Merck undergoes restructuring after Schering-Plough merger

Aug 31 2009

Richard T. Clark, chairman, president and chief executive officer of Merck & Co., Inc. (NYSE: MRK) today announced a new organizational structure and named top management and senior leaders for the new Merck effective upon completion of the merger of Merck & Co., Inc. and Schering-Plough Corporation (NYSE: SGP). Mr. Clark was named CEO of the combined company when the merger agreement was signed in March.

The new structure will build on the combined strengths of Merck and Schering-Plough to create a more customer-focused, innovative and diversified global health care company positioned to capitalize on the greatest opportunities for growth. Animal Health and Consumer Health Care will operate as separate business units reporting to Mr. Clark.

The new company will integrate across its divisions to take advantage of the significant growth opportunities in three key areas: emerging markets, biologics and vaccines. This cross-divisional approach will ensure that the new Merck's commercial, research and manufacturing divisions dedicate the focus and resources necessary to become a leader in these businesses.

The organizational structure for the new Merck is designed to capture the opportunities in the broader and deeper in-line pharmaceutical franchises that will be created through the integration of Merck and Schering-Plough products. The company also will create new franchises focused on Women's Health and Endocrine, and Mature Brands.

The new Merck will benefit from the unparalleled industry experience of senior leaders from both Schering-Plough and Merck. The leaders named by Mr. Clark today will serve on the company's new Executive Committee. They, in turn, named the executives who will lead their divisional and functional teams at the new Merck. About 40 percent of Schering-Plough's senior leaders will be part of the newly combined company in executive roles. As was indicated at the time of the merger announcement last March, a substantial majority of Schering-Plough employees will remain with the combined company.

“Today’s announcement is an important step in establishing the new Merck as the leading global health care company – one that will make a difference in the lives of patients around the world,” said Mr. Clark. “The combined company will draw upon the expertise of the people of both Schering-Plough and Merck. Collectively, the new leadership team has decades of industry experience and proven management track records. To complement our joint talent, we will be adding leaders from outside the two companies with specific experience in key areas. I am confident that the new Merck will have the right team in place to be able to deliver on the promise of this strong combination with Schering-Plough.”

The new Merck will have five primary divisions: Global Human Health; Animal Health; Consumer Health Care; Merck Research Laboratories; and Merck Manufacturing. Each division and global support function leader will be a member of the new Merck Executive Committee and will report directly to Mr. Clark.

Global Human Health

Kenneth C. Frazier, currently executive vice president and president of Global Human Health (GHH), will lead the new GHH organization.

The new GHH organization will include the company's prescription, vaccines and biologics businesses. The combined GHH will have a broad portfolio of innovative in-line medicines and vaccines that, with the robust late-stage pipeline and an expanded global presence, will enable GHH to drive the combined company's growth in markets around the world.

A new Emerging Markets group will be part of the new GHH organization and charged with focusing on regions and markets around the world that represent significant new growth opportunities. These include China; Asia Pacific; Latin America; and Middle East/Africa/Eastern Europe, including Russia and Turkey.

The leadership team for GHH, which will be the new company's largest division, will include experienced executives from Merck and Schering-Plough.

Animal Health

Raul E. Kohan, currently senior vice president and president of Intervet Schering-Plough Animal Health, will lead the new Merck's animal health business. Mr. Kohan will report to Mr. Clark and serve on the Executive Committee.

Schering-Plough's Animal Health business is a world leader with market-leading products for a broad range of species and strong growth potential. The division has more than 1,000 marketed products and generates approximately $3 billion in revenues from business operations in more than 140 countries.

Consumer Health Care

Stanley F. Barshay, currently chairman of Consumer Health Care at Schering-Plough, will lead this business for the new Merck on an interim basis while the company searches for a permanent leader. Mr. Barshay will report to Mr. Clark and serve on the new Merck Executive Committee.

Mr. Clark said the new company plans to place an increased emphasis on growing the consumer business, particularly in markets outside the United States. Schering-Plough's Consumer Health Care business currently includes a number of iconic global brands such as Claritin, Coppertone and Dr. Scholl's.

Merck Research Laboratories

The new Merck Research Laboratories (MRL) will be led by Peter S. Kim, Ph.D., currently executive vice president and president of MRL.

The new structure for MRL is designed to foster innovation while instilling greater accountability at all stages of the R&D process through two core functions: 1) discovery and pre-clinical development, and, 2) clinical development and regulatory affairs. In addition, a new central franchise structure focused on portfolio management will be aligned with the company's Global Human Health division. The new MRL will continue its focus on pursuing the best science around the globe through a Worldwide Licensing group.

The combined research organization will have three new areas of dedicated focus -- emerging markets, vaccines and biologics -- to build on the significant investment that both Merck and Schering-Plough have made in this area.

Mr. Clark is taking a number of steps to ensure that the combined company will deliver on the science behind the merger. Four of the top leaders from Schering-Plough Research Institute (SPRI) will hold leadership positions in the new MRL in senior preclinical, clinical and licensing roles. Most of the basic research heads for SPRI's research sites will remain in their roles following the merger. The new Merck is preparing for the broad integration of MRL and SPRI employees, and plans to maintain the continuity of key late stage development programs from Schering-Plough including, TRA (thrombin receptor antagonist), Simponi^®, Saphris^®, boceprevir, Bridion^®, and IMPROVE-IT.

Merck Manufacturing

The new Merck Manufacturing division (MMD) will be led by Willie A. Deese, currently executive vice president and president of MMD.

MMD will create a strong, interdependent global supply chain fully focused on the needs of the combined company's customers. It will include new units for consumer health and animal health, and expanded technological capabilities for vaccines and biologics.

Global Support Functions

The new Merck Executive Committee will also include leaders of the following global support functions: Mirian Graddick-Weir, executive vice president, Human Resources; Peter N. Kellogg, executive vice president and chief financial officer; Bruce N. Kuhlik, executive vice president and general counsel; and, J. Chris Scalet, executive vice president, Global Services and chief information officer.

Mr. Clark said that Richard S. Bowles III, Ph.D., currently senior vice president of Global Quality Operations at Schering-Plough, will serve as chief compliance officer at the new Merck. Mr. Bowles will help ensure that the new Merck leads on ethics and compliance through central leadership and management of these activities. He will report directly to Mr. Clark and serve on the Executive Committee.

As part of new Merck's commitment to ensuring the well being of patients worldwide, the company will appoint a chief medical officer following an internal and external search of candidates. This person will report directly to Mr. Clark and serve on the Executive Committee.

Smooth Integration

Integration teams from Merck and Schering-Plough are continuing to work together to ensure that following the completion of the merger the combined company is well equipped to begin its first day of business. Adam Schechter will continue leading the integration effort for the new company, reporting to Mr. Clark in this role, and will also lead the combined company's U.S. market. Brent Saunders, who has been leading Schering-Plough's integration team, also will continue to support the integration process following the merger's close.

Mr. Clark said, “Our integration teams have been busy laying the groundwork for the combined company and, thanks to their hard work and dedication, our integration planning is proceeding smoothly and on schedule.”

Merck and Schering-Plough continue to expect the transaction to close in the fourth quarter of 2009. Until that time, Merck and Schering-Plough will continue to operate as separate companies.

As previously announced, shareholders of both companies voted overwhelmingly to approve the proposed merger. The transaction remains subject to the satisfaction of customary closing conditions and regulatory approvals, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as clearance by the European Commission under the EC Merger Regulation and certain other foreign jurisdictions.

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