Merck Restructuring Takes Hold

Merck restructuring: On Tuesday, Merck & Co., Inc. (NYSE:MRK) announced that it will fire 8,500 workers. Also, it publicized the implementation of a more agile operating model, with a significantly reduced and more flexible cost structure. The company expects to restructure itself in a global effort to deliver focus more heavily on its commercial and research and development operations.

“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 stockholders”, stated Kenneth Frazier, Merck’s Chief Executive Officer, in a press release.

The declared workforce reductions add up to the pending and previously announced cuts of 7,500 positions. By the end of 2015 when this reduction is completed, it will result in a decrease of 20% of Merck’s total global workforce –currently of 81,000 employees.

Merck said it would take restructuring charges of $900 million to $1 billion this year. This represents around 40% of the total cost-cutting and it will be realized by the end of 2014. By the end of 2015 the company expects to be realizing around $2.5 billions in annual net cost savings. Most of it will come from cutting down marketing and administrative expenses, as well as research and development operations, as stated by the company.

Merck is a global research-driven pharmaceutical firm dedicated to putting patients first and to the discovery, development, manufacturing and marketing of vaccines and medicines. The company expects that this multi-year initiative will enable it to better target its resources. During recent years, some company’s products have suffered delays in getting in the market. Also, the sales of its diabetes drug and biggest growth engine –-Januvia– have anguished  from rival drugs and newer classes of diabetes treatments.

Now, focusing on the opportunities that meet the biggest potential, the company expects to thus deliver the greatest return on investment. Merck has stated that it will only focus on drug development on a few key therapeutic areas –diabetes, acute hospital care, vaccines and oncology. It further stated that it will also bolster its pipeline increasing efforts to bring in new drugs trough licensing and acquisitions.

Yesterday, Merck’s shares rose by 2%. Check back here for more updates on Merck’s restructuring.

Disclosure: Pamela Gaviño holds no position in any stocks mentioned

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