Despite widespread protests, including a visit from a delegation to its global headquarters in Darmstadt, Germany, and a one-day work stoppage last week, Merck KgaA is proceeding with its original plan to shutter the Geneva headquarters of its Merck Serono division and to transfer all R&D out of Switzerland.

The company said Tuesday that the mandatory employee consultation period has been completed. Minimal adjustments to the original plan were made following the process. However, older employees are now entitled to retire two years earlier, and some other improvements to social benefits were added, Merck spokeswoman Phyllis Carter told BioWorld International. But the original plan is intact.

The move is part of a wider plan to realize annual savings of €300 million (US$380 million) in Merck Serono by 2014 by trimming costs and improving efficiency across the business. The shutdown in Geneva will deliver €120 million of the projected savings, while the rest will come from changes to the organization's commercial infrastructure. The initiative will entail one-time restructuring costs of $600 million.

Up to 1,250 employees will be affected in Geneva. Some 500 positions are being eliminated, and another 750 positions are being transferred to other locations, including 130 to nearby Aubonne, in the Canton of Vaud. Another 80 positions are being cut in three sites located in Vaud, at Aubonne, Coinsins and Corsier-sur-Vevey.

The company is setting up a €30 million investment fund that would provide seed funding for start-ups begun by former employees.

"It would only be used if the proposals have some validity – it's not a giveaway program," Carter said.

Some of the initiatives to receive funding could conceivably entail discontinued Merck Serono projects. The company is moving all its R&D to three global hubs: Boston, Darmstadt and Beijing. The destinations, and indeed the destinies, of the R&D projects under way in Switzerland have not yet been determined.

"That will be decided as it happens," Carter said.

In all, almost 1,000 positions will be retained in Switzerland, in the company's commercial organization, in Zug, and in a new unit dedicated to the development of biosimilars.

As yet there is no plan to discontinue the Serono name, which dates back to 1906, when Cesare Serono founded the Istituto Farmacologico Serono in Rome. (It relocated to Geneva in 1977.) "That's not an issue that has come up. That's not anything that would be considered at this point," Carter said.

The Merck move, which comes less than six years after it commenced the $13.3 billion acquisition process by acquiring the majority stake of the Bertarelli family, has been a considerable shock to Geneva, one of Europe's wealthiest regions. The Swiss trade union Unia said another 250 jobs in local subcontractors would be affected, as well as 3,000 more among companies supplying services to Merck Serono and its employees.

Back in 2006, Serono's then CEO, Ernesto Bertarelli said the prominence in the merged entity of the company's two main drugs, the multiple sclerosis drug Rebif (interferon beta-1a) and the fertility drug Gonal-f (follitropin alfa) would "guarantee to our people that we are going to be an important part of this venture." (See BioWorld International, Sept. 27, 2006.)

However, that prediction did not hold out for very long. Rebif remains the biggest selling drug in the Merck-Serono portfolio – it racked up almost €1.7 billion in sales in 2011 – and Gonal-f, was the division's third biggest seller, with €526 million in sales. But Merck Serono has struggled to generate internally much in the way of pipeline momentum, and it is relying on external licensing and asset acquisitions to shore up its growth prospects.

Recent examples include a deal in cancer with Threshold Pharmaceuticals Inc., of South San Francisco, and deals in multiple sclerosis with Ono Pharmaceutical Co. Ltd., of Osaka, Japan, and Peptimmune Inc., of Cambridge, Mass. Its most advanced pipeline projects include Stimuvax (BLP25 liposome vaccine), a therapeutic cancer vaccine licensed from Seattle-based Oncothyreon Inc., which is undergoing Phase III trials in non-small-cell lung cancer; and cilengitide, an internally developed integrin inhibitor undergoing a Phase III trial in glioblastoma.

Even so, Merck remains faithful to the logic underpinning the original decision to buy Serono, even if at the time it failed to meet two of its five key objectives, to gain a market presence in Japan and to gain a foothold in the oncology market.

Serono's contribution to its biotechnology capabilities, as well as its direct commercial contribution, are, it seems, sufficient justification for the deal.

"Since the acquisition, Merck has been convinced and continues to believe that the acquisition of Serono was key to enable the Merck Group to significantly strengthen its biotech research, development, manufacturing and commercialization value chain to revive its pharmaceutical business," Carter said.

Biotechnology products now account for two-thirds of the company's pharmaceutical sales.