MERCK: Venture’s Expected End Cited in Job Slash
In eliminating 8,500 jobs worldwide over the next two years, Merck & Co. has cited the need to bolster its pipeline, cut significant costs, and target more spending to highest-potential growth areas.
But in a conference call, Merck also linked the convulsive layoff to its expectation that next year it will lose rights to manufacture heartburn drugs Nexium and Prilosec in the U.S.—and with it, considerable revenue.
Merck expects AstraZeneca to exercise its option to buy Merck’s interest in the drugs between March 1 and April 30, ending a partnership stretching to 1982, when Merck agreed to develop and market products of AZ predecessor Astra in the U.S.
AstraZeneca referred GEN to its latest statement on the topic, inside its Full Year Results 2012: Barring unforeseen circumstances, “AstraZeneca now considers that exercise of the Second Option is virtually certain.” If AstraZeneca pulls the trigger, Merck would receive a final one-time $327 million, reflecting an agreed-upon, fair-value estimate of Merck’s interest in Nexium and Prilosec. That payment could rise in 2018, based on sales.
According to Merck’s latest 10-Q filing, the AstraZeneca joint venture generated $737 million the first half of 2013—$507 million in mostly Nexium-Prilosec revenue plus $230 million in equity income—compared to $662 million ($409 million plus $253 million) in January–June 2012. The venture generated more than $1.5 billion ($915 million plus $621 million) all last year.
“We are pretty certain that [the joint venture] will go away,” Peter N. Kellogg, Merck’s CFO, stated on the October 1 call. “That obviously will have an impact on the top line.”
A day later, Warner Chilcott said it will cut 88 jobs in Rockaway, NJ, following its $8.5 billion acquisition by Actavis. Debbie Hart, president and CEO of BioNJ, told GEN not all of New Jersey’s biopharma job news is bad. She noted Merck will keep its HQ in the state—though it will move to Kenilworth from Whitehouse Station, which will close along with Summit.
Hart also cited BioNJ’s Life Sciences Talent Network online job board. As of Wednesday, it featured dozens of positions from companies that include Celgene (35 jobs/all in-state), Allergan (20/all), Covance (92/10), and even Merck (13/10) and Actavis (12/2).
“Some of the pharma folks who have been laid off, the biotechnology companies are hiring them. Our talent is one of the main reasons why companies come here. And the talent continues to be pervasive,” Hart said.