Merck to slash annual costs by $2.5 billion, cut 8,500 jobs
By Ransdell Pierson
(Reuters) - Merck & Co, taking a cue from rival drugmakers that have slashed research spending to bolster earnings, said it will cut annual operating costs by $2.5 billion and eliminate 8,500 jobs, or more than 10 percent of its global workforce.
Merck, whose shares rose 2.3 percent, said it aims to narrow its focus to products with the best chance of winning regulatory approval and achieving substantial sales.
It will jettison research products with less likelihood of success. It plans to pull the plug on some drugs already in late-stage trials, and will license some products to other companies.
The job cuts would be in addition to expected remaining cuts of 7,500 positions from a 2011 restructuring that involved elimination of 13,000 positions - largely of administrative personnel but also related to sale or closure of manufacturing sites.
Merck, like Pfizer Inc, AstraZeneca Plc and Sanofi in recent years, is reaching again for its axe because of competition from generic medicines, stalled sales growth of its important drugs and failures or delays for high-profile experimental drugs.
But half the job cuts from Merck's new restructuring will come from research and development, which has been a protected sphere for the drugmaker, which has long been renowned for its research prowess but has stumbled in recent years.
"We're not doing indiscriminate cuts in research and development, we're doing surgery around where we should invest," Merck Chief Executive Kenneth Frazier said in an interview.
Frazier said the company is now evaluating which drugs or disease areas to discard and which to keep, but few decisions have yet been made. Continued...