Merck to streamline management structure
pharmafile | October 24, 2008 | News story | Sales and Marketing |Â Â MerckÂ
Merck has announced a new round of job cuts and restructuring in a bid to update its business model and cut costs.
The company is making the moves to reflect a changing business model across the sector, and is also responding to new pressure on some of its biggest drugs.
Sales of a number of key products fell back sharply in the third quarter – not only older osteoporosis treatment Fosamax but also newer drugs Vytorin/Inegy and Zetia/Ezetrol.
Third quarter results showed a 28% dip in third-quarter earnings, while sales fell 2% year on year to $5.9 billion, despite the favourable effects of foreign exchange movements.
The restructuring will see around 7,200 jobs cut in the next three years with the US taking about 40% of the losses.
The company would not comment on how many European jobs may go.
But Merck has confirmed that senior and mid-level executives will be hit particularly hard across the board, accounting for approximately one quarter of all positions lost.
In all the move will reduce the manufacturer's workforce by 12%.
The company has scaled back its earnings forecast for the next two years.
Richard Clark, Merck's chairman, president and chief executive, said: "Our current sales trends for key products, compounded by known industry and emerging economic factors, have led us to reassess the environment in which we expect to be operating between now and 2010."
The restructuring will cost up to $2 billion overall, but the company expects to save $3.8-4.2 billion before tax between now and 2013 as a result.
A sum of $250-450 million, much of it in redundancy payouts, will be in the accounts in the fourth quarter of this year.
The restructure will include the closing of three basic research sites in Japan (Tsukuba), Italy (Pomezia) and the US (Seattle) by the end of next year.
Basic research operations will now support specific therapeutic areas in just four locations, a move which Merck hopes will concentrate efforts in areas which have a greater chance of late-stage clinical success.
Merck says it will also incorporate more "worldwide external science" into its pipeline.
The company is altering its business model in other ways, with the manufacturing division now outsourcing non-core business.
It is also be making "greater use of outside technology resources" and will centralise common sales and marketing activities.
This global restructuring programme comes hard on the heels of the last one: the latest round of cuts is in addition to the 10,400 lost in Merck's most recent reorganisation, which began in 2005 and has only just been completed.
Merck has 56,700 employees worldwide at present.
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