Roche Restructuring Plan Includes 4,800 Job Cuts

Roche today announced a global restructuring plan, which includes reducing its global workforce by 4,800 jobs, most of which are in the firm's Pharmaceuticals Division.

The firm has dubbed the restructuring an "Operational Excellence Program" that is intended to result in annual cost savings of CHF2.4 billion ($2.4 billion). It expects to implement the changes, which also include the transfer of certain positions, consolidation at certain sites, and the closure of some facilities, during 2011 and 2012.

The 4,800 job cuts equates to 6 percent of Roche's global workforce. In addition to the reductions, it also expects to transfer around 800 jobs internally and approximately 700 positions to third parties.

The cost-cutting measure is not a surprise, as Roche had said in September that it would undertake such an initiative. However, the details of the effort were not announced until today.

Roche's Pharmaceuticals Division will bear the brunt of the cuts, with 5,400 jobs being affected. The firm said that it will reduce its pharma sales and marketing staff by a total of 2,650 positions. Another 1,350 jobs are expected to be affected by the reorganization of some technical operations within manufacturing at sites in California, Mannheim, Germany, and other places, which will cut around 750 positions, and includes Roche seeking buyers for its sites in Florence, SC, and Boulder, Col., which would affect 600 jobs.

Roche's cuts to R&D include discontinuing RNA interference research in Kulmbach, Germany, and in Nutley, NJ, and Madison, Wis.

Roche's Diagnostics Division, which includes its molecular tools and molecular diagnostics operations, will have 640 positions affected by the restructuring, though it appears the actions will affect the firm's blood gas diagnostics and diabetes care products. Its diagnostics chemical manufacturing and analytical services are expected to be discontinued in Mannheim and transferred to Penzberg, Germany.

"This is a comprehensive, focused initiative to reinforce Roche's long-term innovation capability in the face of increased price pressures and a more challenging market environment," Roche Group CEO Severin Schwan said in a statement.

Roche added that the restructuring effort "is a response to mounting cost pressures in healthcare — particularly in the US and Europe — and to increasing hurdles for the approval and pricing of new medicines."

The firm expects to incur one-time restructuring costs totaling CHF2.7 billion between 2010 and 2012, of which CHF1.5 billion are cash-related.

Roche re-affirmed its outlook for full-year 2010 of mid-single-digit sales growth in local currencies for the Roche Group and the Pharmaceuticals Division (excluding Tamiflu sales). It also said that sales for the Diagnostics Division are expected to grow significantly ahead of the market.