Roche to Cut 1,000 Jobs with Closure of U.S. Site
06/26/2012| 02:15pm US/Eastern
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-- Job cuts affect 5% of Roche's U.S. workforce
-- Closure designed to keep R&D costs stable despite increase in projects
-- Roche to detail costs, financial impact at half year results in July
ZURICH -- Swiss pharmaceutical company Roche Holding AG (ROG.VX) Tuesday said it will close a research and development site in Nutley, N.J. and consolidate its R&D activities in Switzerland and Germany.
The move -- which will result in the loss of 1,000 jobs or 5% of its U.S. workforce -- is in addition to Roche's cost cutting plan announced in 2010.
Roche, which employs 80,000 people globally, announced then that it would cut 4,800 jobs or 6% of its global workforce, as it grappled with product setbacks and mounting downward pressure on drug prices.
Fellow Swiss pharmaceuticals firm Novartis AG (NVS) has also embarked on a cost cutting program, aiming to cut 1% of its global workforce and close three European factories.
Pharmaceuticals companies have been dealing with steep drug price cuts in Europe and in the U.S. and also with declining revenues, as patents on key drugs expire.
Roche said Tuesday that the Nutley closure should allow it to increase the number of clinical development projects without increasing its R&D budget.
In 2011, the company invested 8 billion Swiss francs ($8.31 billion) on developing new drugs and treatments.
"What will be saved by this consolidation will go into expanding our product development pipeline," said Roche spokesman Daniel Grotzky.
The R&D activities carried out at the Nutley site, which focused on oncology, virology, metabolism and neuroscience, will be consolidated at Roche's sites at Basel and Schlieren, Switzerland, and Penzberg, Germany.
After the Nutley closure Roche will employ 20,800 people in the U.S. The company said it would continue to invest in R&D in the U.S. through its Genentech organization, which is based in San Francisco and isn't affected by the reorganization.
Roche Chief Executive Severin Schwan said Roche's R&D programs had been "exceptionally successful" over the last 18 months with 24 out of 28 late-stage clinical trials delivering positive results.
"The planned consolidation of our research and early development organization and the refocusing of R&D activities in Switzerland and Germany will free up resources that we can invest in these promising clinical programs while also increasing our overall efficiency," Mr. Schwan said in a statement.
The company said it would give details of the expected financial impact of the planned measures, in particular one-time costs associated with the closure of the Nutley site, as part of its half-year results announcement on July 26.
It said its financial outlook, expecting low to mid single sales growth for the group, remained unchanged.
The company also said Jean-Jacques Garaud, head of Roche Pharma Research and Early Development and member of the Enlarged Corporate Executive Committee, will leave the company on 30 June 2012.
Mike Burgess, currently Global Head Oncology and Large Molecule Research, will become acting head of Roche Pharma Research and Early Development and a member of the Enlarged Corporate Executive Committee, reporting to Mr Schwan.
-Write to John Revill at john.revill@dowjones.com
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