After MSD announced its “strategy” to separate some medicines under a new company to focus on high-value drugs, employees of its Korean offshoot expressed dissatisfaction with the plan.
On Wednesday, MSD said it decided to establish NewCo, a new company that will sell products under Legacy Brands, Women’s Health, and Biosimilar Division.
Unlike other multinational drugmakers, MSD Korea will separate the products faster than the global headquarters. The head office of NewCo will appoint a leadership team between March and May and start relocating employees from the third quarter.
MSD will complete the spinoff by October and NewCo becomes an independent company in the first half of 2021.
The Korean unit of MSD, however, plans to speed up the separation of NewCo Korea by late this year and complete the separation of the office by early next year, sources said.
On Thursday, MSD Korea held a meeting of executives and employees to share the spinoff schedule and relocation plans.
According to participants in the meeting, MSD Korea CEO Avi BenShoshan emphasized the significance of Korea for NewCo. While NewCo sales are expected to take up about 15 percent of the MSD’s revenue, NewCo Korea’s contribution will be higher at about 42 percent, they said.
As NewCo’s Korean unit will be the fourth largest among global branches, the head office of NewCo is well aware of the importance of the Korean market, the participants said.
However, MSD Korea workers are concerned that the large size itself of NewCo Korea will negatively affect Korean workers after the spinoff.
MSD said the spinoff aims to reinforce each company’s core businesses separately, which will promote the financial efficiency and accelerate growth. However, MSD employees in Korea suspect that sending them under NewCo could be another way of restructuring to reduce staff and costs.
According to detailed plans shared with employees, MSD will own new drugs and pipelines in R&D except for products related to women’s health, and NewCo, new pipelines for future R&D.
One participant said, however, “MSD did not plan to set up an R&D division for NewCo. Although the company stressed the latest trends of new drug development in partnerships, this seems just a trick.”
Another participant agreed, saying, “MSD still has new drugs and key products. So, the spinoff might be a move to throw away unnecessary products to NewCo.”
When asked whether MSD will provide compensation and early retirement program (ERP) for those moving to NewCo, the company said, “The spinoff aimed at growing the two companies in the long term, not seeking a short-term reduction of finance or manpower. The reply, however, created even more discontent, as workers suspect that the drugmaker might not offer compensation or ERP.
MSD Korea also did not answer a question of what alternatives the company could offer to employees who refuse to move to NewCo Korea.
MSD Korea workers complained about the company’s ambiguous stance. The unclear communication is likely to cause a labor-management dispute, observers said.
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