is slashing manufacturing jobs and laying out plans to focus on its research in a bid to become a stronger competitor to its fellow drugmakers.
The Kenilworth, N.J., pharmaceuticals concern plans to let go about 1,100 employees at its New Jersey and Puerto Rico facilities and streamline its global supply chain for the sake of its future, which it thinks will grow brighter at least by next year.
Until then, Schering-Plough's job cuts will hit about 500 full-time employees between its Kenilworth and Union, N.J., facilities, 550 positions at its Manati, Puerto Rico, plant and 50 people in Las Piedras. The company currently employs about 32,000 workers worldwide.
The company expects the plan to cost it between $235 million and $260 million, consisting of about $60 million to $70 million in severance, $85 million in fixed-asset and inventory write-offs, and between $90 million and $105 million for accelerated depreciation and closing costs. Schering-Plough believes the actions will lower its expenses by roughly $100 million a year, starting in 2007.
While the cost of the cuts is a significant chunk of change, the outlays are nowhere near the penalties Schering-Plough has previously incurred for some of the same facilities. In 2002, Schering-Plough paid the Food and Drug Administration $500 million to settle a series of investigations into the company's repeated quality control problems and its failure to improve its manufacturing processes.
Schering-Plough's shares were up 66 cents, or 3.5%, to $19.72 Thursday.
"The actions we are announcing today are another step in our Action Agenda to transform this company into a high-performance competitor for the long term," said Fred Hassan, Schering-Plough's chairman and CEO. "Undertaking these workforce reductions was a difficult decision. To support employees who are affected by these actions, we will be implementing a variety of programs as well as working closely with local authorities and communities to mitigate the impacts."
Schering-Plough says it will continue to employ about 7,000 workers in New Jersey and around 475 people in Las Piedras. The company will be shutting down the manufacturing operation at the Manati site, a move that should be essentially complete by the end of the year.