Roche Starts Cutting 4800 Jobs. Kills RNAi.

11/17/2010

Roche Starts Cutting 4800 Jobs. Kills RNAi.

Back in early September, Roche announced a "Group-wide Operational Excellence" program aimed at reducing costs substantially and making the company more efficient - R&D was one area cited as being a target for efficiency gains.

Today, stories appeared in Fierce Biotech, PharmaGossip, the WSJ and Pharmalot blog detailing the plan's implementation. Roche today announced it will cut 4800 jobs that will save the company an expected $2.4 billion. Cuts became necessary due to some savings expected to be gained from streamlining post the Genentech integration. Roche has also experienced major revenue delays with its taspoglutide and T-DM1 molecules not being approved when expected. It's Tamiflu franchise has also seen a significant dip in sales. Less revenue = less jobs. Simple equation really - albeit unsatisfying if you are one of the 4800 affected.

Here's the job cut summary:

2650 sales jobs will be cut mostly from primary care business
1350 jobs will come from manufacturing
800 product development jobs gone
600 jobs cut from research and early development
640 jobs come from the diagnostics group
260 administrative jobs will cease
800 jobs will be saved through internal transfers and 700 will be transferred to outside companies
The net job loss will be 4800 or about 6% of Roche's WW workforce

Other notable actions in this reorganization include, Roche closing plants in Florence, SC, Boulder, CO and in Graz, Aus (diagnostics). Roche will also kill its RNAi program completely. That means it will stop activities in Kulmback, Ger; Nutley, NJ and Madison, WI.

As reported in Xconomy today, the Roche decision to leave RNAi work has had reverberations on the RNAi companies themselves. Both Alnylam and Tekmira stock experienced some negative wave effects from the Roche decision. Both companies have been Roche partners in the past on RNAi therapeutics - or in Tekmira's case delivery of RNAi molecules. Alnylam landed a $331 M upfront payment from Roche back in July 2007 and Tekmira garnered $18.4 M in May 2009. Both companies indicated that they were sorry to see Roche go but have other partnerships ongoing.

Alnylam lost another key partnership with Novartis in past couple of months as their 5-year development agreement was not renewed. But they still have agreements with Takeda, Sanofi-Aventis and Biogen Idec. Tekmira stated it has ongoing partnerships with Takeda, Pfizer and BMS. However, it should give someone pause when Roche - who many consider to be the leading innovator in the industry right now at least among Big Pharma - decides to cease RNAi work.