Big Pharma Takes No Prisoners as Scores of Plants Across North America Are Set to Close

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Reported by Annette Kreuger, Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). The recent announcements from some of Big Pharma’s biggest players on their intent to close multiple plants have cast a pall on the upcoming holiday season. Unfortunately, thousands will feel the effects well into the New Year and beyond. Industry giants Pfizer (NYSE:PFE)(New York, New York), Merck (NYSE:MRK) (Whitehouse Station, New York) and Swiss drugmaker Novartis (NYSE:NVS) have all revealed stunning plans to close major North American manufacturing plants. The future of the sites includes everything from being sold intact to complete dismantlement.

While of this bad news doesn’t mean the industry is going to tank, it does mean that the industry has to tighten their fiscal belts and streamline their manufacturing operations. While the industry continues to grow at roughly seven percent per year, challenges arose from a multitude of expensive issues that in retrospect were somewhat inevitable. These include product litigation, redundancy and patent expirations, which have all seemingly come together in one devastating year-end blow of bad news. While the impact may have appeared less overwhelming if the closures had been announced individually throughout the year, the bottom line ultimately remains the same. Thousands will lose their jobs and the surrounding areas will take an economic blow when these plants shut their doors.

Pfizer had warned that plant closures were coming when they acquired Pharmacia in 2003. The company simply found itself with too many duplicate facilities and employees. While the majority of the 27 plants that Pfizer is currently set to close are outside of the U.S., domestic plants slated for closure include facilities in Holland, Michigan, Parsippany, New Jersey and Arecibo, Puerto Rico.

The irony of the situation is that the company is currently spending nearly $ 1 billion for new plant construction, expansions and upgrade projects. New Jersey is one state that is experiencing a sense of feast or famine, as Pfizer’s site in Morris Plains is currently undergoing a huge $400 million renovation and upgrade project. All of the plant closures are part of the company’s Adapting to Scale (AtS) productivity initiative. Pfizer is relying on this process to unburden and streamline the organization, generating $4 billion in estimated annual cost savings by 2008.

Merck recently made the headlines for something other than Vioxx with the dramatic announcement in November of their imminent plans to close at least five manufacturing plants. Merck's measures are aimed at saving $4 billion a year by 2010 and start a series of long-term objectives in a global restructuring program. The 7,000 job cuts represent about eleven percent of Merck's global staff. According to the company, about half the job losses will be in the U.S.

With doomed plants scattered across North America, the company is citing problems such as the current Vioxx liability trials and an aging product line as reasons for the move. The sales revenue from Merck’s biggest seller, the cholesterol drug Zocor, are expected to fall from $4.5 billion to $2.6 billion when its patent expires in 2006. Sites targeted for closure include those in Canada, Georgia, New Jersey and Pennsylvania. Merck has announced that they intend to complete and operate the $300 million vaccine plant currently under construction in North Carolina.

Novartis has begun to implement what the company has coined "a merger integration process." Novartis was created in 1996 from the merger of the Swiss companies, Ciba-Geigy and Sandoz. The company is moving ahead with streamlining its manufacturing and distribution system in North America. The facilities affected are the ones that produce branded and generic prescription pharmaceuticals, as well as those for over-the-counter (OTC) products. Over the next five years, Novartis will phase out production at sites in East Hanover and Summit, New Jersey and in Fort Washington, Pennsylvania. Distribution centers in Illinois and New Jersey are also slated for closure. The company does have plans for expansions at its three domestic primary manufacturing sites, which are located in Colorado, Nebraska and New Jersey.

For more information on closed plants, as well as other industrial plant and project trends and analysis see Industrialinfo.com's recently released 2006 Global Industrial Outlook.

Click on the image at right to view a sample graph from the 2005 Global Industrial Outlook.

Industrial Information Resources (IIR) is a Marketing Information Service company that has been doing business for over 22 years. IIR is respected as a leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.