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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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In the Pipeline

« 2011 Drug Approvals Are Up: We Rule, Right? | Main | Chinese Research: Not Quite the Juggernaut? »

July 29, 2011

Merck Announces More Big Cutbacks

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Posted by Derek

This is not good, not good at all: Merck is out this morning with earnings, and they're saying that they're going to cut at least 12% of their work force over the next four years. That's up to 13,000 jobs, and the word is that 35 to 40% of those cuts will be in the US.

This is after they'd already done a fair amount of restructuring after the Schering-Plough deal. And it makes a person wonder: was that deal such a good idea? Has Merck really gotten their money's worth out of it, or have they just brought on a big upheaval that could have been avoided? Going down the list of Schering-Plough assets that were advanced at the time of the acquisition, and the shape that they're in now, I really don't think it looks like something that just had to be done. Hindsight?

Comments (87) + TrackBacks (0) | Category: Business and Markets


COMMENTS

1. Anonymous on July 29, 2011 8:13 AM writes...

So does that mean they're going to stop flooding the ACS website with jobs for plumbers?

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2. Josh on July 29, 2011 8:18 AM writes...

If they bought Schering for boceprevir, perhaps they are beginning that Vertex is going to eat them alive. Just sayin.

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3. Optimist on July 29, 2011 8:40 AM writes...

Let's hope these will all be managers/mba's and will be followed by a huge increase in research based new hires?

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4. Rick on July 29, 2011 8:45 AM writes...

I note that the article says, "The job cuts will come “disproportionately from the elimination of non-revenue generating positions,” The article doesn't say so explicitly, but that surely includes the most despicably revenue-destroying, shareholder-dissatisfying activity of all: R&D. How much R&D will be cut?

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5. You're Pfizered on July 29, 2011 9:12 AM writes...

This line was more ominous:

Ultimately, the Merck executive team would like to bring total headcount much closer to levels that existed before Schering-Plough was acquired; at the time, Merck employed about 53,000 people.

Um, that's an awful lot more people to eventually trim than just that 13K.

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6. anchor on July 29, 2011 9:16 AM writes...


No one is surprised by what is going on at Merck. I mean many companies have been doing the same..which is they are cutting their knees now and hands later. The most mind boggling issue to many is what on earth Dr. Peter Kim is doing? I mean the silence regarding his status from Merck is deafening. Can someone help us on this issue by posting the same in this blog.

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7. Hap on July 29, 2011 9:29 AM writes...

I assume the theory is "If we finished last with you, we can finish last without you", but 1) you usually can't win at baseball fielding a team of seven players and 2) they weren't finishing last before their management (including some of their scientists, presumably) decided that if something can be sold it should be oversold and having actual products of your own is overrated.

As said before, if they believe that the company is ineffective as structured, why is management still around?

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8. Anonymous on July 29, 2011 9:54 AM writes...

"perhaps they are beginning to understand...."

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9. Chemjobber on July 29, 2011 10:06 AM writes...

So the latest R&D layoffs at Pfizer were called "Project Copernicus" (according to that long Fortune article.) So what will the Merck layoffs be called?

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10. andrewD on July 29, 2011 10:10 AM writes...

chemjobber @9
Project Titanic?

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11. SteelyDan on July 29, 2011 10:25 AM writes...

Wait till GSK gets into the act. Long rumored cuts in Oncology coming. Boy, the Mid-Atlantic states are gonna resemble "Night of the Living Dead" with all the Zombie Chemists walking around.

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12. Anonymous on July 29, 2011 10:35 AM writes...

Quarterly profits of $2bn accompanied by tens of thousands of layoffs. I imagine Novartis, GSK and all the rest can't wait to follow sheep-like in Merck's footsteps. This is dire news for all.

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13. Chemjobber on July 29, 2011 10:46 AM writes...

@10 Project Hindenburg?

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14. Pig Farmer on July 29, 2011 11:00 AM writes...

@13 Pharmageddon

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15. Bubba Zinetti on July 29, 2011 11:11 AM writes...

If 2015 is the target date for this round of cuts, that means that there are people who have worked at Merck for 10 years who have known nothing but re-orgs and cuts. Nice.

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16. expharm on July 29, 2011 11:11 AM writes...

Fast Freddies Fantastic Fortune

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17. Student on July 29, 2011 12:31 PM writes...

I can't post the link but Boston Scientific is also laying off 1,200 workers according to The Boston Globe.

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18. BiotechTranslated on July 29, 2011 12:38 PM writes...

It will be interesting to see where these cuts are going to come from. Ken Fraizer has stated that continued R&D funding is what will turn Merck around (and has been spanked by the markets for it). So is Ken going back on his statement, or are these cuts going to come from non-R&D operations?

Mike

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19. Anonymous on July 29, 2011 12:41 PM writes...

Ken is saying that continued R&D will turn Merck around it is just that the R&D will be in China!

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20. Anonymous on July 29, 2011 12:46 PM writes...

So when Kim finally moves out & Rossetti moves in, who will he have left to manage?

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21. chris on July 29, 2011 12:57 PM writes...

Merck also announced dropping telcagepant, in phase III for migraine.

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22. tt on July 29, 2011 1:29 PM writes...

I guess I got out just in time...Although it was pretty obvious that this was going to be announced. A simple glance at earnings (projected) versus head count shows that Merck was not sustainable in its current size. Expect even more reductions in the future with even more reorganization, site closures, and out-sourcing. I guess 1+1 =

From a bench scientist perspective, the past 5-10 years at Merck has been disruptive to say the least where every 6 months you get a new manager and new paradigm (remember TWOOS, shots-on-goal, 6-sigma, blah, blah, blah). Layer that on top of the merger and there is little wonder why morale is at an all time low and no one feels ownership of projects or driven to give it 100% effort (or even 75%).

Expect more of the good people to leave for greener pastures, while those remaining just see it as a paycheck with an uncertain future. I really hope Merck makes it through all this as there is a load of really talented people there who love science and care about what they do, but I fear that with all of this change and strain, Merck will lose the very thing that built them.

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23. GreedyCynicalSelfInterested on July 29, 2011 1:32 PM writes...

Merck should run seminars for the people who are being laid off. Topics will include, "How to pick out a nice trailer in Nebraska," "How to collect disability," "Living with your parents," and "How to sue your employer for age, race, nationality, disability, and sex discrimination." The last seminar will be held at a bar, so the upper management won't find out. With luck, they should be able to turn it into a class-action law suit.

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24. GladToMoveToProcess on July 29, 2011 1:41 PM writes...

#18: Recent Yahoo!Finance blurb says most of the cuts will be "from headquarters and other administrative functions." An earlier piece there said Merck was reducing the upper end of their R&D budget projection slightly. No word whether the R&D will go to Chindia....

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25. @9,10,13,14 on July 29, 2011 1:45 PM writes...

Props on pharmageddon. Rolls off the tongue better than pharmapolypse or Merck-narök.

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26. #24 on July 29, 2011 1:52 PM writes...

Dude, get out of Process labwork and into CMC. American Bureaucracy won't be outsourced to Chindia anytime soon.

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27. PharmaHeretic on July 29, 2011 2:25 PM writes...

The management and leadership (virus) won't quit until they have destroyed the company (killed the host).

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28. Mike on July 29, 2011 2:29 PM writes...

Putting money into something that is broken is still something that is broken. How about going back to promoting from within, New hires reporting to experienced scientists to gain knowledge, Original thinking (no more me too), Targets that give smaller returns but more of them, Effective management, and Will someone please make a decision!! Merck is a model for how not to run a business.

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29. anchor on July 29, 2011 2:44 PM writes...

#22...
...Expect more of the good people to leave for greener pastures... What the hell are you talking about? Greener pastures where? It has been bone dry, as for as my eye can see.

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30. anonymous on July 29, 2011 2:47 PM writes...

MRL Boston has had over the last 6 months over 20% of their staff leaving of their own accord in chemistry. Rat's off a sinking ship

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31. Andy on July 29, 2011 2:48 PM writes...

So if chemists formed a union it would make things worse? Yeah right. Outsourcing is proceeding at maximum velocity.

The absence of a chemists union indicates that chemists are the weak, easily guided and disposable souls management believes them to be.


A good link below shows that most if all jobs that can be outsourced have (or will be) outsourced.

www.economicpopulist.org/content/tradable-jobs

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32. Mr. Perceptive on July 29, 2011 3:24 PM writes...

Big Pharma is Big Auto and Big Steel of the 21st Century. Sclerotic and busted.

Soon, the only jobs available will be with the Leviathan Military-Security Complex.

That's if killing and destroying is your cup of tea...

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33. Mary Peed on July 29, 2011 7:00 PM writes...

I think the people at Bauch & Lomb should be getting nervous.
Pfizer bought Pharmacia and killed it (mostly).
Merck bought Schering Plough and is going to kill it.

Fred Hassan moved from Pharmacia to SP then to B&L.

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34. Anonymous on July 29, 2011 7:10 PM writes...

All management personals at large US pharma need to think this: Your fundamental management philosophy/concept at every level don't work. Whatever new buzz words you come up every year won't change anything. Let those who have true passion in drug discovery lead.

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35. DrSnowboard on July 30, 2011 1:18 AM writes...

Although Pharmageddon does trip of the tongue, how about Project Icarus or Project Somme? Depends whetheryou think pharma is about to crash and burn, or that the war will struggle on for many years with huge losses in the trenches whilst the generals sip sherry back in the chateau. Too late will they realise they need to liberate / mechanise their infantry.

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37. Anonymous on July 30, 2011 7:06 AM writes...

Sirna gone! Peter Kim next?

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38. rex on July 30, 2011 9:09 AM writes...

So long consumer health,the ship is sinking.

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39. Anonymous on July 30, 2011 2:22 PM writes...

siRNA is not "gone". That one site is gone. The work and 10 of the 50 employees are being moved to other labs on the east coast. As long as Kim survives, so too does siRNA.

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40. anonymous on July 30, 2011 6:02 PM writes...

@5. You're Pfizered

Can you please provide the source of this quote??? I, for one, think Merck will "pause", at least for awhile, at 75K employees, give or take a couple thousand.
Thanks.

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