Source: Newark Star-Ledger
BY GEORGE E. JORDAN AND JEFF MAY
Schering-Plough's chief executive said yesterday the budget ax will fall first and hardest in New Jersey as the drugmaker cuts more than $1 billion in spending after the abrupt collapse of its top-selling cholesterol medicines.
Fred Hassan said the global cost-cutting plan announced late Wednesday was still under development, but workers in the United States -- particularly employees at the company's Kenilworth headquarters -- would bear the brunt of the projected 5,500 layoffs.
"The way it's going to fall on the U.S., unfortunately, it's going to fall on New Jersey," Hassan said in a telephone interview. "That's the way the situation has unfolded."
The company would lay off administrators first to spare laboratory researchers and workers on PHYSICIAN WHO CRITICIZED
VYTORIN GIVES HIS SIDEPAGE 21manufacturing lines that produce its stable of allergy, arthritis, respiratory and cancer treatments, he said. The company already was planning on shedding an unspecified number of jobs as it folds in employees from recently acquired Organon BioSciences.
Schering-Plough plans to eliminate 10 percent of its work force and idle an undisclosed number of its 60 manufacturing plants over the next two years. The company employs 55,000 workers worldwide, including roughly 8,000 people in New Jersey.
The prospect of significant layoffs adds to a deteriorating employment picture in the Garden State. New Jersey's economy lost 10,400 private-sector jobs in the first two months of the year, as two of the state's most important industries -- pharmaceuticals and financial services -- undergo painful contraction.
Schering-Plough has yet to brief Gov. Jon Corzine's economic team about the scope of proposed job cuts here, said James Gardner, a spokesman for the governor.
The cost-cutting moves are in response to calls by physicians at the annual American College of Cardiology session in Chicago to curtail the widespread use of the cholesterol medicines Vytorin and Zetia, which together had $5 billion in 2007 sales.
The two drugs are marketed jointly by Schering-Plough and Merck.
Wall Street responded enthusiastically to the proposed cuts, sending shares of Schering-Plough surging $1.52, or 11 percent, to $15.38. On Monday, the shares lost 26 percent.
With less fanfare, Schering-Plough and Merck are moving to shore up sales of Vytorin and Zetia. The partners sent out a letter to doctors in the past week reminding them that the two drugs are effective at lowering LDL, or bad cholesterol, a standard goal for reducing the risk of heart disease. Another, more detailed letter is in the works.
Schering-Plough and Merck halted television advertising for Vytorin in January, when they released preliminary results of a medical trial called Enhance that showed the drug lowered cholesterol but failed at its main goal: reducing clogging in neck arteries better than a statin drug alone. For now, there are no plans to resume broadcast commercials, said Robert Spiegel, Schering-Plough's chief medical officer.
The two companies have continued to run print ads for the drug, however, and are planning a new marketing campaign that will rely on public service-type spots to reinforce the message that lower LDL counts are better. Spiegel said the partners also planned to defend Vytorin and Zetia in responses to medical journals.
"We think there's an insidious message that people have been wasting their time and wasting their money with a drug that doesn't work," Spiegel said, "and we think there's nothing further from the truth."
Many analysts think Vytorin and Zetia sales will be affected through at least early 2009. But Timothy Anderson, who follows the company for Sanford Bernstein, said the market reaction is "overly pessimistic."
Some assumptions call for a decline in Vytorin/Zetia sales of 50 percent or more, Anderson said in a note to investors. More likely is a 25 percent drop by the end of 2009, with a greater falloff in the United States, he said.
"Does all of this mean that Vytorin/Zetia will become a near-dead franchise on life-support, like the market is suggesting?" he wrote. "Not likely. It will decline in value, however."
One problem for Schering-Plough: Its sales representatives have to redouble their efforts at a time when they are likely to be demoralized by job cuts.
Spiegel, however, said morale so far remains good.
"Our sales force remains confident in these products," he said.
A glummer mood pervaded the Schering-Plough message board on Cafepharma, a website for pharmaceutical sales reps.
"We are not toast," read one anonymous post. "We are now fried!"
George E. Jordan may be reached at firstname.lastname@example.org
or (973) 392-1801. Jeff May may be reached at email@example.com
or (973) 392-4282.