Merck & Co., the second-largest U.S. drugmaker, plans to eliminate an additional 12,000 to 13,000 jobs by 2015, expanding a restructuring program to save as much as $4.6 billion a year.
As much as 14 percent of the company’s 91,000 employees will lose their jobs, based on the size of the workforce at the end of last month. The Whitehouse Station, New Jersey-based drugmaker also reported today that second-quarter earnings excluding one-time items were 95 cents a share, matching the average estimate of 17 analysts surveyed by Bloomberg.
“I think bold strategic initiatives resonate well with investors right now,” said Trevor Polischuk, an analyst with OrbiMed Advisors LLC in New York, in a telephone interview yesterday.
Merck is cutting costs, expanding in emerging markets and spending on research and development as the company tries to gain momentum before it loses patent exclusivity next year on its Singulair medicine for asthma. The company just introduced a new hepatitis C drug, Victrelis, and is testing an experimental treatment to raise good cholesterol in a 30,000-patient trial.
“They are focusing on costs,” said David Maris, an analyst at CLSA in New York, in a telephone interview. “That is exactly what they need to do under the new environment we operate under.”
Merck rose 32 cents to $35.25 at 8:32 a.m. before the opening of the New York Stock Exchange. The shares had declined about 3.1 percent this year before today.
The drugmaker will continue to hire in growth areas such as emerging markets, said David Caouette, a Merck spokesman, in a telephone interview.
The job cuts will come “disproportionately from the elimination of non-revenue generating positions,” Caouette said. These include administrative and headquarters positions, as well as the consolidation of offices and the closing of animal health manufacturing plants.
Net income almost tripled to $2.02 billion from $752 million the previous year, when earnings were held down by acquisition-related costs, the company said in a statement today. Sales climbed to $12.2 billion, more than the analysts’ estimate of $11.8 billion.
Merck raised the lower end of its full-year forecast, saying earnings excluding certain items will be to $3.68 to $3.76 a share. The company previously said annual profit would be $3.66 to $3.76 a share.
Since Kenneth Frazier started as chief executive on Jan. 1 Merck has had testing setbacks that included a trial of an experimental blood thinner that was halted in January. The drugmaker said today that it plans to spend as much as $8.3 billion on research and development this year, less than its April outlook that it would spend as much as $8.4 billion.
Merck eliminated about 11,500 jobs last year in a plan to reduce its workforce by 17 percent by 2012. The company had 94,000 employees at the beginning of this year.
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