More Merck manufacturing cuts on the way
CEOs have been offering up cuts to manufacturing operations as one antidote to sick balance sheets during the most recent round of earnings updates and Merck ($MRK) is among those whittling away.
CFO Peter Kellogg told analysts during a call for what turned out to be a pretty dismal earnings picture, that the company has closed 18 plants since its 2009 merger with Schering-Plough. It has gone to 75 from 93 plants across all operations, pharma, animal health and consumer products. But more closures will happen in the next several years. "So you can see that we've obviously made a fair bit of progress on the network rationalization. And we're working on plans to further reduce the size of our footprint," Kellogg said. "But those plans will take some time to implement."
Merck's most recent facility put on the block is an API plant in Oss, the Netherlands. The company said last week that it intended to sell the facility to South Africa generic drugmaker Aspen Pharmacare. According to Pharmafile, Merck intends to keep its finished dosage and biologics production at Oss.
Other companies taking aim at manufacturing include GlaxoSmithKline ($GSK) and Teva Pharmaceutical Industries ($TEVA). GSK CEO Andrew Witty told investors that the company would suck about £1 billion ($1.6 billion) in costs out of its European operations, in part, by simplifying the supply chain process, shortening cycle times and lowering inventory levels. Teva is fingering about $2 billion in costs over several years. It will focus on bigger, more efficient plants, while shifting production to lower-cost parts of the world.
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