Merck KGaA Targets 300 Million Euros Cost Savings as Profits Fall

Merck KGaA has revealed information regarding their new restructuring strategy and is targeting cost savings of 300 million euros at their drugs unit by 2014.

Karl-Ludwig Kley, Chairman of the German organisation, noted that they face “unprecedented market shifts and increasing competition in key product areas [and] we are fortunate that we can address these challenges from a position of relative strength.”  However, he added, “if we do not take urgent action, we will face the prospect of tackling these issues from a much weaker position.”

Approximately 120 million euros of these savings will originate from the closing of Merck Serono’s research and development facility in Geneva, “reducing R&D infrastructure costs elsewhere and eliminating duplicate functions.”  The decision to shut Geneva, which will result in 500 jobs being lost, has met substantial opposition in Switzerland where strikes have been threatened.

Merck commented that initial costs connected to the Merck Serono efficiency programme are expected to total 600 million euros and increase the unit’s cost-effectiveness.  Sales at the division are expected to rise from 5.56 billion euros in 2011 to 5.70-5.90 billion in 2014.  Earnings prior to interest, taxes, depreciation and amortisation should be roughly 1.80-1.90 billion euros, up from 1.57 billion euros last year.

Meanwhile, Merck has posted their first-quarter results which show that net profits fell 48.7% to 176.6 million euros.  However the year-on-year results were up by 157 million euros on the divestment of their crop bioscience business.

Revenues grew 3.2% to 2.65 billion euros, and turnover at Merck Serono grew 5.4% to 1.42 billion euros.  Growth was driven by the multiple sclerosis blockbuster Rebif (interferon beta-1a) which was up 2.7% to 429.8 million euros and the colorectal/head and neck cancer drug Erbitux (cetuximab), sales of which increased 1.3% to 213.6 million euros.

The fertility drug Gonal-f (follitropin) also increased 13% to 152 million euros, while the growth hormone treatment Saizen (somatropin) slipped 6.9% to 59 million euros.


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