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GEN News Highlights : Jul 8, 2010

Merck & Co. to Axe 16 Research and Manufacturing Facilities as Post-Merger Restructuring Heats Up

Firm will cut workforce by 15% in move to save $3.5B per year.

Merck & Co. will be phasing out operations at eight of its global research sites and another eight manufacturing sites over the next two years as part of the multibillion dollar restructuring program that is inevitably following in the wake of last November’s merger with Schering-Plough. The initial phases of the overall restructuring program will also involve cutting some 15% of Merck’s total workforce, although the firm says new staff will be hired as necessary for what it believes to be strategic growth areas of the business.

Merck maintains the new measures will help it achieve some $2.7–$3.1 billion of the target $3.5 billion in annual synergy-related cost savings it aims to make in 2012. It also estimates that cumulative pretax costs for the initial phases of the merger-related restructuring will be in the range of $3.5–$4.3 billion, two third of which will relate to cash outlay resulting primarily from employee severance pay. A portion of the initial pretax restructuring costs are likely to be recorded during the second quarter of 2010, the firm notes.

The end result will be a new Merck Research Laboratories network comprising 16 major research and development facilities worldwide, including several multidisciplinary sites supporting research in multiple fields. Clinical development and regulatory affairs expertise will be retained in major territories including the U.S., Europe, Asia, and Japan.

“These changes are crucial to drive future growth and realize the promise of being a global healthcare leader for the long term,” states Richard T. Clark, Merck chairman and CEO. “While we believe these actions are necessary to support Merck’s competitive advantage, they required difficult decisions that will impact some of our colleagues, their families, and local communities."

The research sites earmarked for the chop include the facility in Montreal, the Schaijk and Nobilon vaccines facility at Boxmeer (The Netherlands), and the sites at Odense (Denmark), Waltrop (Germany), Newhouse (Scotland), and the Kendall Square facility in Cambridge, MA. Merck’s women’s health research, currently centered at Oss in The Netherlands, will be relocated primarily to the U.S., the firm states.

Manufacturing facilities currently in line to be phased out include those at Comazo (Italy), Cacem (Portugal), Azcapotzalco and Coyoacan (Mexico), and Santa Amaro (Brazil). Merck says it also plans to sell its manufacturing facility in Mirador (Argentina) and its Miami Lakes facility in Florida. Conversely, the firm will make new investments to increase capacity at specific sites including those at Xochimilco  in Mexico and Campinas in Brazil.

Chemical manufacturing will also be phased out at the legacy Merck site but will continue at the legacy Schering-Plough site. The 29 animal health facilities that are the subject of the planned joint venture between Intervet Schering-Plough and sanofi-aventis Merial business are not included in any merger-related restructuring, Merck stresses.