Merck Announces Major Cost-Cutting Initiative, Including 6,000 Job Cuts

Pharmaceutical giant Merck has unveiled a sweeping $3 billion cost-cutting initiative that includes the elimination of approximately 6,000 jobs, affecting around 8% of its global workforce. The announcement comes as part of the company's strategic efforts to reallocate resources and support higher-growth areas of its business.

Restructuring and Resource Reallocation

Merck CEO Rob Davis characterized the initiative as more of a reallocation than an outright cut, emphasizing that the savings generated will be channeled into research and development (R&D) and used to support the launch of up to 20 new products. The company plans to focus on fully funding late-stage and commercialization activities for its pipeline assets.

"We need to fully fund those launches," Davis stated during the company's second-quarter earnings call. "But we want to do it productively and efficiently, and that's why we're looking to reallocate resources from the slower growth areas of the business to fully fund into the fast-growing areas of our business."

The restructuring will affect roles across administrative, sales, and R&D functions. However, Merck has not specified how many new employees it plans to add in growth areas, leaving some uncertainty about the net impact on its workforce.

Financial Performance and Product Portfolio

Merck's cost-cutting measures come in the wake of its second-quarter financial results, which revealed a 2% year-on-year decline in revenue to $15.8 billion. The company's product portfolio showed mixed performance:

• Keytruda, Merck's cornerstone product, saw 9% growth, accounting for $7.956 billion in sales.
• Gardasil, the HPV vaccine, experienced a significant 55% year-on-year decline, bringing in $1.1 billion.

The company's focus on reallocating resources aims to address these disparities and support the development and launch of new products to drive future growth.

Industry-Wide Trend of Workforce Reductions

Merck's announcement follows a pattern of recent staffing cuts across the pharmaceutical industry. Other major players have also implemented workforce reductions:

• Bristol Myers Squibb recently laid off 68 employees from its Lawrenceville, New Jersey site, bringing its total layoffs there to over 1,200 since April 2024.
• Roche subsidiary Genentech fired 87 employees from its South San Francisco headquarters.
• Moderna announced a 10% reduction in its global workforce, bringing its headcount to below 5,000.

These industry-wide cuts reflect ongoing efforts to streamline operations, reduce costs, and reallocate resources in response to changing market dynamics and product portfolios.