Merck Announces Further Restructuring, Job Cuts

Last week, Merck & Co. unveiled plans to reduce its global workforce, as measured by year-end 2009 levels, by an additional 12–13% by 2015. The company described its plans in its report on second-quarter earnings, which the company issued on July 29, 2011.

“Merck is taking these difficult actions so that we can grow profitably and continue to deliver on our mission well into the future,” said Kenneth Frazier, the company’s CEO and president, in a company statement. “The environment we operate in is changing rapidly and dramatically, and these steps will help us more efficiently serve customers and patients around the world.”

The latest round of job cuts is part of the next phase of an ongoing merger-restructuring program following the company’s merger with Schering-Plough in November 2009. Merck began its merger-restructuring program in February 2010 with the goal of reducing its total workforce. Through Dec. 31, 2010, the company eliminated 11,550 positions under the program, which included actual headcount reductions and the elimination of contractors and vacant positions, according to the company’s 2010 annual filing with the US Securities and Exchange Commission. As of June 30, 2011, Merck had approximately 91,000 employees, according to the company’s second-quarter 2011 earnings release.

Merck remains on track to achieve its goal of $3.5 billion in annual cost synergies by the end of 2012. By the end of 2015, Merck expects the overall merger-restructuring program to yield annual ongoing savings of $4.0 billion to $4.6 billion, which is more than its original estimate of $2.7 billion to $3.1 billion. Total cumulative pretax costs for the program are estimated to range between $5.8 billion and $6.6 billion.

The company did not specify in what areas it would eliminate jobs. But the company will continue to hire new employees in strategic growth areas such as emerging markets.