Monday, November 29, 2004

Parachutes for Merck execs in post-Vioxx period

Merck has adopted a special severance plan for about 230 managers. Note that part of the motivation for a special plan for Merck managers is the loss of patent protection for Zocor in 2006.

-->from Reuters

Merck & Co. Inc. has adopted a severance benefits plan aimed at protecting key managers in the event the company is taken over -- a growing possibility since the withdrawal of arthritis drug Vioxx sent shares tumbling.

Participants in the plan must sign a release of claims against the company, and a commitment not to solicit company employees for two years following the change in control.

[Barbara] Ryan said the plan, by guaranteeing pay and benefits to senior managers, could discourage them "in the short run" from jumping to rival drugmakers.

But she said morale at the company and the mood of shareholders will continue to be sorely tested because Merck's earnings will likely decline through 2007, in part due to the slated loss of U.S. patent protection in 2006 on its Zocor cholesterol fighter.

Ryan said the two companies most likely to make a bid for Merck, were a bid to emerge, are London-based drugmaker GlaxoSmithKline Plc (GSK.L) and Novartis AG (NOVN.VX) of Switzerland.

She said Glaxo wants to grow into a company closer to the size of New York-based Pfizer, the world's largest drugmaker, and that Glaxo would also bolster its line of heart drugs by acquiring Merck. <--


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