Merck announced plans to reduce its workforce by 8,500, close two facilities, and move its headquarters to Kenilworth, N.J., as part of “a global initiative to sharpen its commercial and research and development (R&D) focus,” according to an Oct. 1 press statement.
“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 C. Frazier, chairman and chief executive officer in the 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 had previously announced that it would close its Whitehouse Station facility and relocate its global headquarters to Summit, N.J. Citing greater cost savings and operational synergies, the company decided to close both the Summit and Whitehouse Station facilities. The Summit-based Animal Health and Consumer Care will relocate to another New Jersey facility; certain manufacturing, laboratory and other function will be relocated to other facilities in New Jersey or Pennsylvania. The transition is expected to begin next year and be completed by 2015.
The press statement announcing the changes reports that company expects to realize approximately $2.5 billion in annual net cost savings by the end of 2015 and estimates that $1.0 billion, or 40%, of the savings will be realized by the end of 2014, with the substantial majority of savings from marketing and administrative expenses and R&D.
A reduction of an additional 8,500 positions, combined with previously announced cuts of approximately 7,500 jobs, will result in a decrease of about 20% of the company’s total global workforce of 81,000 employees.
The statement outlined initiatives in three areas.
Cost efficiencies will allow the company to allocate resources to areas that present the highest-potential growth opportunities, such as its anti-PD-1 immunotherapy program for oncology; invest in licensing and business development activities; and maintain a high level of cash returned to shareholders. Reducing its global real estate footprint will help the company to move forward with plans to improve the efficiency of its manufacturing and supply network, the statement said.
For commercial development, Merck will continue to support its in-line portfolio in its core human pharmaceutical and vaccine business, but will increase its focus on the key therapeutic areas including diabetes, acute hospital care, vaccines, and oncology. The company is creating a new unit to bring MK-3475, its investigational anti-PD-1 immunotherapy, to the market. Geographically, the company will increase its focus in ten markets: United States, Japan, France, Germany, Canada, United Kingdom, China, Brazil, Russia and Korea.
In its R&D efforts, Merck reports it will focus on candidates capable of providing “unambiguous, promotable advantages to patients and payers. “ Programs include the company’s anti-PD-1 immunotherapy program in oncology, BACE for Alzheimer’s disease (MK-8931), its next generation HCV program and V503, the company’s 9-valent HPV vaccine.
The company also will pursue product opportunities independent of therapeutic area or modality and build its biologics capabilities. It will out-license or discontinue selected late-stage clinical development assets and reduce its focus on platform technologies. It also plans to make externally sourced programs a greater component of its pipeline strategy.