Merck & Co. plans to cut 8,500 more jobs as the drugmaker continues its struggle with competition from cheaper generic medications that have squeezed the pharmaceutical industry for several quarters now.
The New Jersey-based company said the reductions it announced Tuesday are in addition to 7,500 cuts it had previously announced but hasnt carried out. That means it is slashing about 20 percent of its workforce, currently about 81,000 people.
Merck, the worlds third-largest drugmaker, said the restructuring will cost between $2.5 billion and $3 billion before taxes, mainly due to employee severance costs.
But it expects the moves to help generate annual savings of about $2.5 billion by the end of 2015.
It expects to realize $1 billion by the end of 2014. Most of savings are expected to come from marketing and administrative expenses and research and development.
Company shares rose $1.13, or 2.4 percent, to close at $48.74. Mercks stock is up about 19 percent this year.
The stock market almost always reacts well to big expense cuts, said Erik Gordon, an analyst and professor at University of Michigans Ross School of Business. Its the simplest, clearest thing for analysts to understand.
In addition, Merck said Tuesday it will now move its headquarters from Whitehouse Station, N.J., to Kenilworth, N.J. The company had previously planned to move to Summit, N.J., but it determined it could save more money by closing both its Summit and Whitehouse Station locations. Its operations in Summit, which include its Animal Health and Consumer Care divisions, will be moved to other locations in New Jersey or Pennsylvania.
The headquarters move is expected to begin next year and be finished by 2015. Merck has been based in Whitehouse Station since 1992.
Company spokeswoman Kelley Dougherty said Merck already has office space, research and development and manufacturing locations in Kenilworth, which is around 20 miles from New York City.