Merck to cut 1,200 sales jobs

May 6, 2008 5:11:39 AM PDT
Merck & Co. said Monday it is eliminating 1,200 U.S. sales jobs, a move that comes a week after federal regulators' surprise rejection of an experimental cholesterol drug heavily touted by the pharmaceutical company.The cuts - announced after a series of recent setbacks - come on top of the elimination of about 8,100 positions under the sweeping restructuring plan announced in December 2005, Merck's so-called Plan to Win.

The new cuts are to be completed by the end of July, with employees of the Whitehouse Station, N.J.-based company being notified by the end of this month.

"It isn't a message that you want to send," said WBB Securities analyst Steve Brozak. "If they didn't have a morale problem now, they certainly will."

Merck shares fell 39 cents to $38.97 in regular trading Monday, then rose 39 cents to $39.37 in after-hours trading.

The cuts amount to nearly 15 percent of the 8,500 sales jobs Merck had at the beginning of 2007, spokeswoman Amy Rose said.

"It's really attributable to a number of things," she told The Associated Press.

Those include the Food and Drug Administration's rejection last Monday of a new cholesterol drug called Cordaptive that Merck had hoped would reinvigorate its key cholesterol franchise. In addition, Rose said, Merck has successfully completed the launch of eight medicines and vaccines in the United States since 2006 and now is scaling back the number of salespeople devoted to those drugs.

Kenneth Frazier, president of Global Human Health at Merck, said in a statement that the step is part of continuing efforts to improve the company's effectiveness and efficiency across its business.

Merck isn't the only drugmaker letting sales representatives go.

At the end of March, Madison, N.J.-based Wyeth let go 1,200 sales reps as sliding sales of former blockbusters make many reps redundant. And late last month, health care giant Johnson & Johnson of New Brunswick, N.J., said it is eliminating about 400 U.S. sales jobs by year's end, due to sales of a key drug being hurt by safety problems.

Merck has been enduring a string of setbacks over the past 11 days, including the FDA rejecting the company's proposed allergy drug that combined the active ingredients of Merck's Singulair and Schering-Plough Corp.'s Claritin, which is available without prescription. Last Wednesday, FDA publicly demanded the company clean up problems at its main vaccine plant.

Brozak said such problems, besides wearing on investors' patience, could lead to a bunker mentality among staff that limits long-term strategizing.

"This is like watching a soap opera," he said, adding, "If anybody has a track record of turning things around, it is these people."