With profits up, Merck plans to cut 13,000 jobs

Posted: July 29, 2011

Merck & Co. Inc. said Friday it would cut an additional 13,000 jobs by 2015, despite also reporting higher quarterly sales and profits.

The global pharmaceutical giant, which is based in Whitehouse Station, N.J., and has operations in West Point and Upper Gwynedd Township, did not say how many jobs would be lost at which facilities. Merck employs about 12,000 people at the Montgomery County sites.

Merck said its second-quarter sales rose 7 percent to $12.15 billion from $11.35 billion in the same quarter last year, while net income nearly tripled to $2.02 billion, or 65 cents per share, from $752 million, or 24 cents for the second quarter of 2010.

However, like all large drug companies in recent years, Merck has been pursuing various strategies to cut costs and replace sales it will lose when top-selling medicines lose their patent protection and face cheaper, generic competition.

In 2009, Merck acquired Schering-Plough Corp. for $41 billion to gain control over cholesterol drugs Zetia and Vytorin. When the deal was announced, the companies said they would cut 16,000 jobs globally by the end of 2012, or about 15 percent of their combined workforces.

Now Merck intends to reduce its global workforce, which stood at 91,000 at the end of June, by an additional 12 percent to 13 percent. Within those cuts, 35 percent to 40 percent probably would be at U.S. facilities, a spokesman said. The cuts will fall largely on "non-revenue-generating" positions, including administrative and headquarters personnel, but some people in research and development also might be laid off. . Besides job cuts, offices will be consolidated, and various manufacturing plants could be sold or closed.

"For our people, this won't be easy," Merck president and chief executive Kenneth C. Frazier said in a conference call with Wall Street analysts. "But the realities of our environment dictate the need to operate more flexibly and nimbly from a cost basis."

Meanwhile, the U.S. Food and Drug Administration said it has been investigating a problem at the West Point plant in which bits of charred plastic shrink wrap were found in vials of injectable vaccines before they left the facility.

The problem medicines, first reported by the Wall Street Journal, included vaccines Gardasil (human papillomavirus infection), Varivax for chicken pox, Pneumova for pneumococcal disease, Zostavax for shingles and MMR II for measles, mumps and rubella. Some vials of Antivenin, used to treat bites by black widow spiders, also had particles.

According to an FDA inspection report from April, Merck received its first customer complaint regarding the particles on Sept. 22, 2009, and had seven others, with four more detected internally. The report said, in part, "The source of the charred shrink wrap was found to be pieces of protective shrink wrap on incoming glass vials that failed to be removed during vial washing," and were subsequently charred during a heating process used for sterilization.

A Merck spokeswoman said the incidence of the problem was reported at a rate of one in 6 million vials. The company sent letters to doctors in May, reminding them to inspect the vials for particles and discoloration, and to notify the company if they found one. The company also said it is in the process of changing the packaging of new and empty vials prior to their arrival at the factory.

Shares of Merck closed Friday at $34.13, down 80 cents, or 2.3 percent.

Contact Mike Armstrong at 215-854-2980 or marmstrong@phillynews.com.

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