Swiss pharmaceutical giant Roche (RHHBY) said Wednesday it is slashing 6% of its workforce, or 4,800 jobs, most of them in the U.S. This is part of the drugmaker's plan to get a handle on costs, which comes in response to recent drug setbacks and as the sector feels the effect of global healthcare cost cutting.
The Basel, Switzerland-based company said the plan is expected to result in annual cost savings of 2.4 billion Swiss francs, or about $2.4 billion.
The reduction of its 82,000 workforce, will be implemented through 2011-2012. In addition, Roche plans to sell some units and transfer other jobs internally, affecting a total of 6,300 positions overall.
The largest reductions are planned in sales and marketing, where Roche plans to cut 2,650 jobs. "The main reasons are the previously announced setback of the diabetes medicine taspoglutide and structural adjustments in the primary care sales organizations," the company explained. In manufacturing, Roche intends to reduce its workforce by 1,350 jobs. Also, 700 positions will be outsourced to third parties.
Overall, Roche's plan will affect 3,550 jobs in the U.S. Sites affected in the U.S include operations in California, Florence, South Carolina and Boulder, Colorado, Nutley, New Jersey, and Madison, Wisconsin. In Europe, Roche plans to cut 1,300 jobs, and 770 in Switzerland.
Roche, the biggest seller of cancer drugs, has recently come under pressure and experience several setbacks, including a failure to win priority status for cancer drug T-DM1, the review of Avastin for breast cancer in the U.S. as well as disappointing results for Avastin in other studies. This year, the company also halted phase III trials for a diabetes drug and a rheumatoid arthritis drug.
In addition, as many countries implement austerity measures and cost cuts, healthcare is one area that suffers. Not unlike other companies, Roche has felt the effect of this tightening and healthcare reforms.
Roche, which completed the $47 billion takeover of Genentech last year, was hoping to take advantage of the U.S. biotech firm's hugely successful research and development. But that has been questioned of late, leaving it with a massive firing plan fancily named Operational Excellence Program.
Many other global pharmaceutical companies have laid off employees in recent years in anticipation of the patent cliff. The onset of a global recession only exacerbated the problem. Just last week, the biggest pharmaceutical in the world, Pfizer (PFE) disclosed to financial regulators that it would exceed its original 15% workforce reduction target -- about 19,500 jobs -- as it integrates Wyeth into its operations, although it didn't say by how much.
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