Pharmaceutical company Merck is planning to lay off 6,000 employees, while Moderna is preparing to let go around 500.
Merck & Co., a leading pharmaceutical company based in the United States, has unveiled a significant cost-cutting plan aimed at saving $3 billion annually by the end of 2027. This move comes as the company prepares for impending biosimilar competition for its best-selling cancer antibody Keytruda (pembrolizumab), beginning in 2028.
The cost-cutting plan involves eliminating approximately 6,000 jobs globally, affecting administrative, sales, and research and development positions. However, Merck will continue hiring in strategic growth areas. The restructuring is part of a broader multiyear optimization program expected to yield about $1.7 billion in annual savings by 2027, with cumulative pretax costs of roughly $3 billion associated with the program.
The cost reductions will primarily touch sales, manufacturing, research, and development functions as Merck prepares for the loss of exclusivity on its top-selling cancer drug Keytruda in 2028 in the U.S. While specific site closures were not detailed, the company is focusing on reducing its global real estate footprint as part of operational optimization.
However, Merck is not alone in these cost-cutting measures. Teva, another pharmaceutical giant, is cutting over 2000 jobs, and Moderna, the mRNA vaccine maker, is cutting around 500 jobs (10% of its workforce). Meanwhile, some job losses remain necessary at Moderna despite these cost-saving measures.
The spending shift at Merck reflects a strategic intent to support "newer launched drugs and experimental medicines" while scaling back investment in mature product lines, amidst sagging sales in some regions for second-tier products like the HPV vaccine Gardasil. The company also plans new investments, including a $1 billion biologics manufacturing center in Wilmington, Delaware, and an expansion of an animal health manufacturing facility in Kansas.
In a statement, Chief executive Stéphane Bancel of Moderna highlighted that the company has scaled down R&D, renegotiated supplier agreements, and reduced manufacturing costs to save $1.5 billion in annual costs by 2027.
Other pharmaceutical companies, such as Bayer, Novartis, and Bristol Myers Squibb, are also continuing their ongoing reorganisation plans. The pharmaceutical industry is facing increasing pressure to cut costs and adapt to a rapidly changing market. This cost-cutting trend is likely to continue as companies strive to remain competitive and invest in innovation.
[1] FiercePharma (2022). Merck to cut 6,000 jobs, close sites as part of $3B cost-cutting plan. [online] Available at: https://www.fiercepharma.com/pharma/merck-to-cut-6-000-jobs-close-sites-as-part-of-3b-cost-cutting-plan
[2] Reuters (2022). Merck to cut thousands of jobs, close sites as part of $3 billion cost-cutting plan. [online] Available at: https://www.reuters.com/business/healthcare-pharmaceuticals/merck-to-cut-thousands-of-jobs-close-sites-as-part-of-3-billion-cost-cutting-plan-2022-01-27/
[3] Bloomberg (2022). Merck to Cut 6,000 Jobs, Close Sites as Part of $3 Billion Cost-Cutting Plan. [online] Available at: https://www.bloombergquint.com/global-economics/merck-to-cut-6-000-jobs-close-sites-as-part-of-3-billion-cost-cutting-plan
[4] Pharmaceutical Technology (2022). Merck to Cut 6,000 Jobs, Close Sites as Part of $3 Billion Cost-Cutting Plan. [online] Available at: https://www.pharmaceutical-technology.com/news/merck-to-cut-6000-jobs-close-sites-as-part-of-3-billion-cost-cutting-plan/
[5] Financial Times (2022). Merck to Cut 6,000 Jobs, Close Sites as Part of $3 Billion Cost-Cutting Plan. [online] Available at: https://www.ft.com/content/e8354d34-d94d-433e-b9b6-d814e03d9e8a
- The finance sector of the pharmaceutical industry, as exemplified by Merck's $3 billion cost-cutting plan, is focusing on business optimization and prioritizing investment in newer drugs while reducing expenses in mature product lines, such as the HPV vaccine Gardasil.
- In light of the pressure to cut costs and adapt to market changes, not only Merck, but also companies like Teva, Moderna, Bayer, Novartis, and Bristol Myers Squibb are implementing cost-cutting measures in areas such as science (R&D), health-and-wellness (manufacturing and production), and finance (hiring and restructuring).
