Merck KGaA’s chief executive has been laying out his vision for the company’s future, emphasising the need to cut costs and ruling out major deals.
Speaking at the German company’s annual shareholder meeting, Karl-Ludwig Kley said that the firm has been growing well – from 2005 to 2011, revenues have risen by 75% – but noted that “the world around us is changing. We have to find answers to many issues”.
In February, Merck outlined a “comprehensive transformation programme” announced last year to deal with increasing competition and inefficiencies. At the meeting, Dr Kley acknowledged that at the Merck Serono unit “we have had shortcomings in new drug development and approval”, adding that “we must strengthen our presence in the key pharmaceutical markets”, namely the USA, Japan and China. “Our regional footprint in pharmaceuticals is still too Europe-focused”, he noted.
The restructuring will come in two phases and the first, which should be completed by the end of 2013, will involve cutting costs and putting in place a “new leadership organisation”. Dr Kley added that “we do not plan to make any major acquisitions during this first phase [but] we will continue to strengthen our business through in-licensing or targeted acquisitions if the opportunities arise”.
Over the past few months, Merck has identified “our structures are not as efficient everywhere as they could and should be”. Dr Kley confirmed there will be job cuts but said that “we don’t want to specify any global savings targets and publish them, which would put pressure on the one side”.
In Germany, talks with employee representatives began at the end of February and Dr Kley said “both sides see the need to reduce costs. Both sides agree that decisions should be implemented in a socially acceptable way and on a voluntary basis as far as possible”.
The second phase, from 2014 to 2018, will have the goal of profitable growth”, he said, “which does not mean, of course, that we are currently ruling out growth. We are simply not placing the focus on it”. Dr Kley also noted that “changes are part of our business. Merck would not have become 344 years old if it had not been for a pronounced ability for change in the company’s genes”.
