Ouch! Merck Issues Grim Diagnosis of Unemployment to 15% of Employees

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Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--For decades, landing a job in the Pharmaceutical & Biotech Industry was like grabbing the golden ring in terms of pay and benefits. Once employed, most would opt to stay, unless to leave for an even more lucrative position with a competitor. This philosophy held true across the board, from production workers to the once-pervasive pharmaceuticals sales force. Unfortunately, for tens of thousands of industry employees, staying is no longer an option. The latest blow for up to 16,000 people came when Merck & Company Incorporated (NYSE:MRK) (Whitehouse Station, New Jersey) announced that it is cutting its workforce by another 15% during the next 24 months.

Click on image at right for a listing of Merck sites targeted for closure or sale.

Utilizing the now-ominous term "restructuring," Merck expects to save anywhere from $2.7 billion to $3.1 billion in 2012, with a target savings of $3.5 billion, but the company will have to spend at least that much on the layoffs. Up to $4 billion will be spent upfront to cover these costs, including what are typically generous severance packages.

In Merck's case, the most recent layoff announcement was not unexpected in the wake of the company's $41 billion merger with Schering-Plough in 2009. Beyond the fact that the industry itself is in transition, there is obviously going to be significant redundancies when two industry majors come together. Administrative offices (including sales & marketing, manufacturing plants, research centers and the people that staff them) are analyzed by the "rationalization" department at company headquarters. The stark reality is that only the most cost-efficient operations and people will survive.

On July 8, 2010, Merck announced in a conference call that it would "...phase out operations at eight research sites and eight manufacturing sites, as well as to continue to consolidate office facilities worldwide, as part of the global merger restructuring program that began last December." After the merger with Schering-Plough, Merck found itself with 91 manufacturing facilities. When operations at the eight plants on the chopping block are completely phased-out, Merck's production needs will be handled by the remaining 77 facilities across the globe and contract manufacturing organizations.

Merck plans to create a global network of 16 major research and development centers. The focus will be on seven key therapeutic areas: Cardiovascular Disease; Diabetes and Obesity; Infectious Disease; Oncology; Neuroscience and Ophthalmology; Respiratory and Immunology; and Women's Health and Endocrine. Although the women's health research unit is centered in Oss, Netherlands, the company has indicated that it eventually will be relocated primarily to the U.S. Beyond Merck's focus on the aforementioned core research targets, in which the primary science and expertise is handled "in-house," the company will continue to additional growth and innovation through partnerships with other companies.

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