The Axe Finally Falls: Roche to Cut 4,800 Jobs

| About: Roche Holding (RHHBY)

Three months after the news leaked, Roche (OTCQX:RHHBY) has pulled the trigger and announced plans to cut 4,800 jobs, or 6 percent of its worldwide workforce of 82,000. In explaining its decision, which was essentially confirmed in early September, the drugmaker cited a delay in a hoped-for diabetes med and an overall need for “adjustments in the primary care sales organizations.” The move is expected to save about $2.4 billion.

Although Roche did not mention other reasons, the drugmaker has experienced several setbacks, including a decline in demand for Tamiflu; the unexpected FDA rejection of its T-DM1 biologic for advanced breast cancer; an FDA panel that voted to rescind a breast cancer indication for the best-selling Avastin cancer med and trials that were suspended for its ocrelizumab rheumatoid arthritis drug.

In any event, here’s the breakdown: 2,650 jobs from sales and marketing; 1,350 from manufacturing; 800 from product development; 600 from research and early development; 640 from diagnostics and 260 from what is called group functions, or administration. This adds up to 6,300 positions because 800 jobs will be transferred internally and another 700 will be outsourced to other companies. Looked at another way, the US will feel the brunt with 3,550 jobs being eliminated, while 700 - where Roche is based - loses 700 and the rest of Europe loses 1,300. The remaining 680 are scattered about.

And here are more specifics: technical operations activities will be reorganized in California, Mannheim, Germany and various other sites, accounting for 750 jobs being eliminated. Roche also intends to sell sites in Florence, South Carolina and Boulder, Colorado, affecting 600 jobs. About 1,200 jobs will be cut in the North American commercial operations, mostly in its primary-care business, while 700 positions will be lost in commercial operations in Europe. As for R&D, Roche will discontinue activities in research and early development in RNA interference in Kulmbach, Germany, Nutley, New Jersey, and Madison, Wisconsin. There are also plans to reorganize two other functions; all totalled, 600 jobs will go.

In diagnostics, Roche is closing a site in Graz, Austria, and transfering development and manufacturing work for blood gas diagnostics to Rotkreuz, Switzerland. In diabetes care, the majority of activities will be based in Mannheim, Germany, while R&D for insulin pumps will be transferred from Burgdorf, Switzerland to Mannheim. Manufacturing will be outsourced the Burgdorf site will be closed. And diagnostics chemical manufacturing and analytical services will be discontinued in Mannheim and transferred to Penzberg, Germany (here is the Roche statement).

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