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MRK Cuts Another 7,200 Jobs

[Wednesday’s closing price of $28.01 is off 55% from the 12-month high reached last December.]

http://online.wsj.com/article/SB122459881115754133.html

›OCTOBER 23, 2008
By JONATHAN D. ROCKOFF and SHIRLEY S. WANG

Merck & Co., hurt by declining sales of key products, reported a 28% drop in third-quarter net income and said it will cut 7,200 jobs, or 12% of its work force, over the next three years.

The pharmaceutical company, which had eliminated 10,400 jobs over the last three years, said the cuts will include the closing of research labs in Seattle, Japan and Italy. Chief Executive Richard T. Clark said the moves were part of a broad reorganization that will result in streamlined sales, manufacturing and research, as well as the outsourcing of some work.

"New business models have to be put in place for our industry to survive," Mr. Clark said in an interview.

Like many pharmaceutical companies, Merck is struggling to come up with new drugs as older ones go off patent and become prey to generic competition. The rising dollar and the economic slowdown, which has caused the first decline in U.S. health-care consumption in recent memory, are also taking a toll.

Net income fell to $1.09 billion, or 51 cents a share, compared with $1.53 billion, or 70 cents a share, a year earlier.

Sales at the Whitehouse Station, N.J., company fell 2% to $5.94 billion due to falling revenue from key products such as cervical cancer vaccine Gardasil and Vytorin, a cholesterol-lowering drug that has been dogged by concerns over the drug's effectiveness.

The cost-cutting will thin Merck's executive ranks by about 25%, Mr. Clark said, and 40% of the overall cuts will be in the U.S. Sales representatives will focus on meeting the needs of doctor's offices, rather than pitching certain products, he added. The company will contract out about a quarter of its research and the manufacturing of non-core products.

Merck predicted full-year earnings of $3.28 to $3.32 a share.

In 4 p.m. composite trading on the New York Stock Exchange, Merck shares declined about 7%, or $1.96 to $28.01.‹