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A Site Selection Web Exclusive, July 2010
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Merck Moves Forward with Post-Merger Plans


harmaceutical giant Merck & Co., known outside the U.S. and Canada as MSD, recently revealed details on its 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. Merck says the plans support its 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.

Merck will phase out operations at eight research sites and eight manufacturing sites. It will also continue to consolidate office facilities worldwide, as part of the global merger restructuring program that began last December. Merck says 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 its broader product portfolio.

The company's total work force will be pared by about 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.

"These changes are crucial to drive future growth and realize the promise of being a global health care leader for the long term," said Richard T. Clark, Merck's chairman and CEO. "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."

Merck said it remains committed to achieving its previously announced target of $3.5 billion in ongoing annual savings in 2012. 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 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 says its 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 Merck Research Laboratories network is being restructured. It will be comprised of 16 major research and development facilities worldwide. Merck will retain clinical development and regulatory affairs expertise in major regions around the world including the U.S., Europe, Asia and Japan.

Merck plans to phase out operations at eight research sites over the next two years. These sites include: Montreal; Boxmeer (Nobilon facility only), Oss, and Schaijk, Netherlands; Odense, Denmark; Waltrop, Germany; Newhouse, Scotland; and Cambridge, Mass. (Kendall Square).

The company's research division will retain its focus on seven key therapeutic areas: Cardiovascular Disease; Diabetes and Obesity; Infectious Disease; Oncology; Neuroscience and Ophthalmology; Respiratory and Immunology; and Women's Health and Endocrine. Merck's women's health research, currently centered in Oss, the Netherlands, will be relocated primarily to the U.S.

Merck is also realigning its global manufacturing network. The company says its core manufacturing activity will be focused on areas where it has unique expertise and capabilities, while leveraging a virtual global network of suppliers. Manufacturing operations will be reduced from 91 facilities at the close of the merger to 77 facilities. This includes 29 animal health facilities that are the subject of the planned joint venture of Intervet Schering-Plough with sanofi-aventis's Merial, which are not included in this restructuring program.

Beginning in the second half of 2010, the company will phase out operations at eight manufacturing facilities as activities are transferred to other locations. Specifically, the company intends to cease manufacturing activities at its facilities in Comazzo, Italy; Cacem, Portugal; Azcapotzalco, Mexico; Coyoacan, Mexico, and Santo Amaro, Brazil, and intends to sell the Mirador, Argentina and Miami Lakes, Florida, facilities. In Singapore, chemical manufacturing will be phased out at the legacy Merck site, but it will continue at the legacy Schering-Plough site. The company's extensive pharmaceutical manufacturing operations will continue at these two Singapore facilities.

Merck will continue to make new strategic investments to support its worldwide product supply needs, particularly in emerging markets. In Latin America, for example, new investments are being made by Merck at its Xochimilco, Mexico and Campinas, Brazil facilities to increase capacity.

The Site Selection Life Sciences Report features exclusive and in-depth reporting and analysis on the most important life science projects and issues. Topics covered include pharmaceutical R&D and manufacturing, biotechnology, medical device manufacturing, health-care services facility trends, clinical research and other key life science sectors.


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