Merck & Co's second quarter net income has nearly tripled and sales have climbed but the impressive financials have been overshadowed by news that a further 12-13,000 jobs could be cut.
The move is an expansion of the US giant's restructuring programme which followed its acquisition of Schering-Plough in 2009. The workforce will be reduced by 12%-13% by the end of 2015, though Merck said it will continue to hire new employees "in strategic growth areas of the business such as emerging markets".
The company said it remains on track to achieve its goal of $3.5 billion in annual cost synergies by the end of 2012. It has decided to "aggressively reduce its cost structure so Merck can continue to invest in long term profitable growth opportunities while driving a more efficient operating model".
Savings of $4-4.6 billion
By the end of 2015, Merck it now expects the overall restructuring programme to yield savings of $4.0-$4.6 billion from the original estimate of $2.7-$3.1 billion. Total pretax costs to implement the changes will range between $5.8-$6.6 billion.
Chief executive Kenneth Frazier said "Merck is taking these difficult actions so that we can grow profitably", adding that "the environment we operate in is changing rapidly and dramatically".
The cuts come at a time when the vast majority of drugs in Merck's portfolio are performing well. Net income came in at $2.02 billion, up from $752 million in the like, year-earlier period, while revenues were up 7% to $12.15 billion.
Growth for all major products
Merck’s best-selling treatment was once again the asthma/allergic rhinitis drug Singulair (montelukast), up 8% to $1.35 billion. The most eye-catching performance came from the diabetes drug Januvia (sitagliptin) which generated $779 million, up 30%, while Janumet (sitagliptin plus metformin) brought in $321 million, a leap of 47%. Turnover from the HIV drug Isentress (raltegravir) reached $337 million, up 26%, while sales of the cervical cancer jab Gardasil jumped 27% to $277 million.
Sales of the cholesterol drugs Vytorin (ezetimibe plus simvastatin) and Zetia (ezetimibe) reached $459 million and $592 million, down 6% and up 5% respectively. However, revenues from the antihypertensives Cozaar (losartan) and Hyzaar (losartan plus hydrochlorothiazide) fell 16% to $406 million, due to losing marketing exclusivity in the USA and the major European markets.
As for products acquired through Merck's merger with S-P, the anti-inflammatory Remicade (infliximab), the Johnson & Johnson drug which Merck sells outside the USA, contributed $842 million. However that will decline soon now that it has transferred certain overseas rights back to J&J for Remicade and its follow-up Simponi (golimumab).
Mr Frazier said that "we're delivering on our promise to grow both the top and bottom lines while continuing our efforts to streamline and transform Merck. He added that "by improving the effectiveness and efficiency of our operations and focusing on scientific innovation, we are well-positioned for sustained and profitable growth in the future".