Merck KGaA cuts boost profits, but most layoffs still to come

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Merck KGaA's cost-cutting drive is already paying off--and more quickly than the company had anticipated. Partly because of those job cuts and site closures, the German company doubled annual profits to €789.8 million, or about $1 billion. Now, it just has to get its pipeline flowing.

The company's restructuring has so far squeezed out €115 million in costs--more than twice the €55 million Merck had expected for the year. That puts it on track for the €300 million in cuts it's looking for by the end of 2014. And Merck now expects the restructuring to save €385 million a year by 2018, up from €365 million.

The sales side of Merck's pharma business isn't as rosy, however. Merck Serono's fourth-quarter revenues grew by 6.1% to €1.64 billion, but a chunk of that depended on higher prices for its multiple sclerosis drug Rebif. Its consumer health business shrank by 5%, Bloomberg notes, to €121 million, because of lagging demand in the cash-strapped European market.

And, as Reuters points out, the company's near-term pipeline is still suffering. The failure of MS treatment cladribine--which prompted big cuts at Merck Serono's Geneva headquarters--was followed by trial failures for cancer treatments Stimuvax and cilengitide. Chairman Karl-Ludwig Kley promises that the R&D news will turn around, though: "Backlogs in the pipeline are a matter of the past," he said.

Lots of job cuts are still to come, too, Kley said. The Geneva shutdown will soon be followed by another 1,100 job cuts in Germany. The company's head count dropped to about 38,400 from 40,676 over the past year, in-PharmaTechnologist reports, but Kley says most of the "redundancies" will come this year and next.

- read the Reuters news
- get more from Bloomberg
- see the in-PharmaTechnologist story

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