Schering-Plough has proven quick on the layoff trigger. The company announced a plan to cut costs by $1.5 billion by 2012 in the wake of the latest round of Vytorin controversy. Roughly 5,500 employees will lose their jobs, or about 10 percent of the company's workforce. Manufacturing plants will be shuttered and layers of middle and senior management slashed. Sales and marketing staff will also take cuts, as will R&D.
The cutbacks include $500 million previously announced as part of its integration of Organon BioSciences, acquired last November for $16 billion. Eighty percent of the $1.5 billion total is scheduled to be pared away from the company by 2010.
Since the controversial Enhance study was presented at the American College of Cardiology meeting over the weekend, Schering's stock has lost nearly a third of its value. At that meeting, a panel of cardiologists said Vytorin--a combo of Zetia and Zocor sold in joint venture with Merck--should be reserved for last-resort use because Enhance showed it to be no more effective on arterial clogging than Zocor alone. The New England Journal of Medicine followed suit.
Vytorin and Zetia account for up to 60 percent of Schering's profits, and sales of the two meds have been off in the double-digit percentages so far this year, with analysts expecting further declines. The credit rating agency Fitch Ratings put Schering on negative watch because of its reliance on the two meds. Merck and Schering-Plough have plans to defend the drug combo with a pushback marketing campaign, but it's as yet unclear how effective those efforts might be.
ALSO: The WSJ Health Blog asks: Will 2008 set a new pharma layoff record? Already Wyeth has announced 1,200 rep cuts, and now it's Schering-Plough. Market watchers say more is to come. And this after 2007 already set a layoff record. Report
Top 8 layoffs of 2007. Report
Vytorin, Zetia scrips plummet. Report
Schering CEO defends Vytorin decisions. Report
A new 'religion' at Schering-Plough. Report
Schering-Plough: A good company to work for. Report