Merck Slashes Jobs, Closes Research Sites | Chemical & Engineering News
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Web Date: October 27, 2008

Merck Slashes Jobs, Closes Research Sites

Company will eliminate approximately 7,200 positions across its worldwide operations
Department: Career & Employment
Credit: Merck & Co
Credit: Merck & Co

Merck & Co. announced last week that it will cut its workforce by nearly 12%, eliminating approximately 7,200 positions across the company's worldwide operations. The job cuts, expected to be completed by the end of 2011, are in addition to the 10,400 positions eliminated as part of a restructuring program announced in 2005.

The company also announced that it will close research facilities in Seattle; Tsukuba, Japan; and Pomezia, Italy.

The news came as part of the company's third-quarter financial results, in which it reported worldwide sales of $5.9 billion, a decrease of 2% from the third quarter of 2007. Net income for the quarter was about $1 billion compared with $1.5 billion for the third quarter last year. Merck now anticipates sales growth of 2 to 4% per year between 2005 and 2010, compared with earlier projections of 4 to 6%.

Analysts view the moves favorably. "These developments reinforce our view that Merck's management team is committed to carving a new path towards becoming a successful pharmaceutical company for the future," write Barbara Ryan and George Drivas, analysts with Deutsche Bank. They note that a lower and more flexible cost structure indicates that the company senses the urgency of managing risk and return and targets maximum revenue growth around the globe.

Like most major drug companies, Merck faces many pressures, including a drop-off in new drugs, impending patent expirations, and declining revenue for products in its portfolio. The company has in recent years closed five of its manufacturing facilities around the world.

Although Merck reports that it has seen significant growth in sales in the third quarter for several of its newer products, such as Januvia, a therapy for type 2 diabetes, it says that Singulair, its asthma drug, posted only 1% sales growth in the third quarter compared with the same period in 2007. Cholesterol drugs Zetia and Vytorin experienced a 15% decrease in combined sales for the quarter.

"Since 2005, Merck has anticipated and aggressively prepared for the changing industry environment by restructuring our business and transforming the way in which we discover, manufacture, and provide our products," Richard T. Clark, Merck chief executive officer, announced on Oct. 21. "With the right long-term strategy and our efforts to reshape Merck's business, including today's actions, I am confident we are building a solid foundation for achieving industry-leading performance in the future."

Merck, which currently has approximately 57,000 employees worldwide, expects the current job cuts to yield cumulative pretax savings of $3.8 billion to $4.2 billion from 2008 to 2013. The company expects a pretax restructuring cost of between $250 million and $450 million in the fourth quarter of this year.

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