Merck Picks Insider as CEO
Merck & Co. named Richard Clark chief executive Thursday, turning to an insider to succeed Raymond Gilmartin after an 11-year tenure that was marred by the recall of the Vioxx painkiller and the loss of the company’s position as the world’s largest drug maker.
Merck’s board picked Clark after seeking a replacement from outside the company for more than a year. Clark, president of manufacturing and the former head of Merck’s pharmacy benefit business, will replace Gilmartin immediately, Whitehouse Station, N.J.-based Merck said. Gilmartin, 64, was scheduled to retire in March 2006.
Directors didn’t name the 59-year-old Clark or anyone else chairman. The board set up an executive committee led by former Honeywell International Inc. chief Lawrence Bossidy, a director since 1992, to “work closely” with Clark and “provide support and continuity.” The structure may reflect an effort by the board to accelerate change as the Vioxx withdrawal and patent expirations reduce earnings.
“It would seem like they’re going to keep him on a short leash,” said Les Funtleyder, a healthcare strategist at Miller Tabak & Co. in New York. “How much does he really know about acquisitions or bringing products through the pipeline? Or marketing? He was probably not their first choice.”
Merck shares fell 18 cents to $34.75 on the New York Stock Exchange. The Sept. 30 withdrawal of Vioxx because of a link to heart attacks and strokes wiped out about $26.8 billion in Merck’s market value.
On Gilmartin’s watch starting in June 1994, Merck’s share value rose an average of 11% a year, compared with 11.2% for the Standard & Poor’s 500 index and 16% for the S&P; 500 healthcare index.
The Bossidy-led executive committee will work with Clark for as long as two years, Merck said. Shareholder rights activists and corporate governance experts have long advocated splitting the roles of CEO and chairman at public companies. At Merck’s annual meeting April 26, almost 47% of shareholders voted for such a proposal.
The new CEO, a 33-year Merck veteran, has the challenge of developing new drugs to make up for the loss of Vioxx’s $2.5 billion a year in sales and next year’s patent expiration on Zocor, Merck’s biggest product.
Merck had planned to have a successor in place this year, Bossidy said in a conference call with investors Thursday. He declined to say whether Clark was the first choice. Referring to Gilmartin, Bossidy said, “In no way did we push him out.”
“This was my choice,” Gilmartin said on the call. Gilmartin will remain at Merck as a special advisor.
Merck’s profit fell the last four years. Merck has been trimming expenses to prepare for the decline in Zocor sales and adjust to the lost Vioxx revenue. The company cut 5,100 jobs in 2004, which may reduce payroll and benefits costs by $300 million in 2005.
Clark joined Merck in 1972 as a quality control inspector. As president of Merck’s manufacturing division, he targeted faster new-product introductions, Merck said. Clark also was responsible for Merck’s global information services and procurement and ran Medco Health Solutions Inc. before Merck spun off the business in August 2003.
