- Merck & Co. on Tuesday said it is revamping its manufacturing and supply network, with plans to close or
divest facilities and reduce employee headcount.
- Pretax costs for the restructuring, which Merck aims to complete by 2023, will amount to between $800 million and $1.2 billion, the drugmaker estimated in a regulatory filing yesterday. About 55% of that total will be cash outlays such as severance costs or plant shutdown costs, Merck said.
- Charges per GAAP accounting will likely amount to $500 million this year, including a $187 million hit taken in the first quarter, Merck said.
The pharma giant is looking to slim down where it can while undertaking a five-year, $16 billion capital investment campaign that includes plans to expand manufacturing capacity for cancer medicines, vaccines and animal health. About $9 billion of that total will be spent in the U.S., Merck said in its earnings presentation yesterday.
Merck said the restructuring is part of an overall effort to optimize manufacturing and supply operations and reduce its "global real estate footprint." The company said it may identify additional areas to revamp as it examines its networks.
The company didn't give figures for how many jobs it expects to cut or how many facilities may be affected.
Merck's manufacturing operations base is Whitehouse Station, New Jersey, and the drugmaker produces human health products at nine locations in the U.S. and Puerto Rico. Merck also operates facilities around the world through subsidiaries.
At the end of last year, Merck employed about 69,000 people, including about 25,400 in the U.S. and Puerto Rico. Its latest round of restructuring follows actions in 2010 and 2013 that resulted in the loss of more than 45,000 positions, including some which were contracted.
Merck is hardly alone in attempts to streamline operations. In February, generic drug manufacturer Teva announced plans to close or sell 11 manufacturing sites in 2019.
And in November, German conglomerate Bayer said it would cut 12,000 jobs and seek to exit the animal health business. Swiss drugmaker Novartis, meanwhile, in September announced plans to cut more than 2,500 jobs in the U.K. and Switzerland.
Merck disclosed the restructuring the same day it released first quarter earnings, reporting an 11% sales bump driven by the immunotherapy Keytruda (pembrolizumab). The company also raised its sales guidance and expects sales growth of between 4% and 7% this year, up from a forecast of 2% to 6% previously.