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Gilmartin leaves Merck

Merck has replaced its longstanding chairman and chief executive, Raymond Gilmartin, 10 months before his scheduled retirement with an inside executive, as the US company prepares to face a wave of lawsuits over withdrawn arthritis painkiller, Vioxx.

Merck has replaced its longstanding chairman and chief executive, Raymond Gilmartin, 10 months before his scheduled retirement with an inside executive, as the US company prepares to face a wave of lawsuits over withdrawn arthritis painkiller, Vioxx.

New chief executive, 59-year old Richard Clark, has worked at Merck since 1972 and was most recently head of its manufacturing operations.

In an unusual twist, Merck declined to give Clark the full chairmanís post, electing instead to install an executive committee of three directors to advise him. The post of overall chairman will be left vacant for up to two years.

Both Merck and Gilmartin have insisted that his early departure is part of an orderly succession despite asserting last month that he would stay until his planned retirement in 2006.

ìIn no way did we push him out,î said Lawrence Bossidy, former CEO of electronics firm Honeywell and head of the new committee.

Merck also denied that the three-man committee was a sign of a lack of confidence in the new CEO.

ìHe [Clark] was the boardís selection and the board chose to develop the committee to make available broad expertise and talent to Dick Clark,î said Merck spokeswoman, Joan Wainwright.

Analysts said Clark faces a huge challenge in turning around the fortunes of the embattled company. Merck looks set to lose US patent protection on its top drug, anticholesterol treatment, Zocor, next year, while osteoporosis drug, Fosamax, could face generic competition as early as 2008.

In the short term, Merckís biggest worry is a wave of litigation over Vioxx, with more than 2,400 lawsuits filed on behalf of patients who say the drug caused heart attacks and other cardiovascular problems. The first trial, originally scheduled for this month, is not expected to begin until July at the earliest.

Clark, who described himself as ìan agent of changeî refused to rule out a big merger in the future, a direction that his predecessor always rejected throughout his tenure.

ìIím going to look at the entire business strategy and what we need to do to become a growth company,î he said.

Deutsche Bank analyst Barbara Ryan, noted that ìthe management of this company has failed to implant the right strategy to drive shareholder value over many yearsî, but said that ìnew bloodî was needed.

Clark is widely regarded as a low-profile executive popular with the companyís rank and file.

ìThis is a ëmiddle groundí choice for a new CEO,î said Timothy Anderson, analyst at Prudential Securities.

30th September 2008

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