Pharmaceutical giant, Merck, is axing 8,500 extra jobs from its workforce to cut $2.5 billion from its cost by 2015 BBC news reported.
"We appreciate the contributions of all our employees, and we will support them during this time of transformation," Merck chief executive Kenneth Frazier told BBC News.
Besides the cuts to its workforce in marketing, administrative, research and development, Merck is also stopping late-stage trials for those products it feels will be unsucessful. Other products are also being licensed to other companies. Merck is also changing its focus to areas with high growth such as cancer treatment.
The company's recent losses, in addition to 7,500 cuts from 2011 and 2012, are 20 percent of its workforce. Company shares increased 2.35 percent to $48.73 after the cuts were made public. Merck is also selling its property in New Jersey to save money.
"While these actions are essential to ensure that Merck can continue to fulfil its mission into the future, they are nevertheless difficult decisions because they affect our dedicated and talented colleagues," Frazier said. "We appreciate the contributions of all our employees, and we will support them during this time of transformation."
Merck estimates its costs will be decreased by $1 billion by the the end of next year BBC News reported.
"Overall, today's announcement makes us more cautious about the potential of Merck's pipeline" of experimental drugs," Alex Arfaei, analyst at BMO Capital Markets told BBC News.
The company is working on a new kind of cancer drug which boosts, a treatment for Alzheimers disease, upgraded versions of its cervical cancer vaccine and care for Hepatitis C.
"I think this is consistent with what everybody else has done in the industry," Les Funtleyder, a strategist at New York Investment firm Poliwogg told The New York Times. "When you've had some clinical trial failures and you've had a number of products go generic, you either have to find new revenue through acquisitions or you cut costs through headcount reductions. They're going the headcount route."
