Merck KGaA triggers restructuring as it pursues R&D turnaround

Merck KGaA's epic failure with its experimental MS drug cladribine has set the stage for unspecified cutbacks as company execs prepare to slash staff across the board. In a release issued last Friday, the German pharma company said the need to cut recurring costs and restructure the company had forced it to start discussions to reduce its workforce in several countries.

The company's release was long on theory and short on details. The company has made some big changes in its R&D department since the cladribine debacle, though there's no word on just how research is likely to be affected by the looming cuts. Last summer the company recruited new execs to head a restructured research effort, with R&D divided between pre- and post-proof-of-concept work. Employees will now have to find out through their job representatives how they will fare in the coming change-up.

"Over the next two years Merck needs to address unprecedented market shifts, increasing competition in key product areas and existing inefficiencies in its own organization to ensure the long-term success of its business model," said Chairman Karl-Ludwig Kley in a statement. "We will therefore progress with our planned efficiency program in order to deliver recurring cost reductions and free up resources for investment in promising growth areas."

Bernstein's Jack Scannell, who follows the company, succinctly zeroed in on Merck KgaA's unsuccessful development efforts as a singular cause for the restructuring. "The Serono pipeline has completely and utterly failed," Scannell tells Bloomberg. "They're left with a margin structure and cost base which simply isn't commensurate with the volume of sales they have."

Now the focus on Merck KGaA has to be on a turnaround.

- read the press release
- here's the story from Bloomberg

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