Roche to cut 4800 jobs

Roche announced plans Wednesday to cut 6 percent of its global workforce, or 4800 jobs, over the next two years as part of a restructuring programme that seeks to generate annual cost savings of 2.4 billion Swiss francs ($2.4 billion) by 2012. Under the programme, which was first announced in September, the company’s global sales and marketing workforce would be reduced by a total of 2650 positions, mainly because of the recent setback with taspoglutide.

In addition, approximately 1200 jobs will be cut in the company’s North American commercial operations, mostly in its primary care business, and 700 positions will be lost in commercial operations in Europe. A further 800 jobs would be transferred to other sites, with 700 positions outsourced to third parties. The total number of jobs affected will top 6300, with 3550 of these cuts occurring in the US. Some reductions would occur through normal attrition, Roche noted.

CEO Severin Schwan said that the drugmaker will also discontinue development of some preclinical research programmes “across the board,” including in cancer, although the company will remain in its current therapeutic areas. Development of one clinical compound in early-stage development will be stopped, he commented, adding that the company also plans to discontinue research into RNA interference, and may spin off or find a partner for these operations. In addition, the drugmaker indicated that it will reorganise several manufacturing sites in the US and Germany, and will seek to sell factories in South Carolina and Colorado.

The executive said that health-care reform will reduce Roche’s revenue by 500 million francs ($503 million) this year, and 1 billion francs ($1 billion) next year. “We have seen a markedly increased price pressure in the US and in Europe,” Schwan noted. “The price pressure was stronger than we had originally anticipated,” he explained. However, the company again reaffirmed its full-year outlook for 2010. The restructuring will lead to costs of about 2.7 billion francs ($2.7 billion), but are expected to generate savings of 1.8 billion francs ($1.8 billion) next year before reaching the 2.4 billion franc annual benchmark in 2012.

Macquarie Group analyst Carri Duncan commented that “the cuts are quite deep and the market should be pleased that the company has taken a serious look in the mirror and did what was required. That was drastically cutting the sales force following the taspoglutide setback and also giving cost savings that reflect the new market environment.” Bank Vontobel analyst, Andrew Weiss, added that “this has been expected by the market and it shows that Roche is making a very clear cut here,” adding that the measures are likely to improve the company’s profitability moving forward.