Roche cutting 1,200 jobs in major shift in producing drugs

Roche ($RHHBY) will close four plants and lay off 1,200 people as it moves toward more biologics and new specialized small-molecule drugs that require less capacity. The drugmaker will take a $1.6 billion charge to cover the move as it plays out over the next 5 years.

The drugmaker said Thursday that it will close plants in Florence, SC, in the U.S., as well as plants in Clarecastle, Ireland; Leganes, Spain and Segrate, Italy. The drugmaker said it will look to sell the facilities in hopes of saving jobs, but it said the "transition" will start next year and play out by 2021. The Swiss drugmaker expects restructuring costs to amount to around $600 million in cash out of the total $1.6 billion.

"With these changes we are responding to the evolution of our small molecule portfolio towards specialized medicines produced in lower volumes," Daniel O'Day, COO of the pharma division of the business said in a statement. "We are aware of the impact this decision has on our colleagues, and we will do our utmost to support them during this transition."

Roche spokesperson Dr. Ulrike Engels-Lange said Friday in an email that there are about 300 employees at each of the sites. Roche said it will immediately begin talks with employee representatives in each country and that employees will be notified as quickly as possible about what to expect at each of the four plants.

On the flip side, the company's site in Kaiseraugst near its Basel, Switzerland, headquarters will get a new CHF300 million plant with the newest technology for small molecule manufacturing. With about 10,400 employees there already, it is one of Roche's largest centers of production.

Engels-Lange said that the new plant, which is expected to be operational within 6 years, is not expected to generate new jobs. "One of the reasons we chose Kaiseraugst as the location for the new late stage technical development and launch facility is that we can transfer the available, skilled employees to there from Basel," she said.

An example of one of Roche's new small molecule drugs is Esbriet, approved by the FDA last year for treating idiopathic pulmonary fibrosis (IPF). It picked the drug up in its $8.6 billion deal last year for InterMune. But much of what is in Roche's pipeline these days are specialized large molecule drugs and so the drugmaker is also investing significantly in expanding its biologics manufacturing, announcing $2 billion in projects in the last few years. In 2013 it said it would invest almost $900 million to build a new facility in Switzerland and expand plants in the U.S. and Germany, adding nearly 500 jobs in the process.

Older biologics like Rituxan, Avastin and Herceptin continue to have strong sales for the Swiss drugmaker but have biosimilar competition coming. The company is pushing new drugs like Perjeta, to replace those. In the last quarter, the HER2-positive breast cancer drug saw 53% growth to 376 million francs, putting it in 4th place, just behind the big three.

November 12, 2015


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