Merck & Co. (MRK: 36.09 0.00 0.00%) recently announced that it plans to close eight manufacturing plants and eight research sites around the world as a part of its restructuring program, which commenced in December 2009, following Merck’s merger with Schering-Plough. The restructuring initiative has been undertaken by the company to reduce its total workforce by 15% (15,000 jobs) and, as a result, achieve $3.5 billion in annual savings from 2012.Merck’s restructuring activities are expected to save the company $2.7 billion to $3.1 billion in 2012. Consequently, it expects to incur pre-tax costs in the range of $3.5 billion to $4.3 billion during the initial part of the restructuring program. Some of these costs will be recorded in the second quarter of 2010.
Over and above the recently announced restructuring plan of closing the eight research sites, Merck plans to phase out operations in another eight over the next two years. These include sites in Montreal, the Netherlands (three facilities), Denmark, Germany, Scotland and Cambridge.
We have a Neutral stance on Merck, as it currently faces issues such as patent expiries of key drugs, recent pipeline failures and softer sales of Gardasil. However, the company has a deep pipeline, which should act as a cushion when its key products lose patent exclusivity in the next few years. Moreover, some of the company’s recent launches are expected to contribute significantly to the top line in the forthcoming quarters. Besides, the benefits from the restructuring initiatives undertaken by the company should percolate down to the bottom line.| Analysts' Targets | |
| Credit Suisse | $47 |
| Reduce | |
| Wednesday, January 13, 2010 | |
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