Merck & Co to cut 8,500 jobs in restructure
Will also sharpen its commercial and R&D focus by targeting opportunities that will deliver the greatest return on investment
Merck & Co, known as MSD outside the US and Canada, plans to cut annual operating costs by US$2.5bn by the end of 2015 and cut 8,500 jobs.
In common with many of its rivals, such as AstraZeneca, GlaxoSmithKline and Pfizer, who have already embarked on such cost-cutting exercises, Merck & Co aims to 'sharpen its commercial and research and development (R&D) focus' by targeting its resources behind opportunities that will deliver the greatest return on investment.
The firm says this will involve bolstering its pipeline and implementing a more agile operating model, with a significantly reduced, more flexible cost structure.
'These actions will make Merck a more competitive company, better positioned to drive innovation and to more effectively commercialise medicines and vaccines for the people who need them,' said Kenneth Frazier, Chairman and Chief Executive of Merck.
The firm estimates that $1.0bn, or 40%, of the savings will be realised by the end of 2014, with the majority coming from marketing and administrative expenses and R&D.
While these actions are essential to ensure that Merck can continue to fulfill its mission into the future, they are nevertheless difficult decisions
By the end of 2015, the workforce reductions announced today, combined with previously announced reductions of approximately 7,500, will result in a decrease of about 20% in Merck’s total global workforce of 81,000 employees. Total pre-tax costs for the new restructuring are estimated to range between $2.5–$3.0bn.
Overall, this global initiative will focus on reducing its cost base, sharpening its commercial focus and refocusing and prioritising its research and development programme.
'While these actions are essential to ensure that Merck can continue to fulfill its mission into the future, they are nevertheless difficult decisions,' added Frazier.
By adopting a streamlined and more flexible cost structure and operating model, the firm says it will be able to allocate resources to those areas that present the highest growth opportunities, such as its anti-PD-1 immunotherapy programme for oncology; BACE for Alzheimer’s disease (MK-8931); its next-generation HCV programme; and V503, the company’s 9-valent HPV vaccine.
Merck says it will invest in new licensing and business development activities to acquire external innovation and commercial opportunities to strengthen its pipeline.
Within its core human pharmaceutical and vaccine business, Merck will increase its focus on the key therapeutic areas of diabetes, acute hospital care, vaccines and oncology.
Geographically, the company will increase its focus in the 10 markets that currently account for the majority of revenue in its pharmaceutical and vaccine business. These are the US, Japan, France, Germany, Canada, UK, China, Brazil, Russia and Korea.
Merck will also pursue emerging product opportunities independent of therapeutic area or modality and build its biologics capabilities. It will also out-license or discontinue selected late-stage clinical development assets and reduce its focus on platform technologies.
The company also plans to move its global headquarters from Whitehouse Station, NJ, to its existing facilities in Kenilworth, NJ. The transition is expected to begin next year and be completed by 2015.
In addition, Merck’s Animal Health and Consumer Care divisions currently located in Summit, NJ will be relocated to another facility in the state, and certain manufacturing, laboratory and other functions currently located in Summit will be relocated to other facilities in New Jersey or Pennsylvania.
Merck has been headquartered in Whitehouse Station since 1992.