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August 1, 2011

More Merck Job Cuts

Pharmaceuticals: Drug maker heralds a second round of layoffs despite strong second quarter

Rick Mullin

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Frazier Merck
Frazier

Merck will cut as many as 13,000 jobs worldwide by 2015, the firm announced July 29, in addition to the nearly 17,000 jobs eliminated following its 2009 merger with Schering Plough. The cuts were outlined in the firm's second quarter earnings statement in which it reported a 7% increase in sales to $12.15 billion compared to the second quarter of 2010, with net income nearly tripling to about $2 billion for the quarter.

Merck, which has shuttered activity at 16 locations around the world in recent years, says some of the new job cuts will result from further closure of manufacturing operations. Most of the lay-offs will involve non-revenue administrative positions and office consolidation. The company did not specify which locations would be effected or how the new round of cuts will affect research.

Merck CEO Kenneth Frazier said in a conference call with investors that revenue increases for the quarter reflect strong sales of its type 2 diabetes treatments Januvia and Janumet, its arthritis drug Remicade, and its HIV drug Isentress, all of which exhibited double-digit growth for the quarter. He said Merck will be looking to invest in emerging markets and Japan for future growth, and he pointed to a partnership with South Korea's Hanwha to develop a biosimilar, or generic version, of Enbrel, Pfizer's arthritis drug.

Merck, however, faces loss of patent protection next year for another of its top-selling drugs, Singulair. The company said last week that it is discontinuing work on telcagepant, a migraine therapy, on the basis of disappointing Phase III clinical results, and that its newly-approved hepatitis C drug, Victrelis, is trailing Vertex's Incivek, which was approved earlier this year.

The new round of layoffs, a 12- to 13 percent reduction, is expected to save Merck an additional $1.3 billion to $1.5 billion in annual costs, on top of the projected $3.5 billion in savings the company said it hoped to achieve by the end of next year from previous cost-cutting measures. Frazier said the firm is on track to meet the savings goal of the first round of cost cutting.

"Realities of our environment dictate the need to operate more flexibly and nimbly, from a lower cost base," said Frazier. While last week's announcement did not include specific information on R&D, Frazier indicated that further cuts in the lab are under consideration. "We are not in a business-as-usual mode when it comes to managing our investments in R&D. We continue to improve the decision process by which we commit to or discontinue projects."

Chemical & Engineering News
ISSN 0009-2347
Copyright © 2011 American Chemical Society
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