Merck & Co. to Slash Another 2,500 Jobs as Part of Company Restructuring

August 18, 2015
By Alex Keown, BioSpace.com Breaking News Staff

NEW YORK – Merck & Co. has its eyes set on eliminating another 2,500 jobs as part of its ongoing restructuring plan announced in 2013, according to a recent filing with the U.S. Securities and Exchange Commission.

According to the filing, the company said “approximately 2,585 position eliminations remain pending under this program as of June 30, 2015.” The majority of the cuts relate to “ongoing manufacturing rationalizations,” and are expected to be completed by 2016, the company stated.

Merck has eliminated “approximately 7,290 positions” since the restructuring plan was announced, the company said in its 10-Qc filing. The positions include full-time employees, independent contractors and vacant positions. During the first half of 2015, Merck has eliminated 1,195 positions, the company said... Positions eliminated were from multiple departments and divisions, including research and development, sales and administrative.

However, in its latest filing with the SEC, Merck said since its acquisition of Schering-Plough in 2009, the company has eliminated “approximately 29,160 positions comprised of employee separations, as well as the elimination of contractors and vacant positions.” Merck said the job eliminations are expected to save the company approximately $8.5 billion in pre-tax costs. In its report, Merck estimated that approximately two-thirds of the cumulative pretax costs relate to cash outlays, primarily related to employee separation expenses.

In 2013, Merck targeted $2.5 billion in cuts in annual operating expenses by the end of 2015. At the time the cuts were announced, Merck Chairman Kenneth Frazier said the initiative to sharpen the company’s commercial and research and development programs “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.” Merck officials expect the majority of savings from the implementation of the initiative, will come from marketing and administrative expenses and research and development.

Since the restructuring began, Merck said it has recorded total pretax accumulated costs of approximately $2.7 billion, which includes $336 million and $358 million in the first six months of 2015 and 2014, respectively.

In addition to eliminating employees, Merck said it will also reduce its global real estate footprint and continue to “improve the efficiency of its manufacturing and supply network.”

After acquiring Cubist Pharmaceuticals, Inc. in January, in March the company said it would eliminate the company's 120-employee drug discovery department in Lexington, Mass. The termination of that department cut about 20 percent of Cubist’s 600-person Massachusetts workforce. Lainie Keller, director of global communications at Merck, said the decision came as Merck took a closer look at its asset picked up in the Cubist deal. She said all of Cubist’s drugs will continue to be developed, with those in pre-clinical testing moving to other sites, and those in clinical trials seen through to completion. Keller added a 450-employee research center in Cambridge, Mass.’s Kendall Square and a Boston-based business development center are also under review.

In June, Merck announced that it would terminate an unknown number of independent contractors at the company’s manufacturing site in central North Carolina, casualties of the company’s consolidation plan.

While the company has been streamlining its employment, Merck has been making several deals to expand its pipeline. In July, Merck enhanced its oncology pipeline with the $605 million acquisition of privately-held Israeli biotech company cCam Biotherapeutics, which is focused on the development of cancer immunotherapies. That acquisition added the company’s lead product CM-24, a “checkpoint” protein that is being evaluated in a Phase I study for the treatment of advanced or recurrent malignancies, including melanoma, non-small-cell lung, bladder, gastric, colorectal, and ovarian cancers. Merck is certainly hoping CM-24 will show the same promise as Keytruda, which has been shown effective in treating three kinds of cancers -- melanoma, lung cancer and mesothelioma.