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Merck Announces 7,000 Job Cuts
Posted on 2005-11-28 15:13:00
Merck & Co. said Monday it will cut 7,000 jobs -- 11 percent of its work force -- and close or sell five manufacturing plants in the first phase of a reorganization meant to save up to $4 billion by the end of the decade. Its shares dropped more than 4 percent in afternoon trading.
The announcement, anticipated by Wall Street, comes as Merck faces the loss of patent protection in June for its blockbuster cholesterol drug Zocor and thousands of lawsuits and billions of dollars in potential liability from its recalled painkiller Vioxx.
Zocor now generates about 20 percent of Merck revenues and is the world's second-biggest drug. Because of the coming competition from generic drug makers, Merck expects Zocor sales to drop to $2.3 billion to $2.6 billion in 2006 from $4.2 billion to $4.5 billion this year.
Whitehouse Station, N.J.-based Merck also said it will revamp its supply chain and outsource some manufacturing as part of the reorganization, which should bring about half the anticipated savings.
Merck said the cuts, which are expected to be completed by the end of 2008, are intended to reduce the company's cost structure, increase efficiency and enhance competitiveness. Merck has slipped from the world's third biggest pharmaceutical company to No. 5 in recent years.
"The actions we are announcing today are an important first step in positioning Merck to meet the challenges the company faces now and in the future," said Richard T. Clark, Merck's chief executive officer and president, told analysts during a morning conference call. "We believe they will improve our earnings-per-share and ultimately enhance our shareholder value."
The company said half of the planned job cuts -- in manufacturing and other divisions -- will target its U.S. operations. The company employs just under 63,000 people, half of them in the United States. Last month, Merck cut 825 jobs worldwide.
Merck did not identify where the five manufacturing plants to be closed or sold are located. It has 31 manufacturing plants overall. It also plans to reduce operations at a number of other sites and will close one basic research site and two preclinical development sites. Those sites were also not identified.
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