Where Are Merck's Cuts Coming From?

Feb.18.10 | About: Merck & (MRK)

Merck (NYSE:MRK) reported earnings this week, and dropped the other shoe: they're going to make the Schering-Plough merger work by trimming the head count at the company by 15%. Where are the cuts coming from?

As of Dec. 31, 2009, Merck had approximately 100,000 employees. As part of the first phase of its Merger Restructuring Program, by the end of 2012, Merck expects to reduce its total workforce by approximately 15 percent across all areas of the combined company worldwide. The company also plans to eliminate approximately 2,500 vacant positions as part of the first phase of the program. The reductions will primarily come from the elimination of duplicative positions in sales, administrative and headquarters organizations, as well as from the consolidation of certain manufacturing facilities and research and development operations.

Merck said that certain actions, such as the ongoing reevaluation of manufacturing and research and development facilities worldwide, have not yet been completed, but will be included later this year in other phases of the Merger Restructuring Program. Merck also said it will continue to hire new employees in strategic growth areas of the business throughout this period.

Well, OK, the cuts are coming from. . .everywhere. Looks like sales and administration will be first, since those are the easiest to figure out, with R&D coming along later. It doesn't appear that there's any hard information to be had, which doesn't give anyone much to work with. Basically, everyone in research at Merck can, I suppose, just hang out for the rest of the year waiting to hear something. That'll crank up the productivity, as the scientists at Pfizer (PGE), GSK, AstraZeneca (NYSE:AZN) et al. can tell you.