In conjunction with the release of its third quarter financials on Wednesday, Merck said it plans to eliminate approximately 12 percent of its work force, or 7,200 jobs, by the end of 2011—40 percent of which will occur in the U.S.—as part of its 2008 restructuring initiative.
The Whitehouse Station, N.J.-based Merck said that the number of senior and mid-level executives will be reduced by about 25 percent. As part of the changes, 6,800 active employees will be let go, while 400 current vacancies will be left unfilled. The company noted that the latest job cuts are in addition to the 10,400 positions eliminated as part of a 2005 restructuring plan, which Merck said was substantially completed in September.
"Our focus remains on increasing revenue from our new and in-line products, fully funding innovative R &D, investing in growth opportunities, such as emerging markets,” said Richard T. Clark, chairman, president and CEO of Merck. “However, 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.”
Merck reported that earnings fell 28 percent to $1.1 billion in the 2008 third quarter, which ended Sept. 30, compared with the prior-year period due in part to a $612-million restructuring charge and declining Zetia and Vytorin sales, which fell 15 percent to $1.1 billion. Overall revenue dropped 2 percent to $5.9 billion.
For the 2008 third quarter, marketing and administrative expenses were $1.7 billion, a decrease of 11 percent from the third quarter of 2007. The company noted that included in the third quarter 2007 expenses was a $70 million reserve solely for future legal defense costs for Vioxx litigation.
Merck said its research and development expenses were $1.2 billion for the quarter of 2008, including $31 million for costs associated with its global restructuring programs—a decrease of 19 percent from the third quarter of 2007. For the third quarter of 2007, research and development expenses included a $325 million acquired research charge associated with the purchase of NovaCardia.
Restructuring costs, primarily related to employee separation costs associated with the company's global restructuring programs, were $757 million for the third quarter of 2008 and $49 million for the third quarter of 2007.