Get ready for the next breakthrough cancer drug. Merck & Co. is developing pembrolizumab, an investigational anti-PD-1 immunotherapy also known as MK-3475. What makes this treatment so revolutionary is its use of the body’s own natural defenses to fight malignant tumors.
Since March, the Food and Drug Administration has allowed Merck to initiate an expanded access program in which a number of eligible patients with advanced melanoma have been able to receive treatment before final federal approval or outside of the clinical trial process. Merck has received a priority review for this drug prospect as the Octo. 28 FDA deadline nears for the agency to make a decision on a new wave of such immuno-oncology treatments. Moreover, the European Medicines Agency is in the process of reviewing a marketing authorization application for the drug that could be available throughout the continent by the end of the year.
Merck Chairman and CEO Kenneth Frazier views MK-3475 as a game changer with the potential to save millions of lives worldwide. Will Merck win the cancer drug race by beating its Big Pharma competitors Bristol-Myers Squibb and Roche to market? His response: “Let me start by saying that Merck is a company committed to saving and improving lives. With this new immunotherapy for cancer, we have a whole new way of treating people who have different kinds of cancers. We’re investigating it in more than 30 tumor types right now. Of course, we would like to get to market first. We like to be leaders. But the reality of the world is that all of these companies have an opportunity to contribute to the health of cancer patients. If we’re able to do that as an industry, that’s actually great for mankind.â€
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Frazier further makes his case, citing that Merck’s “raison d’être is coming forward with transformational medicines.†And there are plenty of such offerings in the pipeline, including the next generation of drugs to treat HIV as well as a novel treatment for the hepatitis C virus, or HCV, a leading cause of liver damage that has infected around 150 million globally.
Frazier has authorized his team to make significant investments. Since taking the helm, he has given the green light to pumping billions into research and development to attack a host of pernicious diseases. And this fall Merck expects to complete the $3.85 billion acquisition of Cambridge, Massachusetts-based Idenix Pharmaceuticals, which focuses on HCV treatment, to add a third component of a “triple therapy,†combining it with two existing drugs in Merck’s portfolio.
Find out more about Frazier’s path to success on the next page …
Kenneth Frazier covers the latest issue of Black Enterprise magazine. (Image: File)Such groundbreaking developments represent the core of Frazier’s strategic vision, injecting innovation into his operation while pursuing emerging markets. By doing so, Merck can significantly boost sales and meet the needs of its global customers. To achieve that goal, Frazier continues to direct a corporate reorganization–Merck has spent the past five years integrating mammoth Schering-Plough into its culture–and to narrow the company’s focus on “patients and patents.†This thrust was further confirmed by hawking its consumer products line, which included such household names as Coppertone sunscreen and Claritin allergy medicine, to German drug maker Bayer for $14.2 billion. At the same time, he’s charged his team with ensuring that Merck, known as MSD outside of the U.S. and Canada, provides increased access to healthcare for disadvantaged populations domestically and abroad.
Frazier’s approach has served as good medicine for shareholders. During his tenure as CEO, which began Jan. 1, 2011, his management has been responsible for increasing shareholder value; the stock price has appreciated by 86% (see chart).
For his leadership role in bolstering Merck’s corporate performance, driving innovation, and exerting an impact on global health, Frazier has been selected as the 2014 black enterprise Corporate Executive of the Year.
A Massive Global Operation
From Merck’s expansive, lush campus tucked away in Whitehouse Station, New Jersey, 59-year-old Frazier runs a massive operation. Established in 1891 as the U.S. subsidiary of the German company Merck KGaA (the two companies have been separate since 1917), Merck has global reach: Its prescription drugs, vaccines, therapies, and health products treat people in more than 140 countries. The pharmaceuticals goliath grossed $44 billion in 2013, making it the nation’s third biggest drug manufacturer and the largest publicly traded company operated by an African American CEO. The company has more than 76,000 employees across the globe and an additional 1,300 through joint ventures in China and Brazil.
In 2013, the company spent a whopping $7.5 billion in R&D for its team of 12,000 scientists and others to create new drugs and vaccines. As of April 30, it had 34 programs–either in Phase 2 and 3 of development or under review–in its pipeline. It’s essential to keep the products flowing, Frazier says, because pharmaceutical companies are forced into reinvention every decade or so–the rough lifespan of a useful patent before a given medicine is forced to compete with lower-priced generic offerings. So in 2012 when the patent expired for its asthma drug Singulair, which grossed about $1 billion a year, Merck had to replace that revenue with other blockbuster products.
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Frazier’s R&D efforts are expected to pay off big. According to market analysis from Goldman Sachs, although Merck will meet tough competition from Bristol-Myers Squibb, the estimated $20 billion market for cancer immunotherapy drugs will provide room for major players with Merck as one of the leaders. The Goldman Sachs report further states: “[Merck] aggressively advanced their PD-1 program by completing both a U.S. and [European Union] filing ahead of [Bristol-Myers Squibb], and we see today’s news as a positive for the entire PD-1 category. [Merck] expects to have seven clinical studies for regulatory filing in progress by end-2014 (three in melanoma, two in lung, one in bladder, and one in head and neck). As for its hepatitis C treatment, Merck is expected to be a dominant force in the market.â€
Find out more on Frazier’s prescription for growth on the next page …
(Image: Thinkstock)Another element of Frazier’s prescription for growth: a focus on ensuring that developing countries gain access to quality medicines
using Merck’s development and distribution process. He proudly points to the fact that when he was named CEO, 70% of life-saving vaccines were sold in the U.S. Today, just three-and-a-half years later, 66% of them are sold outside the U.S., without lowering the number of domestic purchases. “That means that these life-saving vaccines are going to children in South America, Africa, and Asia,†he says. “The impact on people’s lives can be immense.â€Maintains Executive Vice President and General Counsel Bruce Kuhlik, a 10-year Merck veteran: “I think the biggest challenge that we face right now as a company and in the pharmaceutical industry is the decline of research and development productivity. Where many companies have decided to reduce their investments in R&D, Ken has been the leading force in the industry saying, ‘No, what this industry is all about is discovering new medicines to treat areas of unmet medical need.’ â€
Part of that investment has been bringing in a new R&D chief over the past year, the acclaimed Dr. Roger Perlmutter as its president of Merck Research Laboratories, to bolster the drug discovery, development, and approval process.
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In addition to internal discovery, Frazier also believes that “we need to find ways to access the best science, technology, and products being developed by smaller companies and universities around the world.â€
As you would expect, patents represent currency for Big Pharma. Merck has assembled a crack legal team of roughly 200 lawyers mandated to protect the company’s intellectual property, inoculate it from product liability claims, and ensure that regulatory and compliance requirements are met, among other objectives.
Manufacturing represents another critical operation. It’s been given a directive to increase the production capacity of its vaccines and medicines for 80% of the world’s population by the end of 2015. The division holds manufacturing and supply agreements with local plants in Russia, China, Saudi Arabia, and Latin America.
Head, Heart, and Guts
Observers credit Frazier’s analytical yet accessible leadership style with creating an innovative, precision-obsessed organization. Mirian Graddick-Weir, executive vice president, Human Resources, characterizes Frazier as having the right mix of “head, heart and guts,†borrowing the term from a book on how “whole†leaders transform organizations.
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(Image: Thinkstock)“He’s very good at knowing the right questions to ask so that we all focus on core issues and bring things back to how does this impact our mission. That’s the head part of it,†she says. “On the heart side, Ken has this amazing ability to connect with people at all levels of the organization and hold what I call intellectually honest discussions with them about how we should all be optimistic about the future but also realistic around some of the challenges. Finally, he’s just got this amazing amount of courage and candor. He’s not afraid to take on some of the really tough decisions.â€
Those leadership qualities have been vital to meeting “the synergy target†of $3 billion after the $41.1 billion merger with former rival Schering-Plough. After excising $3 billion of operational
expenses, Frazier required senior managers to identify an additional $2.5 billion in costs by 2015. The key was candid communications with staff members about balancing cost-cutting measures with reinvestment in growth areas such as MK-3475.Whether addressing company town hall meetings or making employee broadcasts, the energetic, enthusiastic Frazier pushes a culture built on “customer centricity‖aligning internal philosophies and processes with exceptional customer service. That’s evident in Frazier’s commitment to corporate diversity in talent development and succession planning. “If you think about it, this process of coming up with medicines and vaccines worldwide is essentially about the human condition, which is by definition a diverse human condition,†Frazier says. “Our job is to make sure that our internal workforce reflects the people that we serve around the world.â€
Frazier’s influence and reputation extend outside Merck, from the power players in global business to the corridors of the White House. “Ken’s passion for making a contribution to society by creating life-saving medicines is genuine and inspiring,†says Ian Read, CEO of Pfizer. “I respect him as both a competitor and a business partner, and as someone I collaborate with as leaders of our industry trade association and the President’s Export Council. I value Ken’s leadership in our industry’s continued effort to advance medical innovation and access to healthcare for patients around the world.â€
The Humanitarian Touch
Frazier’s passion to serve as a skillful change agent began to develop in his early years. Growing up in poverty-stricken North Philadelphia, he and his two siblings were raised by his father, Otis, after his mother died when he was 12. Along with civil rights leader Martin Luther King Jr., and the first black Supreme Court justice Thurgood Marshall, Frazier’s father, a janitor and former sharecropper, graces the top of his list of heroes. The elder Frazier instilled in young Kenneth the drive for education and excellence. Frazier didn’t disappoint his father: He graduated with highest honors from Pennsylvania State University in 1975 and from Harvard Law School in 1978.
For the next 14 years, the ambitious attorney would work at the Philadelphia law firm of Drinker Biddle & Reath, where he rose to become partner. He represented corporate clients that included AlliedSignal and Merck. The case that won Frazier the greatest praise, however, is the pro bono work he did that won the release of James Willie “Bo†Cochran who was wrongly convicted for killing a white man in Alabama. Cochran had spent 21 years on death row.
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Kenneth Frazier (Image: File)Counseled by the venerable Merck Chairman and CEO Dr. P. Roy Vagelos, among others, who helped him “get out of my comfort zone,†Frazier accepted a position at Merck in 1992. During his tenure as general counsel, Frazier cemented his reputation for his grace-under-pressure approach to problem-solving as he led the company through thousands of lawsuits regarding the alleged harmful effects of the painkiller Vioxx. Kuhlik, who was hired by Frazier to serve as associate general counsel at the time, remembers witnessing the development of Merck’s unflappable leader: “He was an absolute rock. Two of the real strengths that I
think he has came through for me there, and he’s applied them elsewhere. One is that he’s absolutely fearless. He will not back down from a challenge and will do everything that it takes to succeed. That’s combined with a remarkable set of analytical skills. He saw how the pieces would fit together and what needed to happen in order to achieve the objectives.â€That can also be said about his humanitarian approach to business.
There’s a bronze sculpture in Merck’s lobby of a blind African man being led by a boy along the bank of a river. When Frazier looks at the statue, entitled “Sightless Among Miracles,†he beams with pride. It commemorates the 25th anniversary of Merck’s Mectizan Donation Program which started in 1987–the longest-running initiative and public—private partnership of its kind–to treat millions in African and South American countries who suffered from the parasitic disease river blindness. In December 2007, Merck announced a contribution of $25 million over eight years as part of an initiative with the World Bank to raise about $50 million to help eliminate the disease in Africa. The World Bank has raised the remaining $25 million, providing all the funding necessary for 28 African countries affected by river blindness to develop self-sustaining Mectizan distribution programs by 2015.
That type of commitment fused with Frazier’s own sense of humanity has led to the creation of Merck for Mothers, a 10-year, $500 million program that seeks to reduce maternal mortality. The company recently partnered with Women in the World to raise awareness and promote treatment. Working closely with the World Health Organization, Frazier and his team took the effort a step further by seeking to develop medical solutions. “Scientifically, we are very excited about working on an opportunity to take the drug, Carbetocin, which is a very good drug but needs to be refrigerated. It’s commonly used for this kind of hemorrhaging,†he explains. (A leading cause of maternal mortality is post-partum hemorrhage.) “We’re looking to make a heat-stable version of that drug which can be used in the field. Obviously, if you have to refrigerate it, it’s not of use in [parts of] India and sub-Saharan Africa, where refrigeration isn’t available,†he adds.
He expends the same energy on projects not related to Merck. For instance, he and his wife, Andréa, are part of the founding board of Cornerstone Christian Academy, a school serving roughly 250 children from one of Philadelphia’s poorest census tracts. “Our goal as a school is to provide a first-rate education in the context of Christian upbringing so that the children can gain not only the academic skills they’re going to need to compete in the world, but also a sense of who they truly are and of their responsibilities to their fellow humans. I think they could be future leaders of Merck. They could be future leaders of this country,†Frazier says. “My life story, if it has any meaning, based on my father’s beliefs, means that being born poor doesn’t mean that you’ll always end up there. Your story isn’t written. You get to write that story. You get to determine your future. â€
–Additional reporting by Richard Spiropoulos