Merck & Co's 3rd-qtr EPS drops 27% on restructuring; further downsizing to come

US drug major Merck & Co's third-quarter 2008 earnings per share dropped 27.1% year-on-year to $0.51 due to a heavy $0.29 per share restructuring charge and slightly lower sales. Net income fell 28.2% to $1.09 billion.

On the day the results were reported, October 22, Merck shares closed down 6.6% to $28.01, as the firm announced plans to implement another cost-cutting program in a bid to lose 7,200 positions by the end of 2011, with 40% of the total job cuts to take place in the USA. As part of this latest wave of downsizing, Merck plans to reduce its total number of senior and mid-level executives by 25%.

These lay-offs are in addition to the 10,400 eliminated as part of a 2005 restructuring program, which was substantially complete at the end of September and left Merck with approximately 56,700 employees. The firm expects the new program to yield cumulative pretax savings of $3.8 billion to $4.2 billion from 2008 to 2013, in addition to the savings of $4.5 billion to $5.0 billion, which the company remains on track to achieve at the end of the 2005/10 period.