Pharmaceutical giant Merck & Co, known outside the USA and Canada as MSD (Merck Sharp & Dohme), will cut its workforce by a further 8,500, revamp its research and development, and reduce marketing and administrative costs.
Merck says it aims to cut costs by $2.5 billion by 2015. On announcing the further 8,500 job cuts, on top of 7,500 it had announced in 2011 and 2012, the company’s shares rose 2.35% in New York trading.
Merck says it is going to concentrate more on high growth areas, such as cancer (anti-PD-1 immunotherapy program for oncolog), Alzheimer’s disease, its next generation HCV program, and V503, the company’s 9-valent HPV vaccine.
The company is having a close look at its experimental drugs that are currently being used in human trials, and pulling those it believes will not be successful. Other products are being licensed to different companies.
Merck estimates that by the end of this year, its costs will have been reduced by $1 billion (or 40% of its target).
Kenneth C. Frazier, chairman and chief executive officer, Merck, said:
“These actions will make Merck a more competitive company, better positioned to drive innovation and to more effectively commercialize medicines and vaccines for the people who need them. Today’s announcement further underscores that we are committed to improving our performance in the short term while also investing for the long term to create value for patients, customers and shareholders.”
Merck added that it is selling both its Summit campus and its main Whitehouse Station facility in New Jersey as part of its cost-cutting strategy.
Merck says it will increase its focus in ten prioritized markets, which account for most of its income in the vaccine and pharmaceutical business. These markets are the U.S., U.K., Germany, Canada, China, Brazil, Russia, Korea, Japan and France.
Other pharmaceutical giants, such as Sanofi, AstraZeneca, and Pfizer have been cutting staff and costs in response to competition from generic medications, poor sales growth of their main drugs, and disappointing outcomes from their experimental drugs.
Diabetes medications Janumet and Januvia, which together bring in sales of $6 billion, are struggling against competition from similar rival drugs and newer diabetes treatments.
Asthma medication, Singulair, which had annual sales of $6 billion during its peak, has seen sales fall by as much as 80% due to generic drugs.
About Merck & Co
Merck was established in the United States in 1981 as a subsidiary of the German company Merck KGaA. During World War I, Merck & Co. was confiscated by the U.S. government and established as a company in its own right.
According to Fortune 500 listing of pharmaceutical companies, Merck & Co. was number 3 in 2012, after Pfizer Inc. and Johnson & Johnson Services Inc.