Trenton, N.J. – Drugmaker Merck & Co., squeezed by Vioxx lawsuits, tumbling revenues and other troubles, is eliminating 7,000 jobs and five production plants and revamping manufacturing in the first phase of a global reorganization. The long- awaited announcement Monday drove Merck shares down more than 4 percent.
The restructuring of manufacturing, supply-chain and research operations, meant to lower pretax costs by $3.5 billion to $4 billion through 2010, includes immediately starting to cut 11 percent of Merck’s workforce, with 60 percent of the reductions in manufacturing. The rest of the job cuts – the third round since October 2003 – are to be spread across the company, with about half in the United States.
By the end of 2008, Merck also plans to close one basic research site and two preclinical development sites, close or sell five of its 31 manufacturing plants and reduce operations at some others.
It will also streamline manufacturing and outsource more of it, and reduce supply costs, with the latter effort expected to produce about half the savings.
Analysts said the move is part of an emerging trend in an industry that for years never had to worry about cutting costs, given gross profit margins well above 70 percent and limited pressure on prices until recently. Pfizer, Wyeth and smaller companies have announced restructuring and job cuts in the last year or so.
“This is in response to a very challenging environment,” said Morgan Stanley managing director Jami Rubin. “I would expect broader cuts to be announced within the sales force, marketing, general and (administration) as well as R&D over the longer run.”
