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Merck CEO says public service is in his future, but not politics, as he plans June retirement


Among the primary issues Ken Frazier says he reads in the mornings are the obituaries in the New York Times.

“It’s not morbid,” Frazier, 66, mentioned Thursday in a phone interview. “The reason you read them is because most of us spend our life polishing our resume … and my dad used to say, ‘It’s what they say about you at the end that matters. Did you care about people?’ That’s not on your resume.”

Frazier has fairly the resume, which can get an replace in June when he retires as chief govt officer of Merck after 10 years on the helm. Frazier will develop into the pharmaceutical large’s govt chairman for some time frame, whereas the corporate’s chief monetary officer, Robert Davis, turns into CEO.

Frazier’s time main Merck noticed a dramatic shift in the way in which some types of most cancers are handled, and Merck was the developer of the biggest drug behind that new wave of most cancers immunotherapy: Keytruda. The drugs drew greater than $14 billion in gross sales final 12 months, 29% of Merck’s whole income, main some on Wall Street to query if the corporate is too reliant on its star drug.

Frazier turned a reluctant chief amongst CEOs as the primary to step down from a White House manufacturing council after former President Donald Trump described White supremacists who violently marched in Charlottesville in 2017 as “very fine people.” It put a highlight on the CEO that he hadn’t sought.

But it is one which associates and colleagues say they’re completely happy he’s accepted.

“I think Ken reminded everyone that we could no longer afford to look away,” mentioned Dr. Tony Coles, CEO of biotech firm Cerevel, who’s recognized Frazier since they each began at Merck in 1992. “No longer was it simply acceptable for business leaders to remain inwardly focused on their companies.”

A deal with analysis

When Frazier’s requested what he’s proudest of over his time as Merck’s CEO, he factors to the science.

“When I took over, the Street was saying you shouldn’t invest in research,” Frazier recalled by cellphone on Thursday. “There was one publication, I can’t remember which, that said CEOs could create value in the industry by cutting research and investing in non-pharma assets.”

It was a time when corporations like Valeant had been catching the attention of hedge fund buyers, shopping for up different drug corporations and slashing analysis budgets. Frazier, employed by legendary Merck CEO Roy Vagelos, bucked that development. Between 2010 and 2020, Frazier elevated Merck’s analysis funds by 24%, to $13.6 billion.

“I tried to keep the flame,” Frazier mentioned. “I tried to keep the heritage of Merck. Merck is a science-based company.”

But that technique was out of vogue, he mentioned, “and our stock went way down.”

In 2013, Frazier made one of the crucial consequential choices of his time as CEO: he requested Dr. Roger Perlmutter to re-join the corporate as chief of analysis.

“Roger made this company what it is,” Frazier mentioned. “I want to be very clear.”

But Frazier additionally acknowledged his personal position in luring Perlmutter again. The physician-scientist, who’d left Merck and moved to California to steer analysis at Amgen, “doesn’t come back unless he really believes that I believe in that heritage, right?” Frazier mentioned. “You don’t leave sunny Santa Barbara to come to Rahway, New Jersey, unless you’re going to come work for somebody who really believes in what Merck stood for.”

The subsequent 12 months, the Food and Drug Administration authorised Keytruda, amongst a wave of recent therapies that harness the immune system to struggle most cancers. It’s now cleared for greater than 20 completely different settings in most cancers, and famously was used to efficiently deal with the melanoma that had unfold to former president Jimmy Carter’s liver and mind.

Criticisms

Frazier’s tenure as CEO did not escape criticism from the investor or the medical group. Dr. Peter Bach of Memorial Sloan Kettering Cancer Center mentioned the way in which Merck has run medical trials for Keytruda seems to him to be extra of a company technique to generate income, reasonably than yield data that might be most useful about how the drugs might greatest be used.

“They are ‘spreading their bets,’ launching dozens and dozens of smallish trials in an endless array of indications,” Bach wrote in an e-mail. “But small trials, particularly of important therapies like Keytruda, don’t shed that much insight into the proper use of therapies.”

The firm additionally got here beneath hearth in 2019 for a scarcity of an previous but important drug for bladder most cancers recognized as BCG. Other drug corporations had stopped manufacturing the remedy, which is advanced to make but cheaply priced — a dropping mixture for the pharmaceutical trade — and Merck was left as the only real producer. Merck greater than doubled its manufacturing, but nonetheless could not meet demand, which means some most cancers sufferers had to make use of costlier, and sometimes much less appropriate, therapies.

Dr. Benjamin Davies, a urologist at UPMC, bristled on the amount of cash Merck was making from Keytruda whereas declining to take a position in a brand new plant to make BCG.

“They have a financial responsibility to their investors,” Davies mentioned on the time. “But I think you have a moral obligation as well.”

Ultimately, Merck agreed, and mentioned in October it deliberate to take a position in constructing a brand new manufacturing facility for the drugs. But the corporate warned it would take 5 to 6 years to assemble, which means the shortages will not instantly be alleviated.

Davies, contacted Thursday, referred to as it a “cloud on an otherwise amazing career.”

On Wall Street

From buyers’ perspective, “Merck has done OK by big pharma standards,” mentioned Les Funtleyder, a long-time health-care investor at E Squared Capital Management.

Merck’s inventory greater than doubled beneath Frazier’s management, but that is just like the efficiency of rival Pfizer (whose CEO, Albert Bourla, wished Frazier properly through Tweet on Thursday), and far lower than rivals like Eli Lilly, whose inventory is up virtually five-fold in the identical interval.

Even so, a lot of the criticism would not stretch to Frazier himself. Funtleyder described him as “the most approachable of any of the pharma CEOs.” He was keen, Funtleyder mentioned, “to speak with any investor at any time. He didn’t hide in his office like most of the rest of them.”

President Donald Trump, proper, speaks as Ken Frazier, chairman and chief govt officer of Merck & Co., listens throughout a gathering with representatives from the Pharmaceutical Research and Manufacturers of America (PhRMA) on the White House in Washington, D.C., U.S., on Tuesday, Jan. 31, 2017.

Ron Sachs | Pool | Bloomberg

Bach, a famous critic of the drug trade, really makes use of a photograph of himself sitting subsequent to Frazier as his profile image on Twitter. He mentioned his respect for the CEO grew as he bought to know him personally, and was heightened first by Frazier’s choice to “walk out on Trump’s CEO nonsense after Charlottesville,” after which by his warning on overpromising on vaccines through the pandemic.

“If all the CEOs were like him,” Bach mentioned, “the industry would be entirely different.”

Funtleyder added: “I hope he runs for office.”

Next steps

Frazier mentioned that is not in his plans.

“I want to do public service, but public service doesn’t mean elected office,” Frazier mentioned.

He declined to say exactly what his future plans entail, although famous he’s had quite a lot of presents.

“I care very much about issues of equity and justice, particularly around education,” Frazier mentioned. “The thing I care most about is opportunity.”

He cited an initiative he co-chairs referred to as OneTen, which goals to shut the chance hole for Black Americans.

“Almost 80% of African-Americans at age 26 don’t have a four-year degree,” Frazier identified. “If you require a four-year degree as a pre-requisite, you’re excluding people structurally who can develop the skills to do valuable work, so they don’t get earned success.”

Frazier was a singular voice after the dying of George Floyd final summer season. He joined CNBC on June 1 and in uncooked testimonial described the “huge amount of pent-up anger among many people in the African-American community.”

“This African-American man, who could be me or any other African-American man, is being treated as less than human,” Frazier mentioned. “I think what really caused the spark that set all of this off is: what is the reaction of the officials to what I just said? You now have this videotape and for four days, there’s no action. No one thinks that this is worthy of even putting the officer under arrest.”

Void on the prime

With Frazier’s retirement, there will probably be solely three Black CEOs of corporations in the Fortune 500 Index.

“I don’t think we’ve done enough,” mentioned Coles. “I don’t think we have looked hard enough, I don’t think we have had, maybe, the courage to make better, faster progress.”

But he additionally famous, regardless of Frazier’s affect on social justice, “we should start with the fact that Merck has performed exceptionally well, because to only call him a social justice warrior would understate what he’s done for society through the work with Keytruda and the rest of the great Merck products.”

Ultimately, that is what Frazier is reflecting on as he prepares to retire, naming Merck’s dedication to enhancing maternal mortality and its growth of the primary Ebola vaccine amongst his proudest accomplishments. But he emphasizes it was the individuals of Merck who’re most chargeable for the success of its medicines.

“This credit that CEOs get, a lot of it is what I call the narrative fallacy,” Frazier mentioned. “If the people of Merck, all the dedicated, talented people of Merck do Keytruda while you’re in the chair, they say, ‘Look, he did Keytruda!’ You know, Bill Belichick is now finding out that winning a Super Bowl without a quarterback named Tom Brady is a lot harder than winning a Super Bowl when the quarterback is named Tom Brady, and yet, Bill Belichick will go to the Hall of Fame as a great coach.”

“It’s the people of Merck,” Frazier continued, “it was their commitment, their dedication, their brilliance, their perseverance that led to a number of important products coming to the marketplace. And my job was to get out of their way, and give them the resources and the peace and quiet to do what they did. That was my role.”

When Frazier turned CEO ten years in the past, he mentioned Vagelos advised him there are two metrics that basically matter for the job: “How many people do you help? And how much help do you give those people?”

Asked how he thinks he did, Frazier mentioned: “I did all right.”





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