Drug maker Merck laying off 8,500 in strategy overhaul

Merck & Co., the second-largest drug maker by sales, said Tuesday it will lay off 8,500 employees in a strategy overhaul to revamp its research and development efforts.

That’s on top of a previous announcement that the Whitehouse Station, N.J.-based company would lay off 7,500 workers. The combined cuts amount to 20% of the company’s global workforce.

In a statement, the drug company said the strategy is expected to save $2.5 billion by the end of 2015; 40% of those savings would be realized by the end of next year.

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The layoffs will affect employees across several areas, including research and development and sales and marketing, the company said.

“These actions will make Merck a more competitive company, better positioned to drive innovation and to more effectively commercialize medicines and vaccines for the people who need them,” said Kenneth C. Frazier, Merck’s chief executive.

Merck said its strategy will include overhauling its operations in an effort to reduce costs. Its also will focus on developing drugs to treat diseases that include diabetes, cancer and Alzheimer’s.

John Lyon, a professor at the Warwick Business School, said Merck’s announcement is part of a larger trend of restructuring at pharmaceutical companies that has included AstraZeneca and Pfizer.

“Pharmaceutical companies can no longer rely on the blockbuster model of developing drugs ... so they need to look at innovative ways of generating new products,” Lyon said in an emailed note.

Lyon, a former pharmaceutical company executive, said drug makers need to be more nimble in order to stay competitive.

Merck’s shares were trading at $48.72, up $1.10 or 2.3%.

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