Merck Slashes More R&D Jobs

Continuing to downsize in the face of research setbacks, Merck & Co. intends to eliminate 8,500 jobs by the end of 2015. Combined with 7,500 job cuts announced previously, the new actions will reduce the drugmaker’s overall workforce by nearly 20%. Also, instead of a planned headquarters move from Whitehouse Station, N.J., to Summit, N.J., the firm will move its headquarters to Kenilworth, N.J., and close the Summit site.

Merck expects the new action to yield about $2.5 billion in annual cost savings by the end of 2015. “No area was exempt,” CEO Kenneth C. Frazier told stock analysts on Oct. 1 about putting the plan together. About half of the cuts will come from R&D and half from marketing and administrative areas. “This is not a change in our strategy. This is all about greater focus and generating greater operational efficiencies,” Frazier said.

The announced actions are “not driven by any single immediate issue,” Frazier added. “Slowing growth in key markets, combined with research disappointments and regulatory delays, requires us to change how we are going to move forward with the right plan to drive growth.”

The downsizing will be accompanied by a sharpening of the company’s commercial and research focus. R&D will now be aimed at diabetes, acute hospital care, vaccines, and oncology. Merck will discontinue or out-license selected late-stage clinical development projects, while making externally sourced programs a larger part of its development plans.

Along with the reduction in employees and R&D programs, Merck will consolidate sites in New Jersey. Headquarters will move to the Kenilworth site that Merck acquired in 2009 when it bought Schering-Plough.

With the closure of the Summit site, animal health and consumer care divisions located there will move to another New Jersey facility, and manufacturing, lab, and other functions will move either within the state or to a Merck location in Pennsylvania. The transition is expected to begin in 2014 and be completed by 2015.

“While these actions are essential to ensure that Merck can continue to fulfill its mission into the future, they are nonetheless difficult decisions because they affect our dedicated and talented colleagues,” Frazier said. “We appreciate the contributions of all our employees and will support them during this time of transformation.”