Merck slashes 7,200 jobs, pursues more customer-centric selling model

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Merck & Co., Inc. will eliminate 7,200 jobs, 6,800 active employees and 400 vacancies across all areas worldwide, by the end of 2011. About 40% of the total reductions will occur in the U.S..

The Whitehouse, NJ-based pharmaceutical company will reduce its total number of senior and mid-level executives by approximately 25%, in addition to the 10,400 positions eliminated as part of the 2005 restructuring program, which was substantially complete at the end of September 2008. As of Sept. 30, Merck had approximately 56,700 employees.

Merck reported that it will also accelerate the rollout of a new, more customer-centric selling model and it would make greater use of outside technology resources, centralize common sales and marketing activities, and consolidate and streamline its operations. 

Merck's manufacturing division will further focus its capabilities on core products and outsource non-core manufacturing. Merck is also enhancing its research operations to expand access to worldwide external science and incorporate it as a key component of the company's pipeline, and ensure a more sustainable pipeline by translating basic research productivity into late-stage clinical success.

Basic research operations will be organized to consolidate work in support of a given therapeutic area into one of four locations. This will provide a more efficient use of research facilities and result in the closure of three basic research sites in Tsukuba, Japan; Pomezia, Italy; and Seattle by the end of 2009.

Merck reported that for the third quarter of 2008, worldwide sales were $5.9 billion, a decrease of 2% from the third quarter of 2007. Foreign exchange for the third quarter favorably affected global sales performance by 4%. Net income for the third quarter of 2008 was $1 billion compared with $1.5 billion in the third quarter of 2007, which include after-tax restructuring charges of $612 million and $117 million, respectively. For the first nine months of 2008, worldwide sales were $17.8 billion and net income was $6.1 billion.

Marketing and administrative expenses were $1.7 billion for the third quarter of 2008, a decrease of 11% from the third quarter of 2007. Included in marketing and administrative expenses in the third quarter of 2007 was a $70 million reserve solely for future legal defense costs for Vioxx litigation.  

Restructuring costs, mostly 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. Of that third quarter 2008 total, $102 million were from the 2005 program and $655 million were from the 2008 program.
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