Merck cuts will hit 235 Canadian jobs
Global axe likely to strike 7,000 Vioxx lawsuits, patent lapses cited
MONTREAL— Merck & Co.’ s Canadian subsidiary is suffering 235 job cuts as part of a wider 7,000person international bloodletting. Merck Frosst Canada Ltd. said yesterday that most of the positions to be eliminated will be gone by year- end. As part of the restructuring, Merck plans to cease manufacturing at a plant in the Montreal suburb of Kirkland in early 2006. The changes were attributed to last year’s withdrawal of the Vioxx painkiller as well as the loss of Canadian patent protection for cholesterol drug Zocor and osteoporosis drug Fosamax, and “ a new supply strategy by Merck & Co.” Merck Frosst added that it “ will continue to be a leader in research and development in Canada,” and the changes “ will in no way reduce the ability of Merck Frosst to supply Canadians with pharmaceuticals and vaccines of the highest quality and therapeutic value.” Merck Frosst, which spent $117 million on Canadian research and development last year, retains 300 scientists at a centre for therapeutic research and ‘‘ continues to make significant progress in a number of research programs.” The struggling United Statesbased parent, Merck & Co., has been squeezed by Vioxx lawsuits, tumbling revenues and other troubles. The company is eliminating 7,000 jobs and five production plants and revamping manufacturing in the first phase of a global reorganization. The restructuring of manufacturing, supply chain and research operations, meant to lower pre- tax costs by $ 3.5 billion ( U. S.) to $4 billion through 2010, includes immediately starting to cut 11 per cent of Merck’s workforce, with 60 per cent of the reductions in manufacturing. The rest of the job cuts — the third round announced since October 2003 — are to be spread across the company, with about half in the U. S. By the end of 2008, Merck also plans to close one basic research site and two preclinical development sites; close or sell five of 31 manufacturing plants and reduce operations at some others; streamline manufacturing and outsource more of it; and reduce supply costs, with the latter effort expected to produce about half the savings.
Analysts said the move is part of an emerging trend.
“ This is in response to a very challenging environment,” said Morgan Stanley managing director Jami Rubin. “ 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.’’
In December, then- chief executive officer Raymond Gilmartin announced several similar changes aimed at cutting Merck’s costs by $2.4 billion through 2008. Merck also eliminated 5,100 jobs through buyouts and layoffs in 2003- 04 and an additional 825 this year.
Richard Clark, who took over as CEO in May, said Merck’s revenue and legal troubles didn’t play a role in his strategy, which is meant to create a more efficient, competitive business. Meanwhile, he said, the New Jersey-based company must maintain sales of its top drugs, launch new ones and better integrate late- stage research and manufacturing to reduce the time to launch new products.