Big pharma cuts back.

Two of the world's largest drug companies have announced major changes this year, the effects of which are already being felt by instrument providers (see page 8). In the latest announcement, Merck unveiled a global restructuring plan, which will eliminate 11% of its workforce, cutting positions in manufacturing and other divisions by 2008. Merck will sell off or close five manufacturing plants and shutdown one basic research site and two pre-clinical development sites. Additionally, Merck Manufacturing Division intends to employ a new supply strategy to accelerate production time and lower costs by outsourcing. Altogether, Merck anticipates pre-tax savings of $3.5-$4 billion over the next five years. Merck's R&D expenses am estimated to decline in the low to mid-single digits this year and to be flat in 2006.

Updating its plan from earlier this year (see IBO 4/ 15/05), Pfizer forecasts cost savings of more than $600 million in 2005. Through 2008, the company expects to realize $1.3 billion in procurement savings, $1.3 billion in operating expense savings and $0.3 billion in facilities savings. In July, the company announced it will reorganize its R&D operations into 11 therapeutic categories. Six "drug-candidate producing sites" remain, but development for most therapeutic areas will be concentrated at single sites. In the second and third quarters, R&D spending for the company increased 3% and fell 6%, respectively. In 2006, R&D expenses are expected to fall 1%.