MSD to cut 11 per cent of worldwide workforce

Following speculation that US pharmaceuticals giant Merck & Co, the parent company of the UK’s MSD, would announce a major restructuring plan the company yesterday confirmed that it would cut 7,000 jobs and close five of its 31 production plants.

The company said that about half of the job cuts would be outside the US but it is as yet unclear how many of the company’s 2,000 or so UK employees will be affected.

However, it was revealed that 60 per cent of the cuts would be in the manufacturing interests of Merck, the remaining 40 per cent spread around the rest of the company.

Morgan Stanley managing director Jami Rubin, told Forbes: “I would expect broader cuts to be announced within the sales force, marketing, general and (administration) as well as R&D over the longer run.”

The production plant closures and job cuts will be supplemented by the restructuring of supply chain and research operations in an attempt to reduce pretax costs by $3.5 billion to $4 billion by the end of 2010.

In addition, Merck said it also expects to close one basic research site and two preclinical development sites.

The company has been under pressure in recent years and seen its ranking fall from third to fifth largest drugs company in the world
It faces 6,400 Vioxx-related lawsuits and potentially billions of dollars in payments to patients.

Further problems have stemmed from the fact that many of the patents that the company holds are set to run out in the next few years, of particular concern is the patent for its cholesterol drug Zocor which accounts for $5.2 billion in annual sales.

In all it is expected that about half of Merck’s projected 2005 revenue of $22-billion will be exposed to generic competition over the next five years.

Yesterday, shares in the company fell $1.42, or 4.6 per cent, to close at $29.56 as markets reacted to the announcement.

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