By Bill Berkrot
Difficult economic conditions and a reversal in favorable foreign currency exchange rates will further compound the impact of patent expirations of lucrative medicines, few major new drugs on the immediate horizon and a tougher regulatory climate in an industry that has already been going through serious belt tightening.
"If we don't change the business models we're not going to survive as an industry," Merck <MRK.N> CEO Richard Clark said on a conference call with analysts and investors.
"Our current sales trends for key products, compounded by known industry and emerging economic factors, have led us to reassess the environment in which we expect to be operating between now and 2010," Clark said in a statement.
Wyeth <WYE.N> reported flat third-quarter profit in line with Wall Street expectations as it was hit by generic competition for its Protonix acid reflux drug.
Wyeth raised only the low end of its full-year forecast by 2 cents, but its failure to raise the forecast overall and the setback for its babineuzumab Alzheimer's drug spooked investors and its shares fell 8 percent.
GlaxoSmithKline Plc <GSK.L>, the world's second-largest drugmaker, provided a glimmer of stability, reporting that its profit before restructuring charges rose 6 percent, topping analysts' forecasts, as sales rose 7 percent for the quarter.
But the British company stuck to its cautious full-year forecast for a mid-single-digit decline in earnings per share in local currencies.
Merck's third-quarter net profit fell 28 percent, and its shares were off 1 percent.
It said 6,800 employees will lose their jobs and another 400 vacancies will not be filled. Those cuts come on top of 10,400 jobs that were slashed in an earlier restructuring.
Wyeth said it still expects to reduce its head count 4 percent to 6 percent this year and by 10 percent over several years.
"As the top line has been slowing and in some cases declining, pharmaceutical firms are reacting aggressively with job cuts," Morningstar analyst Damien Conover said.
Both Merck and Wyeth said results were hurt by exposure to financial institutions that succumbed to the global credit crisis. And both were helped by favorable foreign currency exchange rates, a trend that has begun to reverse.
Merck said its global restructuring should result in cumulative savings of $3.8 billion to $4.2 billion from 2008 to 2013.
"It's clear that companies across the board are working hard to reduce expenses," said Caris & Co analyst David Moskowitz.
(Additional reporting by Ransdell Pierson and Lewis Krauskopf; Editing by Maureen Bavdek)