Merck's CEO Ken Frazier said that he will continue to spend on R&D to create new drugs regardless of the various investor and analyst calls for him to cut back. He says "science and innovation" are in his company's DNA.
"I'm trying to run the company in a way that I can satisfy the short- and intermediate-term needs of investors without sacrificing really what we're about," said Frazier.
I'm glad to see it. I think it is the right call and is courageous to do. The pharma industry does depend on innovation and discovery. While it may be fine to redeploy some R&D spending into various new models (e.g. hubs, partnerships, biotech acquisitions, academic collaborations) rather than sticking to only in-house groups, it is a mistake to make drastic cuts for the short-term pleasure of shareholders at the expense of long-term company health.
Posted by Bruce Lehr July 19th 2011.