose US basic product patent protection in the near term, according to the company’s 2009 annual report. Some key products are Celebrex ($2.4 billion in 2009 sales, patent expiration in 2014), Viagra ($1.9 billion in 2009 sales, patent expiration in 2012), Xalatan ($1.7 billion, 2011 patent expiration), Detrol ($1.2 billion, 2012 patent expiration), and Geodon ($1.1 billion, 2012 patent expiration).
US-headquartered Merck & Co. named Kenneth Frazier, formerly president of Merck & Co., as CEO and president, effective Jan 1., 2011, succeeding Richard Clark, who is continuing as chairman of Merck & Co. Frazier will lead Merck & Co. following its $49-billion merger with Schering-Plough (Kenilworth, NJ) in 2009. The move was in line with a succession plan at Merck & Co. with Clark first ceding the role of president to Frazier in April 2010. Merck & Co. faces the US patent expiration for its top-selling drug, Singulair (2009 sales of $4.7 billion) in August 2012.
These new CEOs and other pharmaceutical executives will continue to be put to task to navigate the uncertainty of drug development while meeting short-term and mid-term revenue expectations. How they will respond to these challenges is not only important for individual companies but for the industry as a whole. As we near the end of 2010, a question to be answered during the next several years will be whether the platforms for revenue growth taken by these and other companies, such as emerging-market growth strategies, product-development intensification in biologics, and merger and acquisition activity, will be sufficient or will be the industry be due once again for another changing of the guard.