Merck's Outside Man
If there were any doubts that Merck (MRK) Chief Executive Officer Richard Clark means to shake up the ailing drug giant, his first major hire dispelled them. On Apr. 3, the company announced Clark had hired Peter Loescher, president and CEO of GE Healthcare Bio-Sciences (GE), to run Merck's global pharmaceutical business. In that newly created position, Loescher will have Merck's four main sales units reporting to him, including the U.S. operation and Merck's growing vaccines division.
The move is a major shift for two reasons: Loescher is an outsider, and he has little in the way of Big Pharma experience in the U.S., Merck's biggest market. Right now, the ranks of the $22-billion drugmaker are filled with longtime Merck managers, including Clark, a Merck lifer. So observers say bringing in an outsider is a clear sign that Clark wants to change the somewhat insular, academic culture at the company (see BW Online, 12/16/05, "Merck's Plan for a Comeback").
At the same time, while the Austrian-born Loescher spent years in Japan for drugmaker Aventis (SNY) and before that in Europe for Hoechst, he hasn't run a major U.S pharmaceutical operation. "Clark is bringing in an outsider to challenge the status quo at Merck," says Trevor Polischuk, an analyst at fund manager OrbiMed Advisors.
Those who know Loescher say he has strengths that will more than offset his lack of experience in the U.S. pharmaceutical market. Loescher came to GE when it bought Amersham, a diagnostics and drug discovery tool company. GE Vice-Chairman Bill Castell, who recruited Loescher to Amersham in 2002, says Loescher was adept at improving the efficiency of operations while also enhancing the company's marketing strategy.
Kai Lindholst, a senior partner at executive search firm Egon Zehnder who knows Loescher well, points out that he's fluent in German, English, Italian, French, and Spanish. "He's one of a very small group of individuals in Big Pharma with that kind of big company experience and extensive multicultural track record who can move into a position of this size with the issues [Merck] is facing," says Lindholst.
Loescher's challenge at Merck is sizable. Faced in recent years with a raft of patent expirations on big drugs and a weak pipeline, industry pros say Merck has lost a lot of talent in its management ranks. The withdrawal of arthritis drug Vioxx from the market in September, 2004, because of stroke and heart-attack risks -- and a subsequent flood of lawsuits -- seriously hurt morale at the company (see BW Online, 11/3/05, "A Weak Tonic for Merck").
The company has recovered some since Clark took over last May, with a number of promising new products moving toward the market, including a much-anticipated vaccine against cervical cancer. Still, Clark is looking to completely overhaul Merck's sales and marketing machine, including reducing the reliance on expensive sales reps and looking for ways to use the Internet to communicate with patients and doctors. The task for crafting and executing that reinvention will now fall to Loescher.
The question is whether he will face management turmoil as he attempts the overhaul. Lindholst says the Loescher appointment was most likely a "bombshell" in the corridors of Merck's top management. If successful in his new role, the 48-year-old Loescher will be widely viewed as an heir to the 60-year-old Clark. (Mandatory retirement age at Merck is 65.) In fact, Loescher's salary was set at $1.1 million, the same as CEO Clark's.
Loescher's hiring is widely viewed as a setback for ambitious executives in the company, including 49-year-old Bradley Sheares, who runs the U.S. pharma operation. No doubt the changes are only beginning at Merck.