Merck bulks up in China while cutting plants elsewhere

Merck ($MRK) has been cutting manufacturing operations around the globe in the face of challenged earnings but continues to expand in China 20 years after erecting its first manufacturing facility there. 

The latest facility for MSD, as the company is known outside of North America, is a $120 million plant in Hangzhou, which will package products for the entire Asia region. The 75,000-square-meter facility was built to accommodate up to 16 high-speed lines for packaging both tablets and sterile products for diabetes and cardiovascular, infectious, respiratory and bone diseases. MSD said it is currently set to run more than 300 million packages a year. The facility also will handle products for clinical studies. It was built in anticipation of handling future commercial launches as well.

MSD said the plant is part of a network of facilities in China that include three manufacturing plants and an R&D center in Beijing, as well as a marketing and sales organization in Shanghai. The company has more than 5,000 employees in China. Merck has a sizable presence throughout Asia and has been expanding in other countries in the region. In October it opened a $21 million packaging plant in Indonesia. It also has pledged to invest more than $250 million over a decade in operations in Tuas, Singapore.

But while it has new facilities in the emerging area, its manufacturing network has had a net reduction of about 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. CFO Peter Kellogg told analysts in February during discussion of its dismal 2012 earnings that it would continue to reduce its manufacturing operations globally to get its costs down.

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