Merck planning additional cuts

TRENTON, N.J. -- Pharmaceutical giant Merck & Co., under siege because of lost revenues from its recalled blockbuster arthritis drug Vioxx, will cut about 5,100 jobs by year's end, 700 more than originally planned, and will slash hundreds of millions of dollars in spending, chairman and chief executive Raymond V. Gilmartin said yesterday.

Gilmartin, speaking to analysts during Merck's annual business briefing, said the company is accelerating changes to increase growth but will stick with its strategy of shunning major mergers. It will seek new drug candidates through more licensing deals and internal research instead.

"Our focus now is on the future, on renewing the growth of the company," Gilmartin said.

Gilmartin reaffirmed earnings guidance for this year and next, saying Merck expects earnings per share of $2.59 to $2.64 for 2004 and $2.42 to $2.52 for 2005. Analysts surveyed by Thomson First Call were expecting earnings per share of $2.62 and $2.47, respectively.

Merck's 2004 forecast is reduced by 50 cents to 55 cents because of lost revenues after pulling Vioxx from the market worldwide on Sept. 30 when its own internal study showed the popular drug increased the risk of heart attacks. The company has since been beset by lawsuits and a sharply lower stock price.

The 2005 guidance does not include any reserves to cover Vioxx litigation, Gilmartin said.

The impact of that litigation will be the key to Merck's future, said independent pharmaceuticals analyst Hemant Shah of HKS & Co. in Warren, N.J.

He said Merck has several experimental drugs in early testing, including ones for obesity, diabetes, stroke, and Alzheimer's disease.

Gilmartin said the past year brought "an extraordinary challenge."

"We are not operating under 'business as usual' in any sense," he said.