Merck & Co., Inc. (NYSE: MRK), known outside the U.S. and Canada as MSD, today provided further detail on integration plans for the company's research and development, manufacturing and other business operations as part of a global restructuring program announced following the November 2009 merger of Merck and Schering-Plough. The consolidation plans support Merck's strategic direction as a customer focused, innovative and diversified global health care company, and position the company to invest in key areas for future growth, including emerging markets, biologics, vaccines and consumer care.
“Today's announcement is another important step as we successfully integrate our global operations on schedule and move forward with Merck's strategic priorities”
Merck today announced plans to phase out operations at eight research sites and eight manufacturing sites, as well as to continue to consolidate office facilities worldwide, as part of the global merger restructuring program that began last December. The goal of the restructuring is to create a flexible R&D organization that cultivates scientific innovation, facilitates external collaboration and drives pipeline progress and a reliable, more fully utilized and cost efficient worldwide manufacturing supply chain to support Merck's broader product portfolio.
Merck continues to expect its total workforce to be reduced by approximately 15 percent across all areas of the combined company worldwide as part of the initial phases of its merger restructuring program. The company said it will continue to hire new employees in strategic growth areas of the business as necessary.
"Today's announcement is another important step as we successfully integrate our global operations on schedule and move forward with Merck's strategic priorities," said Richard T. Clark, chairman and chief executive officer of Merck. "These changes are crucial to drive future growth and realize the promise of being a global health care leader for the long term. 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. We will implement our restructuring plans with the utmost care and respect for the hard-working and talented employees of Merck," he said.
Merck said it remains committed to achieving its previously announced synergy target of $3.5 billion in ongoing annual savings in 2012. With the plans announced today, Merck expects the initial phases of the merger restructuring program to result in savings of approximately $2.7 to $3.1 billion in 2012 toward the $3.5 billion target. The company said synergy target savings will also come from non-restructuring-related activities, such as its ongoing procurement savings initiative. The company estimates that cumulative pretax costs for the initial phases of the merger restructuring program will now range from $3.5 billion to $4.3 billion. Merck expects that a charge for certain portions of these costs will be recorded in the second quarter of 2010. Merck said that approximately two-thirds of the cumulative pretax costs will relate to cash outlays, primarily due to employee separation expense. About one-third of the cumulative pretax costs are expected to be non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested.
Merck is taking a careful and thoughtful approach to these actions, including exploring appropriate local partnerships, business development initiatives and, in some cases, site sales to help minimize the potential impact on communities and employees. The company said its evaluation of these opportunities as well as the company's global network continues. Merck will comply with all local laws and regulations, including where applicable, any requirements to inform or consult with works councils, trade unions or other employee representative bodies.
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