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WHITEHOUSE STATION, N.J. — Merck is implementing a multiyear plan to sharpen its commercial and research-and-development focus, an effort that the drug maker said will entail a redesigned operating model and cost reductions including 8,500 job cuts.
The company said Tuesday that it expects to realize $2.5 billion in annual net cost savings by the end of 2015 and estimates that $1 billion, or 40%, of the savings will be achieved by the end of 2014.
According to Merck, most of the savings will likely come from marketing and administrative expenses and R&D. The savings are off of the company’s full-year 2012 expense levels.
"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," stated Kenneth Frazier, chairman and chief executive officer of Merck. "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."
Merck said that by the end of 2015, the workforce reductions announced Tuesday plus previously announced cuts of about 7,500 jobs, will result in a 20% decrease of 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 billion.
"While these actions are essential to ensure that Merck can continue to fulfill its mission into the future, they are nevertheless difficult decisions because they affect our dedicated and talented colleagues," Frazier commented. "We appreciate the contributions of all our employees, and we will support them during this time of transformation."
Merck also announced Tuesday that it plans to move its global headquarters from Whitehouse Station, N.J., to its existing facilities in Kenilworth, N.J.
The company had previously reported it would close its Whitehouse Station building and relocate its headquarters to Summit, N.J. However, the pharmaceutical giant said that after re-examining its real estate needs in the state, it 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.
Merck has had its headquarters in Whitehouse Station since 1992. Prior to 1992, the company was based in Rahway, N.J.
