US pharma giant Merck is to make 4,400 redundancies in an effort to stem falling profits, following a 7% drop in third quarter earnings.

The company's administrative costs and R&D spending have increased rapidly this year as it prepares for product launches to replenish its ageing portfolio of drugs.

Merck's biggest earner, cholesterol drug Zocor went off-patent in Europe this year and is fast approaching the same fate in the US, while a number of drugs such as allergy treatment Singulair have not performed as well as expected.

Raymond Gilmartin, chairman, president and chief executive of Merck, said: "In an environment driven by increasing competition, cost-containment pressures and greater customer demand for value, we have examined every aspect of our business, at every level, to identify ways to more effectively address these challenges."

Merck aims to save around $300 million in annual payroll and benefits savings with the reduction of 3,200 permanent and 1,200 contract or temporary positions.

From 1 December  Merck will also put in place a new distribution programme for its US wholesalers, which is intended to moderate the fluctuations in sales currently caused by wholesaler investment buying, and improve efficiencies in the distribution of Merck pharmaceutical products.

The new programme will have cut into fourth quarter revenues by around $700 million, but one product will bare the brunt of this reduction.

Zocor fourth quarter sales will take a hit of approximately $500 million of the total revenue reduction. Merck's statin had worldwide sales of $1.4 billion in the quarter.

Sales of Merck's five largest products Zocor, Fosamax, Cozaar and Hyzaar, Singulair and Vioxx - collectively increased 9% in the third quarter of 2003 and together they accounted for 67% of Merck total sales.