Merck (NYSE: MRK), the second-biggest U.S. drug maker by sales, will fire 8,500 workers and revamp its research and development after seeing new medicines delayed by U.S. regulators.

The 8,500 positions to be eliminated are in addition to 7,500 job cuts Merck had already announced, the Whitehouse Station, New Jersey-based company said in a statement today. The combined firings equals about 20 percent of the global workforce, and will cut across almost the entirety of Merck, including R&D, sales and management.

The overhaul, to save $1 billion next year, is part of a new strategy being set by Chief Executive Officer Ken Frazier and R&D chief Roger Perlmutter, who was hired in April to replace Peter Kim. Under Kim, experimental drugs in cardiovascular, surgery, and osteoporosis encountered development setbacks while rival drugmakers were able to get new products to market.

“These actions will make Merck a more competitive company, better positioned to drive innovation and to more effectively commercialize medicines and vaccines for the people who need them,” Frazier said in a statement. “Today’s announcement further underscores that we are committed to improving our performance in the short term while also investing for the long term to create value for patients, customers and shareholders.”

The company said it will place more emphasis on developing drugs with the most sales potential, as well as putting more focus on the world’s biggest economies, including the U.S., Europe, China, Japan, Brazil and Russia.

Merck operates a huge vaccine production facility in Durham, N.C. and acquired then closed down Inspire Pharmaceuticals in Raleigh.

The company also recently decided to expand its facility in Wilson, N.C., and signed a licensing deal with RTP-based Chimerix.

Shares React

Merck rose 1.3 percent to $48.24 at 8:01 a.m. New York time. The stock had gained 5.3 percent in the last 12 months through yesterday, compared with a 18 percent gain in the Standard & Poor’s 500 Pharmaceuticals Index of drugmakers.

By 2015, savings from the cuts will rise to $2.5 billion a year, the company said. Most of the savings will come from marketing and administrative expenses and R&D costs.

The company also will trim its real estate holdings, particularly in New Jersey, and work to improve the efficiency of its manufacturing and supply network.

The Merck cuts follow moves at other major U.S. drugmakers to slim and refocus after years of expansion through large deals. Pfizer Inc., the biggest U.S. drugmaker, has shed non- drug units. AbbVie Inc., split off from Abbott Laboratories at the start of the year, has said it will no longer focus on primary care medicines and has fired workers as products in that category have lost sales exclusivity.

More Rivals

Merck’s biggest sales line, diabetes, is being threatened as half a dozen new competitors to its drug Januvia that are in the final stages of development or scheduled to debut in the next two years. Pfizer and Bristol-Myers Squibb Co., meanwhile, have already put emphasis on a new generation of cancer drugs that Merck now says it will focus on.

New primary care drugs developed before Perlmutter took over either haven’t been approved, or are likely to face limited sales. Suvorexant, a sleep pill, in July wasn’t approved by U.S. regulators at the two highest doses, and the lower dose isn’t available yet.

The medicine will also face competition from existing, widely used generic medicines. Odanacatib, an experimental osteoporosis treatment, has been delayed while the company conducts a second study.

Merck said it looked at every part of its business during the overhaul. Part of the strategy shift involves creating a new unit to sell oncology drugs that use the body’s own immune system to kill cancer cells. The company will do more outside deals to bolster its pipeline.

The company said it wasn’t changing its 2013 earnings forecast. It will take a $900 million to $1.1 billion charge this year as part of the restructuring costs, mostly in the third quarter. The restructuring will cost the company about $2.5 billion to $3 billion.