Merck CEO seeks drug add-ons, not large tax-inversion deals

Merck & Co., the second-biggest U.S. drugmaker, is staying in the United States and sticking to a bolt-on acquisition strategy, shunning the route taken by its biggest rival, Pfizer Inc.

Merck, maker of the diabetes pill Januvia, is not interested in large-scale purchases that are "very time-consuming and distracting to what we're here to do, which is invest in new medicines," Ken Frazier, Merck's chief executive officer, said in an interview Tuesday. Merck also isn't looking for a cross-border deal to lower its tax rate, he said.

Instead, "we're trying to get Congress to look at how all U.S. firms are at a huge disadvantage" and encouraging tax reform, Frazier said.

Both Merck, of Whitehouse Station, N.J., and Pfizer, of New York, have large operations in the Philadelphia region.

Frazier is sticking to Merck's longtime strategy despite a flurry of deals in the pharmaceutical industry, many designed to lower tax rates. This includes AbbVie Inc.'s $55 billion takeover of Ireland-based Shire P.L.C., announced July 18, which will make it the largest U.S. company to move its legal address abroad for lower taxes. The generics-maker Mylan Inc. and medical-device maker Medtronic Inc. have also announced cross-border acquisitions.

Viagra maker Pfizer, the biggest U.S. drug company, tried for its own deal with a proposed $117 billion takeover of London-based AstraZeneca P.L.C. The offer was rebuffed, and talks could resume as soon as next month if AstraZeneca invites Pfizer back to the table, or in November after a U.K.-imposed waiting period.

Ian Read, Pfizer's chief executive officer, said in a conference call with analysts Tuesday that the company was looking at a "wide spectrum of M&A transactions."

Merck on Tuesday reported second-quarter profit that topped analysts' estimates by 4 cents as it cut costs and realigned its drug-development focus. Net income more than doubled to $2 billion, or 68 cents a share, from $906 million, or 30 cents, a year earlier. Revenue fell 1 percent to $10.9 billion.

The company last year said it would fire 8,500 workers in a move to save $1 billion, trimming research and development, sales, and management. Last week, Merck informed Pennsylvania officials that in the coming weeks it would cut 600 jobs at facilities in North Wales and Lansdale.

Merck also has been reprioritizing its research focusing on drugs that use the body's immune system to fight cancer and treatments for hepatitis C and metabolic disease.

Frazier said he would look into more bolt-on acquisitions like the purchase of Idenix Pharmaceuticals in June for its experimental hepatitis C drug. Merck is developing a four- to six-week therapy that will compete with Gilead Sciences' $1,000-per-pill treatment Sovaldi.

Merck shares rose 1.1 percent, or 61 cents, to $58.58.

Pfizer's second-quarter earnings, also announced Tuesday, fell 79 percent from last year, when it booked a $10 billion-plus gain from a business spinoff.

Pfizer said it earned $2.91 billion, or 45 cents per share, down from $14.1 billion, or $1.98 per share, last year. Adjusted earnings totaled 58 cents per share, a penny more than analysts expected.

Revenue slipped 2 percent to $12.77 billion.

Pfizer shares fell 1.2 percent, or 37 cents, to $29.73.