NEW YORK (TheStreet) -- Merck (MRK) is firing 8,500 workers and implementing other cost-cutting measures in a restructuring effort to focus more heavily on its commercial and research and development operations.
"These actions will make Merck a more competitive company, better positioned to drive innovation and to more effectively commercialize medicines and vaccines," Merck CEO Ken Frazier said in a statement.
The New Jersey-based drugmaker seeks to reduce operating expenses by $2.5 billion by the end of 2015. The 8,500 job cuts announced Tuesday, added to previously announced layoffs of 7,500 employees, will decrease Merck's total workforce by 20%.
Merck expects 40%, or $1 billion, of the savings to be realized by end-2014. The restructuring efforts will cost between $2.5 billion $3 billion, two-thirds of which will be cash outlays associated with separation expenses.
"While these actions are essential to ensure that Merck can continue to fulfill its mission into the future, they are nevertheless difficult decisions because they affect our dedicated and talented colleagues. We appreciate the contributions of all our employees, and we will support them during this time of transformation," said Frazier.
Merck restated its full-year 2013 non-GAAP earnings per share guidance of $3.45 to $3.55 a share.
On the R&D front, Merck said it will focus drug development efforts on a few key therapeutic areas, including diabetes, acute hospital care, vaccines and oncology. Merck said it will also step up efforts to bring in new drugs from outside companies through licensing and acquisitions.
Goldman Sachs revised its price target on the announcement to $54 from $52 but maintained its hold rating.