IHS Global Insight Perspective | |
Significance | Merck & Co (U.S.)'s company restructuring is to see eight research and manufacturing sites phased out, while consolidation of offices globally will continue. Total workforce is to be reduced by about 15% across all areas. |
Implications | The initiatives are part of the integration efforts set out by the firm since the acquisition of Schering-Plough last year. The consolidation appears to be moving towards creating a cost-efficient manufacturing base as well as a research and development organisation aimed at incorporating the strengths in Schering-Plough's portfolio. |
Outlook | Merck is driving towards achieving a savings target of US$3.5 billion in the next two years, and the restructuring efforts are aimed at moving closer to that goal. The company is also expected to intensify efforts to focus on sustaining growth not only by finding efficiencies but also expanding its business horizons in emerging markets over the next few years. |
U.S. pharma major Merck & Co has announced concrete plans to phase out research and development (R&D) as well as manufacturing sites in the global shake up of its operations. The move is part of restructuring efforts implemented by the firm since the US$41-billion acquisition and subsequent merger of U.S. firm Schering-Plough was completed in late 2009. In a statement, the pharma major said that eight research and manufacturing sites will be phased out from its operations. The timeline for the indicated phase out is scheduled over the next two years.
The research and development sites facing the axe are as follows:
Merck & Co's Phase Out of Sites | |
Manufacturing | R&D |
Comazzo, Italy | Montreal, Canada |
Cacem, Portugal | Boxmeer (Nobilon facility only) |
Azcapotzalco, Mexico | Oss, Netherlands |
Coyoacan, Mexico | Schaijk, Netherlands |
Santo Amaro, Brazil | Odense, Denmark |
Mirador, Argentina (Sell) | Waltrop, Germany |
Miami Lakes, Florida (Sell) | Newhouse, Scotland |
Singapore chemical manufacturing unit | Cambridge (Kendall Square), Massachusetts, U.S. |
Source: Merck & Co | |
The firm said that its Merck Research Laboratories network will now be made up of 16 major R&D facilities globally and will retain clinical development and regulatory affairs expertise in major regions around the world including the United States, Europe, Asia, and Japan. Drug-development focus will be maintained in seven therapeutic franchise areas, namely—Cardiovascular Disease; Diabetes and Obesity; Infectious Disease; Oncology; Neuroscience and Ophthalmology; Respiratory and Immunology; and Women's Health and Endocrine.
Merck Manufacturing Division, meanwhile, will see its network shrink from 91 facilities to 77 facilities. The firm said that this will include 29 animal health facilities the subject of a planned joint venture between Intervet Schering-Plough and Sanofi-Aventis's Merial, which are not included in this restructuring programme.
Even as the talk of phasing out research and manufacturing sites continues, Merck & Co has said it will continue to make new strategic investments to support its worldwide product supply needs, particularly in emerging markets such as in Latin America, where investments at its Xochimilco, Mexico, and Campinas, Brazil, facilities are ongoing.
Outlook and Implications
The announcement reflects on the internal efforts to integrate major units of Schering-Plough into Merck following the merger. The phasing out of the eight manufacturing and research facilities was expected and will only boost the firm's plans to attain savings of over US$3 billion in the next two years. Interestingly, Merck's new research network may turn out to focus on its operations in developing nations. So far, the firm's research sites in North America and Europe have only been affected by the restructuring. On the manufacturing front, the consolidated network now provides for attaining better cost efficiencies.
The size of the restructuring efforts clearly underscore the scale of the operations of the merged entity. At the time of the merger, Schering-Plough's 20 major manufacturing sites were added to Merck & Co. The emphasis of the integration is to maintain good manufacturing standards while streamlining capacity. Merck is expected to intensify its efforts to expand operations in emerging markets, namely China, Turkey, and Russia. Initiatives to increase investments in Latin American markets could be targeted at enhancing capacity in specific therapeutic areas or markets. Merck & Co's new entity has five main units—Global Human Health, focusing on prescription drugs, vaccines, and biologics, Merck Research Laboratories, Merck Manufacturing, Animal Health, and Consumer Health Care.
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