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Merck to cut 8,500 jobs; will move HQ to Kenilworth, not Summit, as previously announced

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Signage at Merck's Whitehouse Station headquarters. The company will move its base to Kenilworth, not Summit as previously announced.
Signage at Merck's Whitehouse Station headquarters. The company will move its base to Kenilworth, not Summit as previously announced. - (NJBIZ file)

Merck & Co.'s latest downsizing plan comes with a twist.

In addition to more job cuts — 8,500 this time — the global pharmaceuticals giant is walking away from its plan to relocate to Summit, instead saying it will move its headquarters to its Kenilworth operations, on Galloping Hill Road.

The new downsizing plan is expected to save Merck another $2.5 billion by the end of 2015.

Merck, currently based in the Whitehouse Station section of Readington, said today it shifted plans after determining it could achieve greater savings in real estate and other operating expenses by moving to Kenilworth.

Over the summer, Merck was actively shopping manufacturing buildings on its Kenilworth property to buyers in the private and government sectors. The R&D facilities at the 113-acre site were not being listed as part of a possible sale, a spokeswoman said this morning.

Both the Whitehouse Station and Summit facilities will now close, giving Merck a smaller footprint in New Jersey. The complete transition is expected to complete by the end of 2015.

Merck said the savings will enable the company to sharpen its commercial and research and development focus, so it can pursue opportunities that will deliver greater returns and a stronger pipeline.

"These actions will make Merck a more competitive company, better positioned to drive innovation and to more effectively commercialize medicines and vaccines for the people who need them," CEO Kenneth Frazier said in a statement.

Merck said most savings will come from marketing and administrative expenses and research and development. The company projects $1 billion in savings by the end of 2014, and the full $2.5 billion by the end of 2015. These savings are off 2012 levels.

The 8,500 jobs slashed today come after previous downsizings cutting 7,500 jobs. Total reductions will amount to about 20 percent of current levels, bringing the company's global workforce of 81,000 to about 65,000.

Merck's animal health and consumer care divisions, based in Summit, will be relocated elsewhere in New Jersey. The company said additional manufacturing, laboratory and other functions currently based in Summit will move to other sites in New Jersey and Pennsylvania.

By restructuring, Merck said it will better target "high growth" opportunities, such as its anti-PD-1 immunotherapy program for oncology. Merck said it also plans to increase focus on therapeutic areas involving diabetes, acute hospital care, vaccines and oncology.

The company said cost reductions will also enable it to better maintain high cash levels returned to shareholders in the form of dividends and stock repurchases.

Merck had initially planned to move headquarters to Summit into facilities acquired from its acquisition of Schering-Plough in 2009. Merck has been based in Whitehouse Station since 1992; before that, its headquarters were in Rahway.

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