updated 5/5/2005 3:38:03 PM ET 2005-05-05T19:38:03

Merck & Co. said Thursday that Raymond V. Gilmartin has stepped down from the top jobs at the drugmaker, which has been slammed by mounting lawsuits and falling revenues since recalling its blockbuster painkiller Vioxx last fall.

Merck named Richard T. Clark, 59, as chief executive officer, president and a board member in Gilmartin’s place. Gilmartin also is stepping down as chairman although no successor was named.

The company said it will operate without a chairman for 1½ years to 2 years, with a new three-person executive committee handling many of the usual chairman’s duties and assisting Clark during the transition.

“Then we’ll deliberate on the situation and decide whether we’ll appoint a chairman or do something else,” said Merck board member Lawrence A. Bossidy, former chairman and CEO of Honeywell International Inc.

Bossidy would not say whether Merck might then make the chairman a separate post from CEO, a move some shareholders advocated during their annual meeting last week.

Bossidy will serve as chairman of the new executive committee; the other two seats will be held by two longtime board members, William G. Bowen and Samuel O. Their.

Clark had been president of Merck’s manufacturing division, which operates 31 plants in 25 countries. He began working at Merck in 1972 as a quality control inspector and advanced through jobs in production, new product planning and strategic planning.

“I never dreamed that one day I would be leading the company,” he said.

Clark previously served as the chairman and chief executive officer of Medco Health Solutions Inc., one of the country’s biggest managers of prescription drug programs. Merck spun off Franklin Lakes-based Medco in August 2003.

“He’s a person of vigor, he’s a hands-on leader, he’s got plenty of energy,” Bossidy said of Clark. “We think he will do a wonderful job taking this company forward.”

Gilmartin, who has served as president and CEO since 1994, will serve as special adviser to the board’s executive committee until March 2006, when he will retire. He turns 65 that year.

Gilmartin had originally intended to remain CEO until then.

“In no way did we push him out,” Bossidy told reporters during a conference call.

Clark was tapped after Merck’s compensation and benefits committee, headed by Bossidy, reviewed numerous internal and external candidates. The search began last fall, shortly after the huge impact of the Vioxx withdrawal began to crystallize.

Just last Tuesday, about 900 Merck shareholders packed the company’s annual meeting, with many criticizing Merck’s handling of the Vioxx safety issue and at least one shareholder urging Gilmartin to step down.

“I don’t blame you for the Vioxx situation, but in America you get paid for success and not for trying,” William Steiner, of Piermont, N.Y., told Gilmartin.

Asked Thursday whether Bossidy would be serving as a de facto CEO, Clark said, “I am certainly a change agent and I need full control to do that. There is no question that I am in charge.”

Gilmartin called Clark an excellent choice with “a wealth of experience and great knowledge of our industry.”

Two weeks ago, Whitehouse Station-based Merck reported its first-quarter income fell 15 percent, due to much lower sales of its top drug, cholesterol-fighter Zocor, and its Sept. 30, 2004 withdrawal of Vioxx, a popular arthritis drug that had 2003 sales of about $2.5 billion, 11 percent of Merck’s revenue. Merck pulled Vioxx from the market last fall after a study showed it doubled the risk of heart attacks and strokes in patients using the drug for more than 18 months.

As of March 31, the company had been named a defendant in more than 2,300 product liability lawsuits from customers alleging Vioxx caused heart attacks, strokes, kidney damage and stomach bleeding. Last year, Merck reserved a total of $675 million for Vioxx legal matters, but analysts have estimated its liability at anywhere from $4 billion to $30 billion.

To make matters worse, the company’s top selling drug, cholesterol-lowering agent Zocor, loses patent protection in 2006. That had been seen as Merck’s biggest problem until the Vioxx withdrawal.

During the call, Merck officials refused to answer any questions about the Vioxx situation.

In April, Merck said its first-quarter profit fell because revenues were cut by the withdrawal of Vioxx and by much-lower sales of Zocor. Still, its quarterly income of $1.37 billion, or 62 cents per share, for the January-March period beat the average estimate of 59 cents per share from analysts surveyed by Thomson Financial. In the year-ago quarter, Merck earned $1.62 billion, or 73 cents per share.

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