Merck says additional jobs, spending being cut
Tuesday, December 14th 2004, 10:38 am
By: News On 6
TRENTON, N.J. (AP) _ Merck & Co., under siege because of lost revenues from its recalled blockbuster arthritis drug Vioxx, will cut about 5,100 jobs by year's end, more than originally planned, and will slash hundreds of millions of dollars in spending, Chairman Raymond V. Gilmartin said Tuesday.
Gilmartin, speaking to analysts during Merck's annual business briefing, said the Whitehouse Station, N.J.-based company is accelerating changes to increase growth, but will stick with its strategy of shunning major mergers. It will seek new drug candidates through more licensing deals and internal research, instead.
``Our focus now is on the future, on renewing the growth of the company,'' Gilmartin said.
Gilmartin, chief executive officer of the pharmaceutical giant, reaffirmed earnings guidance for this year and next, saying Merck expects earnings per share of $2.59 to $2.64 for 2004 and $2.42 to $2.52 for 2005. Analysts surveyed by Thomson First Call were expecting earnings per share of $2.62 and $2.47, respectively.
Merck's 2004 forecast is reduced by 50 cents to 55 cents because of lost revenues after pulling Vioxx from the market worldwide on Sept. 30 when its own internal study showed the popular drug increased the risk of heart attacks. The company has since been beset by lawsuits and a sharply lower stock price. The 2005 guidance does not include any reserves to cover Vioxx litigation, Gilmartin noted.
``This past year has presented us with an extraordinary challenge,'' he told the analysts. ``We are not operating under 'business as usual' in any sense.''
He said in the wake of the Vioxx recall, Merck has sped up changes. Those include taking advantage of new technology to identify promising drug candidates faster, boosting the number of external alliances and licensing deals from 10 in 1999 to an expected 50 deals this year, and moving experimental drugs more quickly through testing to seek government approval earlier.
Gilmartin said Merck sales representatives now are focusing on fewer products, being taught more about them and working with fewer doctors.
He said core research and development spending is growing, and sales reps, scientists and manufacturing employees who had been working on Vioxx have been redeployed to work on existing products and upcoming launches.
Merck plans later this month to seek Food and Drug Administration approval of a new type of diabetes drug called muraglitazar, developed jointly with Bristol-Myers Squibb Co. It should seek approval next year for three vaccines, for rotavirus, human papillomavirus _ a sexually transmitted virus that causes cervical cancer _ and the pain caused by shingles, Gilmartin said. FDA submissions for the latter two vaccines are now expected in the second quarter, instead of the second half of 2005.
Merck had announced a restructuring in October 2003, saying it would eliminate about 4,400 positions. Gilmartin said Tuesday that with a total of 5,100 jobs cut, Merck would save $300 million on payrolls next year.
He also briefly outlined other planned savings, including $1.2 billion by 2008 from procurement changes, $300 million by 2006 from inventory reduction, $600 million by 2008 from capital initiatives and additional savings in manufacturing costs, partly from using plants' flexibility to handle new products without hiring more workers.
``We are committed to maintaining annual dividends in excess of $3 billion and to continuing share repurchases from operating cash flow,'' Gilmartin added.