Merck & Co joins string of “restructurers,” cutting 8,500 jobs

US pharma giant Merck & Co (NYSE: MRK) is the latest of a flood of leading drugmakers to announce restructuring plans, and significant job cuts, in this case aiming to “sharpen” its commercial and R&D focus, looking to make annual cost savings of around $2.5 billion by the end of 2015, the company announced yesterday (October 1).

By close of trading yesterday, Merck’s share shares were up 2.2% to $48.67, having gained 7.8% in the past 12 months, versus a 19% rise in the Standard & Poor’s 500 Pharmaceutical Index, noted Bloomberg.

$1.0 billion, or 40%, of the savings will be realized by the end of 2014. The company anticipates that the substantial majority of savings will come from marketing and administrative expenses and R&D. These savings are off of the company’s full-year 2012 expense levels. By the end of 2015, the 8,500 workforce reductions announced, combined with pending, previously announced reductions of about 7,500, will result in a decrease of about 20% in Merck’s total global workforce of 81,000 employees. Total pretax costs for the new restructuring program are estimated to range between $2.5 billion and $3.0 billion.

Plans to move global HQ

As part of the overall global initiative, Merck also announced plans to move its global headquarters from Whitehouse Station, New Jersey, to its existing facilities in Kenilworth, NJ. The company had previously announced that it would close its Whitehouse Station building and relocate its global headquarters to Summit, NJ. However, after re-evaluating its real estate needs in the state, Merck determined that it could achieve greater cost savings and operational synergies by closing both its Summit campus and its main Whitehouse Station facility. The transition is expected to begin next year and be completed by 2015.

“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,” said Kenneth Frazier, chairman and chief executive of Merck, adding: “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.”

Sharpened commercial focus