Roche disclosed the measures it plans to take as part of its Group-wide Operational Excellence Program, announced in September. The initiative 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.
Measures aim to strengthen innovation and ensure sustained success in a fast changing market environment
- The Operational Excellence Program is aimed at adapting cost structures to an increasingly challenging market environment and achieving significant efficiency and productivity gains.
- The planned measures will enable sustained investment in research and product development and thus strengthen the Group’s long-term innovation capability.
- The initiative is expected to result in annual cost savings of 2.4 billion Swiss francs. Implementation is scheduled for 2011 and 2012.
- Implementation plans include reducing the work force by 4,800 positions worldwide, or 6% of the Group's current work force, over the next two years. The largest reductions are planned in sales and marketing and in manufacturing. Approximately 800 jobs would be transferred to other Roche sites and 700 positions outsourced to third parties. Combination of planned job reductions and transfers affect 6,300 positions overall.
- The Group anticipates restructuring costs totalling 2.7 billion Swiss francs from 2010 through 2012, only part of which will be cash related.
Commenting on the Operational Excellence Program, Roche Group CEO Severin Schwan said: "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. We will continue to drive our highly promising product pipeline to help seriously ill patients and contribute to more efficient healthcare systems." Mr Schwan added: "These measures are necessary to ensure sustained success of the company. We will make every effort to find socially responsible solutions for the employees affected."
Planned impact of Operational Excellence on jobs
As a result of cost structure adjustments and improvements in efficiency and productivity, Roche is planning to reduce its workforce by 4,800 positions worldwide, or about 6% of the Group’s current workforce of approximately 82,000 employees. Some reductions will be handled through normal attrition. In addition to the planned reductions, the company anticipates transfers of roughly 800 jobs internally and approximately 700 positions to third parties. The combination of planned job reductions and transfers is expected to affect about 6,300 jobs overall.
Most of the planned job reductions will occur in the Pharmaceuticals Division, particularly in the division’s global sales and marketing organisation and in manufacturing.
- Worldwide, Roche plans to reduce its workforce in sales and marketing by a total of 2650 positions. The main reasons are the previously announced setback of the diabetes medicine taspoglutide and structural adjustments in the primary care sales organisations – mainly in the US and Europe.
- To further improve capacity utilisation within the Group’s global manufacturing network, some Technical Operations activities will be reorganised in California, US, in Mannheim, Germany and various other sites across the network. This will result in a reduction of 750 positions. In addition, Roche intends to seek buyers for its sites in Florence, South Carolina and Boulder, Colorado, in the US, which would affect additional 600 jobs.
- Certain product development activities are expected to be discontinued or transferred - most of them from the US - to other Roche sites or third parties to improve overall productivity. Roughly 800 positions will be affected by the planned reductions or transfers.
- Following a comprehensive portfolio review, Roche will discontinue certain activities in research and early development. These include RNA interference research in Kulmbach, Germany, and in Nutley, New Jersey, and Madison, Wisconsin, in the US. In addition, plans also include reorganising certain internal functions to free up resources for upcoming phase II studies of new molecular entities. Approximately 600 positions will be affected.
In the Diagnostics Division the consolidation of three sites will further optimise seamless collaboration and cost structures in development and manufacturing.
- Plans call for the closure of the site in Graz, Austria, and the transfer of the development and manufacturing activities relating to blood gas diagnostics to Rotkreuz, Switzerland, where the division’s Professional Diagnostics unit has its global headquarters.
- In Diabetes Care the majority of activities will be based in Mannheim, Germany, the unit's global headquarters. Research and Development of insulin pumps will be transferred from Burgdorf, Switzerland to Mannheim, Germany. In addition, the plan is to outsource manufacturing and close the Burgdorf site thereafter.
- Diagnostics chemical manufacturing and analytical services are expected to be discontinued in Mannheim, Germany, and transferred to Penzberg, Germany.
Continued focus on innovation
Despite a changing healthcare market and product setbacks this year, Roche is implementing this initiative from a position of strength. In contrast with many of its competitors, Roche's exposure to patent expiries over the next several years is low, and the Group has 14 product franchises, each generating annual sales of more than 1 billion Swiss francs. With its combined strengths in pharmaceuticals and diagnostics and its recognised expertise in molecular biology, Roche is uniquely positioned to advance personalised healthcare solutions, giving patients access to safer, more effective treatment options.
Roche's late-stage development portfolio includes six drug candidates that are effective in specific patient populations and thus could help advance personalised healthcare: a BRAF inhibitor for skin cancer, T-DM1 and pertuzumab for HER2-positive breast cancer, MetMab for lung cancer, lebrikizumab for asthma and a polymerase inhibitor for hepatitis C. Roche also has other important drug candidates in late-stage development for cancer, central nervous system diseases and metabolic disorders. With 12 new molecular entities in late development, Roche has a very strong product pipeline.
About Roche
Headquartered in Basel, Switzerland, Roche is a leader in research-focused healthcare with combined strengths in pharmaceuticals and diagnostics. Roche is the world's largest biotech company with truly differentiated medicines in oncology, virology, inflammation, metabolism and CNS. Roche is also the world leader in in-vitro diagnostics, tissue-based cancer diagnostics and a pioneer in diabetes management. Roche's personalised healthcare strategy aims at providing medicines and diagnostic tools that enable tangible improvements in the health, quality of life and survival of patients. In 2009, Roche had approximately 82,000 employees worldwide and invested almost 10 billion Swiss francs in R&D. The Group posted sales of 49.1 billion Swiss francs. Genentech, United States, is a wholly owned member of the Roche Group. Roche has a majority stake in Chugai Pharmaceutical, Japan. For more information: www.roche.com.