Roche Cuts 4,800 Jobs in the West, Continues Investing in China

| About: Roche Holding (RHHBY)

Roche (OTCQX:RHHBY) will cut 4,800 jobs over the next two years as part of its long-awaited downsizing plan, called "Operation Excellence." Most of the jobs – a total of 3,550 – will affect its US workforce. However, in China, the Swiss biopharma plans to increase its Chinese headcount by 25% this year, adding 750 new hires to its present level of 3,000 employees.

Increases in pharmaceutical sales are single-digit in western markets, but not in China. That means Roche will follow a different formula in the PRC as it seeks to increase its profitability around the globe. According to Severin Schwan, CEO of Roche, "For China, the situation is totally different; therefore, in China, we will continue to invest and also expect the headcount in China to increase," he told China Daily.

Having begun operations in China in 1988, Roche can claim “early adopter” status there. Similarly, it opened its own R&D center in Shanghai in 2004, focusing on drugs for oncology and virology. In 2007, the company followed up with a second Shanghai R&D center. This $100 million facility was designed to be completely self-sufficient, capable of taking a drug aimed specifically at the China market from discovery through regulatory approval.

Roche is known for its innovative drugs, and it has accordingly pursued a high-end, patented drug strategy in China. At the same time, it has developed its diagnostic products division. In recent years, the revenues for Roche Diagnostics have grown by 50% annually, and Roche wants to continue increases at that level.

In 2008, Roche opened an Asia partnering office in Shanghai’s Zhangjiang Hi-Tech Park. It also has an on-going relationship with BioDuro, now part of PPD (NSDQ: PPDI), for discovery chemistry.

The job reduction in the west will eliminate about 6% of Roche’s worldwide jobs, saving the company $2.4 billion through 2012. The company said most of the jobs were in sales, marketing and manufacturing. Roche also plans to transfer 800 jobs internally and transfer 700 jobs to third parties, bringing the total number of jobs affected in the restructuring to 6,300.

Disclosure: none.