Analyst: Merck job cuts could boost earnings

The elimination of 1,200 sales jobs that Merck & Co. Inc. announced this week could add 7 cents a share to its earnings in 2009, an analyst predicted today.

The move, combined with other recent job cuts, would reduce Merck's field staff 20 percent since last year, to roughly 6,800 from about 8,500, the company said.

Merck, which employs about 10,500 people in Montgomery County - its biggest single site worldwide - said the cuts were all in its nationwide field sales staff, which calls on physicians and delivers samples. No cuts are planned at the company's national marketing headquarters in Upper Gwynedd.

People to be let go will be notified later this month and will be gone by July, Merck said.

The move continues a steady contraction across the pharmaceutical industry, once the world's most profitable but now grappling with thinner product pipelines, stricter scrutiny, and more generic competition.

Barbara Ryan, a pharmaceutical analyst at Deutsche Bank Equity Research, estimated that cutting 1,200 sales jobs would add 7 cents a share to Merck's earnings in 2009.

In its last quarterly report, Merck posted a profit of $3.3 billion, or $1.52 a share, compared with $1.7 billion, or 78 cents a share, for the first quarter a year earlier. It estimated that per-share earnings for the whole year would wind up between $3.28 and $3.38.

Merck shares, hovering around their lowest price since August 2006, closed today at $38.84, down 14 cents.

Ryan, in a note to investors, emphasized Merck's "strong base business, new-product growth, and agile, increasingly lean cost structure," as well as its "growing late-stage pipeline."

But the recent delay in launching Merck's cholesterol-lowering drug Cordaptive, ordered by the U.S. Food and Drug Administration, made reductions in the field sales staff prudent, company spokeswoman Amy Rose said.

Merck had eight successful launches of new medicines in 2006 and 2007, "which are in the mature stage now," Rose said.