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Merck Serono: Fresh Pipeline Leads Growth but More Jobs Cuts to Come

By Dan Stanton , 07-Mar-2013

Merck Serono says “fast progress” in its restructure programme helped double its net savings guidance for 2012 though headcount dropped by almost 2,000 with more cuts to come. 

Merck KGaA announced a positive end to FY2012 with total revenues across its divisions standing at €11.2bn ($14.6bn) up 8.7% on 2011. As it implements its ‘Fit for 2018 ’policy, the company has realized €115m in net savings with €100m coming from the Merck Serono division – twice the amount estimated in the company’s guidance for the year.

In an earnings report Chairman of the Executive Board Karl-Ludwig Kley said Merck Serono’s revenue growth of 5% on the previous year was complimented by restructuring efforts which “made progress much faster” than expected.

In a specific callout to the media Kley said: “Backlogs in the pipeline are a matter of the past” and that future headlines would be concentrating on the new “streamlined” pipeline as hangover projects from Serono’s old organization have now been finished with. The Merck-Serono (known as EMD Serono in the US) merger was completed in 2007.

However, while Kley also focused on Merck Serono’s largest selling product Rebif – a multiple sclerosis treatment – which generated €1.9bn of revenue and was up thanks to recent price hike in the US – much of the major cuts in cost have come from facility shuttering and a cull in personnel.

The headcount dropped to 38,814 from 40,676 in the past year yet according to Kley “the majority of redundancies will come in 2013-4.”

Last year the Swiss headquarters of the company shut resulting in a loss of 500 jobs, and closures and cutbacks at a number of production plants have also played a role in Merck’s cost-savings initiatives. Kley said these closures were necessary “in order to increase utilization from 60% to 80%” across Merck’s facilities.

He also mentioned the soon-to-be-shut plant in Hull, UK, which, according to Kley in November’s Q3 earnings conference will have its manufacturing and packaging activities relocated and outsourced.

Emerging Markets

There was some positive news regarding jobs as Kley announced that “in emerging markets we have increased headcount” as the company again demonstrated its commitment to its ‘Fit for 2018’ policy, restructuring and moving away from stagnant areas.

Merck Serono’s sales outside Europe stood at 58% in 2012 with the majority of business coming from the US. For emerging markets organic growth grew by 6.8% to a total of €1.7bn.

Kley said Merck had “made great progress” across all divisions in implementing the strategy and the “continued shift from Europe to higher growth regions” already saw a 9% increase in sales from these markets as they become Merck’s major revenue source in the longterm.

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