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Merck KGaA targets savings of €300m by 2014

Details on cost-cutting efforts come as first quarter pharmaceutical sales see slight increase

Merck KGaA HQ Darmstadt

Merck KGaA expects to save €300m by 2014 as part of its ongoing cost-cutting efforts, which include the closure of its Merck Serono Switzerland headquarters in Geneva.

Net savings of €180m are expected from cutbacks to the company's commercial operation, which will see downsizing in administration and marketing, and the elimination of duplicate positions.

A further €120m is planned to be saved from the planned closure of its R&D hub in Geneva, as well as reducing R&D infrastructure costs elsewhere.

These expected savings take into account one-time costs related to the company restructuring of up to €600m, which Merck will face from 2012 to 2014.

In addition, Merck announced the consultation period with its employees in Switzerland regarding the facility's closures is to be extended from May 16 to June 4, 2012, to allow more time to develop proposals to support and redeploy people who will lose their jobs.

According to Merck, these cost-saving measures plans will “improve the profitability” of its pharmaceutical division, Merck Serono, whose sales it expects to rise from €5.56bn during 2011 to between €5.70bn and €5.90bn for 2014.

“Merck faces unprecedented market shifts and increasing competition in key product areas,” said the company's chair Karl-Ludwig Kley.

“If we do not take urgent action, we will face the prospect of tackling these issues from a much weaker position. While our initial focus is on our largest division, Merck Serono, the efficiency programme will affect all businesses in all regions. We are convinced that this programme will lay the foundation for Merck to better capitalise on future growth opportunities.”

Part of this urgency comes from the impact of increased competition for the company's big-selling injectable multiple sclerosis (MS) treatment Rebif (interferon beta-1a), such as Novartis' oral drug Gilenya (fingolimod).

Planned methods to boost Merck Serono's performance include increased R&D productivity and the rebuilding of the company's pipeline through internal research and early in-licensing.

Merck Serono will also increase efforts into biologics, shift investments to regions outside of Europe and expand its work in oncology depending on the approval of new products.

The plans came as the company released its first quarter financial results for 2012, which saw revenues for Merck Serono during the period climb 5.4 per cent year-on-year to €1.42bn, contributing to total group revenues that grew 3.2 per cent to €2.64bn.

Profit after tax was down by 49 per cent to €177m in the first quarter of 2012, due primarily to last year's divestment of the company's Crop BioScience business and receipt of the purchase price for Théramex.

17th May 2012

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