Schering-Plough Eyes Cut in Payroll
TRENTON, N.J. (AP) _ Struggling drug maker Schering-Plough Corp. said Thursday it will slash at least 10 percent of its payroll expenses in a cost-cutting move that could cut an additional 2,000 jobs.
Last August, the company said it would eliminate 1,000 positions through an early retirement program for U.S. employees. Workers have until Dec. 15 to sign up for the buyouts. The new jobs would include workers worldwide.
The Kenilworth-based maker of respiratory and hepatitis medicines said Thursday that it is beginning the second phase of a restructuring program aimed at cutting annual expenses by more than $200 million. The company is not saying exactly how many jobs will be cut.
``We would not be taking these steps if it were not critical to our company’s future,″ chief executive officer Fred Hassan, who took over in April, said in a prepared statement.
The cuts will not affect the sales force, nor quality control and manufacturing compliance employees overseeing plant improvements ordered by the Food and Drug Administration after it imposed a record $500 million fine for a host of deficiencies. That would leave administrative, research and development, marketing and production jobs at risk.
At the start of the year, Schering-Plough had 30,500 employees worldwide, including 11,900 in the United States.
The company also said it is trimming expenses related to temporary employees and contractors by at least 10 percent.
Independent pharmaceuticals analyst Hemant Shah of HKS & Co. in Warren, N.J., said the job cuts are no surprise and he expects more.
``They don’t have the revenue to support their cost structure,″ Shah said.
He said it remains to be seen whether Hassan can revive Schering-Plough, despite his reputation as a corporate turnaround whiz. Hassan took over Pharmacia Corp. when it was floundering after the merger of Pharmacia and Upjohn and built it into the world’s No. 10 drug company before Pfizer acquired it in April.
``With Pharmacia, he was sailing with the wind behind him,″ Shah said of Hassan. ``With Schering-Plough, he’s sailing with the storm ahead of him.″
In August, Hassan announced cost-saving measures including reducing the quarterly dividend by two-thirds, selling one of the two corporate jets, freezing most employee merit increases through 2004, canceling profit-sharing payments for all employees for the first time in decades and eliminating bonuses _ including his own $2 million bonus.
Six weeks ago, the company reported its first quarterly loss _ $265 million _ since Schering-Plough was formed by a 1970 merger. Revenues for the July-September quarter declined by 16 percent to $2.04 billion from $2.42 billion a year earlier.
Net income for the first nine months of 2003 plunged 95 percent to $90 million, or 6 cents per share, from $1.66 billion, or $1.13 per share, in January-September of 2002.
``Schering-Plough is facing tough challenges,″ Hassan said. ``We have set ambitious but, we believe, attainable goals aimed at turning our company around and achieving the kind of results we _ and our shareholders _ expect and demand.″
The company has slipped from No. 11 in U.S. pharmaceutical sales in 2002 to No. 13 as of June, according to health data company IMS Health.
Schering-Plough’s stock has been battered by federal probes of its marketing, sales and clinical trials practices; its troubles with the FDA, and falling revenues as competition hurt sales of its top two drug lines. Share prices dropped steadily from $60 in January 2001 to the $15-$16 range, where they have been mired since August.
Claritin, the blockbuster allergy drug that once provided nearly $3 billion in annual revenues, now is sold over-the-counter and has generic competition. Its third-quarter sales were only $68 million, and sales of a successor prescription drug, Clarinex, were flat at $169 million.
Schering-Plough’s No. 2 product line, companion drugs for the difficult-to-treat hepatitis C virus, has steadily been losing market share since Swiss drug giant Roche Group introduced competing products about a year ago.
Schering-Plough shares closed up 6 cents at $16.95 in afternoon trading on the New York Stock Exchange.
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