Merck announces 8,500 layoffs, wins applause

Coupled with job cuts announced earlier, the latest move will reduce Merck's workforce by 16,000 from the beginning of this year to the end of 2015.
Coupled with job cuts announced earlier, the latest move will reduce Merck's workforce by 16,000 from the beginning of this year to the end of 2015. (EMILE WAMSTEKER / Bloomberg News)
Posted: October 03, 2013

Merck & Co. made Wall Street happy but saddened employees Tuesday when the drug manufacturer said it would eliminate 8,500 jobs from its marketing, administrative, and research and development departments in the hope of reducing annual operating expenses by $2.5 billion by the end of 2015.

When Philadelphia native and chief executive officer Ken Frazier and chief financial officer Peter Kellogg explained the plan to financial analysts in a telephone conference call, two analysts congratulated Kellogg on the move.

Merck, which had less revenue and profit in 2012 than 2011, saw its stock price rise 2.38 percent to $48.74 in trading Tuesday on the New York Stock Exchange.

Merck is based, for now, in Whitehouse Station, N.J., and has operations elsewhere in New Jersey and the Philadelphia suburbs, including West Point and Blue Bell.

A Merck spokesman would not specify how many jobs would be eliminated at each facility, whether Philadelphia-area facilities would be shut, or how many of the people know they will be fired.

The company did say it was again changing plans for moving its headquarters, also in hope of saving money. Previously, Merck said it would vacate the Whitehouse Station office and move people to a facility in the North Jersey town of Summit. On Tuesday, Merck said it would close the Whitehouse Station building and the Summit campus, with the headquarters going to an existing building in Kenilworth, also in North Jersey.

The company said some functions in Summit could move to other facilities in New Jersey or Pennsylvania. The moving will commence in 2014 and be completed by 2015, Merck said.

Through the first nine months of 2013, news reports told of other planned layoffs, but the company had not quantified the earlier cuts until Tuesday, when it said they totaled 7,500 positions.

When completed by the end of 2015, the 16,000 cuts will reduce the worldwide workforce about 20 percent, from 81,000 at the start of 2013 to about 64,800.

In an August filing with the Securities and Exchange Commission, Merck said it had cut 23,810 positions between Jan. 1, 2010, and June 30, 2013, the period following its $41 billion purchase of Schering-Plough. The 16,000 in recent cuts and planned reductions would bring the total jobs losses to 39,810.

With future sales and profit hopes in mind, Merck will narrow its research focus to areas involving diabetes, oncology, acute hospital care, and vaccines.

"We're eschewing distractions," Roger Perlmutter, who was hired in the spring to fix R&D, said on the conference call.

Frazier said Merck has had "development disappointments" in its pipeline of drugs, which adds to the external problems facing brand-name drug companies. Exclusivity of high-profit drugs disappeared and generic competitors took away revenue. Public and private insurers have pushed for lower prices and more proof that medicine works as advertised.

Frazier twice on Tuesday said Merck's animal health and consumer products units were important to the company, but he clearly opened the door to selling them.


8,500 positions eliminated in latest cutback.

16,000 total by 2015.

Departments losing personnel: marketing, administrative, research and development.

North Jersey facilities in Whitehouse Station and Summit to close, with HQ moving to Kenilworth, N.J.

New R&D focus: diabetes, vaccines, oncology, acute hospital care.



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