Merck ($MRK) will cut 8,500 jobs from its R&D and commercial operations as part of a $2.5 billion global restructuring plan. The cuts come soon after Merck squeezed out its previous R&D chief to bring on Roger Perlmutter, who previously held that job at Amgen ($AMGN)--and amid major sales losses to generic competition.
The makeover also includes a shift in relocation plans. Rather than moving its headquarters to Summit, NJ, from Whitehouse Station as previously planned, the company will establish its home base in Kenilworth, on an existing Merck campus. Both the Summit facility and the Whitehouse Station headquarters will be shut down.
This restructuring is the fourth major sweep since 2008. Merck has shed many thousands of jobs and cut billions in costs over the past several years as it girded for its patent cliff--and scrambled to replace revenues drained off as key drugs lost exclusivity. One for instance: Singulair, once Merck's best-selling drug, saw sales plummet by 90% immediately upon patent expiration last year; the allergy drug brought in $618 million for the first half of this year, down from $2.8 billion for the same period of 2012.
But it's not just generic competition that's taking a toll on Merck. The company's pipeline drugs have faltered one after another, forcing the company to can once-promising blockbuster hopefuls. Its sleep drug suvorexant and anesthesia drug sugammadex are among the recent stumbles. Perlmutter's task is to turn that trend around, and he has repeatedly warned of an R&D revamp (though he's also hinted that the overhaul wouldn't claim many jobs).
Still, though the magnitude of the restructuring might be a surprise, the fact of it is not. When Merck cut its 2013 sales forecast this summer, analysts predicted restructuring. One analyst went so far as to urge Merck to shed at least $1 billion, considering Merck's "lackluster" sales and R&D setbacks. Well, Merck came through--the company expects $1 billion of the overall savings will hit by the end of 2014. When it's all said and done, Merck's workforce of 81,000 will be 20% smaller.
The company topped FiercePharma's layoffs list in 2011, with announced job cuts of 12,000 to 13,000. In 2009--a big year for pharma job cuts--it ranked in second place with 16,000; at the time, the company had just snapped up Schering-Plough for $41.1 billion, and the layoffs were part of the "synergies" of that deal. In 2008, Merck announced 8,400 cuts. Some of the restructuring plans have overlapped--indeed, this latest round includes 7,500 previously announced cuts, Merck says. Nominally, however, the series of cutbacks amounts to almost 40,000 jobs.