Merck to cut 7,200 jobs

Merck said today that it will cut 7,200 jobs--more than 12 percent of its workforce--following the announcement of a 28 percent drop in Q3 earnings. The job cuts, which will include 6,800 active employees and 400 vacancies, will be made in all areas of the company. Forty percent of the cuts will be in the U.S. and 25 percent will be senior and mid-level execs. Back in 2005, Merck cut 10,400 positions; these new cuts come in addition to that, and are expected to be completed by 2011.

Merck Q3 2008 Sales Results
Merck Q3 2008 sales graphic

In Q3, the company took a multimillion restructuring charge (about 29 cents a share) and had unimpressive sales. As a result, net income dropped to $1.08 billion--just 51 cents a share--down from $1.53 billion and 70 cents a share a year ago. Third-quarter revenue was down 2 percent, partly due to sluggish sales for most of its vaccines, major generic competition for Fosamax, and a drop in its cholesterol drug sales of about 15 percent to $1.1 billion. Merck did see some positive movement with its blood pressure, asthma, HIV and diabetes drugs.

The restructuring includes more than just layoffs. In a release, the company said it would:

  • accelerate the roll-out of a new, more customer-centric selling model;
  • make greater use of outside technology resources, centralize common sales and marketing activities, as well as consolidate and streamline its operations; and
  • focus its manufacturing division on core products and outsource non-core manufacturing.

In addition, Merck said it will consolidate its R&D ops. Basic search operations will be organized to consolidate work in support of a given therapeutic area into one of four locations. As a result, Merck will close three research sites in Japan, Italy and Seattle by the end of 2009. 

"Our focus remains on increasing revenue from our new and in-line products, fully funding innovative R&D, investing in growth opportunities, such as emerging markets, and becoming the most trusted partner in delivering value to our customers. 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," said CEO Richard Clark (photo). Merck expects restructuring costs from $1.6 billion to $2 billion through 2001, but hopes to save between $3.8 billion and $4.2 billion by 2013.

- see Merck's announcement
- here's a chart on Merck's drug sales
- read the AP article