Merck Job Cuts On the Rise, Cuts Could Prove Beneficial

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For months, the struggling New Jersey- based pharmaceutical conglomerate has been struggling, and the numbers they've been producing have only made their financial woes more evident. But, yesterday the company set a new plan of action in motion. Merck & Co. announced in a press release on Tuesday that they would be eliminating approximately 20% of their work force. The flagrant percentage equates to approximately 16,000 of the 81,000 jobs. Initially the drug-maker stated a total of 7,500 jobs would be cut, but in an effort to crunch even more numbers and cut further cost, they added an additional 8,500 jobs to the chopping block.

Merck, the third-largest pharmaceutical maker in the nation, stated that the restructuring plan will definitely incur costs which roughly equate to approximately $2.5 billion to $3 billion, excluding tax. The staggering expenditures will actually cover the severance costs due to employees that will be compromised due to the downsizing.

The overall cost relief is projected to be seen roughly over the next 2 years. Merck financial analysts project that the company should produce nearly $1 billion by the end of next year. Overall, the downsizing plan should actually generate $2.5 billion in annual saving by the top of 2016. Most of the financial relief efforts will be derived from the company's marketing, and administrative sectors in addition to research and development. Merck is also expected to diminish their real estate holdings, to refocus their attention on manufacturing and supply efficiency.

But unlike most companies that have resorted to some form of downsizing, Merck's current struggle isn't as daunting as others. Even with the costs of downsizing, Merck has still has a projection of earning approximately between $3.45 and $3.55 a share this year.

The restructuring effort could actually be a momentous turning point for the company. With their drug designed to treat Alzheimer's in the late-stage of clinical trials, the drug might not only be ground-breaking, but highly beneficial for the company's financial sector.


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