Schering-Plough's productivity transformation programme to yield $1.5 billion annualised savings

Schering-Plough Corporation has announced a major new productivity transformation programme (PTP) to reduce and avoid costs and increase productivity to generate a total of $1.5 billion in targeted annual savings and synergies - approximately 10 per cent of the combined company's full year 2007 estimated cost base, including Organon BioSciences (OBS) and manufacturing. NN
The previously announced integration synergy targets of $500 million from the company's November 2007 acquisition of Organon BioSciences of the Netherlands will be rolled into PTP.

The company says the programme responds to dramatically intensifying pressures on the pharmaceutical industry, especially new pressures in the United States, and also to the confusion in the US market around cholesterol management that impacts the products of the Merck / Schering-Plough joint venture, Zetia and Vytorin.

While the details of the implementation programme are being developed, at least $1.25 billion, or more than 80 per cent of the planned savings are targeted to be accomplished by the end of 2010, with the balance achieved by 2012, reflecting the longer time lines for implementing such actions effectively and prudently in the global supply chain.

"Savings and productivity improvements will be realised across the company and around the world. No area will be exempt," said Fred Hassan, chairman and CEO. "Our first actions will be to execute reductions in high overhead cost areas, beginning with reductions in higher management levels in the company's headquarters and elsewhere. A major focus will be the US, where the most intense new pressures on our industry and our company are centered."

Added Hassan, "We will be executing this cost saving, productivity enhancing program with care and prudence. We will not engage in across-the-board cost cutting. We will avoid unwise short term actions. We will be focused on the same goal that has driven our company over the past nearly five years of my tenure as CEO: driving high performance for the long term."

 PTP will include the following: