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Merck plans job cuts as its earnings remain sluggish

"In an environment driven by increasing competition, cost-containment pressures and greater customer demand for value, we have examined every aspect of our business, at every level, to identify ways to more effectively address these challenges."

Raymond Gilmartin, Merck chairman

Merck & Co, the US' second-biggest drugmaker, reported sluggish re-sults for the third quarter on Wednesday and said it planned to cut as many as 4,400 jobs.

The numbers reflect what drug industry analysts have been saying for months: the company's cupboard of new blockbuster drugs is currently bare.

Merck was one of several big drugmakers to report earnings on Wednesday. Results from Pfizer, Wyeth and Glaxo were mixed.

Merck, based in Whitehouse Station, New Jersey, said its operating net income for the third quarter totaled US$1.9 billion, or US$0.82 a share, down 1.4 percent from the US$1.8 billion, or US$0.83 a share, a year earlier.

Most Wall Street analysts had expected Merck to post earnings of US$0.85 a share.

Merch's revenues rose 6 percent, to US$5.8 billion.

The company's earnings exclude results from Medco Health Solutions Inc, the prescription drug benefit business that Merck spun off to shareholders on Aug. 19.

Investors, who have been hammering Merck and other big drugmakers all year, punished the company's stock again on Wednesday. Shortly before noon, Merck's shares were trading down US$3.15, or 6.4 percent, to US$45.76 on the New York Stock Exchange.

So far this year the Standard & Poor's 500 pharmaceuticals index is essentially flat, lagging well behind the broader S&P 500-stock index, which through Tuesday was up 18 percent. The drug index fell 22 percent last year and declined by 16 percent in 2001.

Once viewed as the quintessential growth company of the drugmakers, Merck has fallen on harder times because of a lack of new products flowing from its laboratories, while growth from the big drugs it still has under patent is slowing.

Sales of the company's five top drugs -- a list that includes its No. 1 product, Zocor, which is used to treat high cholesterol -- rose just 9 percent in the quarter. But Zocor's sales actually fell 2 percent, to US$1.4 billion. Revenues from its second-biggest drug, Vioxx, fell 32 percent.

Merck said it planned to cut 3,200 full-time positions and 1,200 contract or temporary job slots.

The cuts, which the company said would save US$250 million to US$300 million annually, amount to about 7 percent of its work force.

"In an environment driven by increasing competition, cost-containment pressures and greater customer demand for value, we have examined every aspect of our business, at every level, to identify ways to more effectively address these challenges," said Raymond Gilmartin, Merck's chairman, president and chief executive.

"That process is ongoing, as we continue to identify opportunities to fundamentally change how we operate our business," he said.

Pfizer said its third-quarter profit fell 4.9 percent, to US$2.24 billion, from US$2.35 billion a year earlier, because of costs related to its purchase of the Pharmacia Corp.

Revenues, however, jumped 56 percent, to US$12.5 billion, in large part because of strong demand for Celebrex, the painkiller developed by Pharmacia.

Wyeth posted a third-quarter loss, as it set aside more money to pay for lawsuits over the fen-phen diet drug combination. It lost US$426.4 million, compared with net income of US$1.4 billion, a year earlier. Revenues rose by 13 percent, to US$4.08 billion.
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