Did Merck & Co. Inc. (NYSE:MRK) Spend Extra Money?
Merck & Co. Inc. (NYSE:MRK), a global healthcare company, has announced its plans to cut 8,500 jobs by the end of 2015 as part of its new restructuring strategy.
Taking a cue from rivals that have cut research spending to boost earnings, Merck expects to save $2.5 billion annually by the end of 2015 and $1 billion by 2014-end. According to the company, the majority of the savings is expected to come from cutting down marketing and administrative expenses and research and development.
The job cuts, combined with previously announced cuts of 7,500 employees, will result in a decrease of about 20% in the company’s global workforce of 81,000 employees.
As part of its restructuring plans, Merck proposed a plan to streamline its business and said it will focus more on the key therapeutic areas; form a new integrated unit to ensure that its investigational anti-PD-1 immunotherapy, MK-3475, is successfully brought to patients globally. The company will also increase its focus in ten prioritized markets, including US, France, Japan, Germany, Canada, UK, China, Brazil, Russia, and Korea.
“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, 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.”
In addition, the company will reduce its global real estate footprint, particularly in New Jersey where it is headquartered.
In a separate release, Merck & Co. Inc. (NYSE:MRK) said it is shifting its global headquarters to its existing facilities in Kenilworth, New Jersey from Whitehouse Station, New Jersey. The company expects the transition to be completed by 2015. Merck & Co. Inc. (NYSE:MRK)’s Animal Health and Consumer Care unit, which is located in Summit, will also be moved to another facility in New Jersey. In addition, some of the manufacturing, labs, and other functions located in Summit will also be shifted to other facilities in New Jersey or Pennsylvania.
The company expects the restructuring charges to be between $900 million and $1 billion in 2013, which will be mostly visible in the third quarter.
Merck & Co. Inc. (NYSE:MRK) reiterated its full-year 2013 earnings per share target range of $3.45-$3.55.