Merck & Co manufacturing restructure risks half billion in factory shut-downs

Published: 2-May-2019

By 2023 Merck aims to have optimised the supply network but expects collateral along the way

Merck is making a bold move spending up to US$1.2 billion. Over the next four years the company will carry out a restructure of its manufacturing and supply network.

The restructure will focus primarily on further optimising the manufacturing and supply network, as well as reducing the pharma giant’s global real estate footprint.

The manufacturing base for the company is in Whitehouse Station, NJ with other locations around the world, operating as part of Merck directly or as a subsidiary. The company has not stated which are at risk or disclosed any indication of what the priorities will be when choices are made.

Though the company didn’t outline any specific factory closures, the announcement did state that over half the cumulative pretax cost of the restructure will be allocated to cash outlays, primarily related to employee separation expense and facility shut-down costs.

Manufacturing is a key step in the realisation of new capital projects. With Merck adding $4bn to its investment in these new projects the success of its immunotherapy drug, Keytruda, it seems a good time to shake-up manufacturing.

The optimisation is expected to be completed around 2023 will be key as more projects come online and Keytruda gets approved for more and more applications.

Though much uncertainty lays ahead, company CEO, Kenneth C Frazier, seems optimistic, saying: “Our investments in research and development are paying off, and we are confident in our science-driven strategy, growth prospects and ability to sustainably deliver value to patients and shareholders.”

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