Roche announces implementation plans for its Operational Excellence Program

10-12-2010

 

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.’

 

Strengthening growth and innovation capability in a changing market environment

Roche today 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. Operational Excellence will improve Roche’s efficiency and flexibility in this changing market landscape, enabling the Group to focus its investments on innovations that promise the greatest clinical benefit for patients.

 

Financial implications of Operational Excellence

The Operational Excellence Program is expected to generate savings of 1.8 billion Swiss francs in 2011, with projected savings of 2.4 billion Swiss francs from 2012 onwards. Implementation is scheduled to start in 2010 and will be substantially complete by the end of 2012. During the period from 2010 through 2012 Roche expects to incur one-time restructuring costs totalling 2.7 billion Swiss francs, of which 1.5 billion francs are cash-related.

 

Roche confirms its outlook for full-year 2010. It expects mid-single-digit sales growth in local currencies for the Group and the Pharmaceuticals Division (excluding Tamiflu sales). Sales in the Diagnostics Division are expected to grow significantly ahead of the market. Roche is aiming for a double-digit increase in Core Earnings per Share at constant exchange rates.

 

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 structure