Merck's Risky Bet on Research

In early January, not two weeks into his job as chief executive officer of Merck (MRK), Kenneth C. Frazier got word that a safety panel had shut down a nearly completed 13,000-patient study of an experimental drug. It was vorapaxar, a blood thinner touted as the prize jewel in Merck's pipeline. Some analysts had predicted sales could reach $5 billion a year.

Despite the setback, the litigator, 56, with just three years of operational experience at Merck, announced on Feb. 3 that the company was doubling down on new-drug development and plans to spend as much as $8.5 billion on research in 2011. That hefty sum vaults Merck to the top ranks of research spending worldwide, neck-and-neck with longtime leaders Pfizer (PFE), the world's biggest drugmaker, and software giant Microsoft (MSFT).