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Roche laying off 900 workers Thursday, May 31, 2001

By LEWIS KRAUSKOPF Staff Writer

Nutley drug maker Hoffmann-La Roche Inc. will lay off 900 workers as part of a worldwide restructuring, the company's Swiss parent said Wednesday.

About 600 of the cuts will be pharmaceutical sales representatives, who report to Nutley but are spread throughout the country. The remaining 300 jobs will come from manufacturing, marketing and sales, and general administration positions within the 127-acre Essex County campus, said Martin Hirsch, a company spokesman. Another 400 positions at Nutley are being eliminated through a hiring freeze and attrition, Hirsch said.

Executives of Roche Holding Ltd. in Basel, Switzerland, announced the restructuring after the Swiss markets closed Wednesday. About 3,000 jobs worldwide will be eliminated as the company restructures its pharmaceutical division.

The affected employees won't know their fates until next week, Hirsch said. About 3,000 people work at the Nutley plant, which is the company's U.S. prescription drug headquarters. Another 2,500 work in the field pitching the company's products.

The specter of job cuts has hung over employees since February, when George Abercrombie, the company's new head of Roche's U.S. operations, warned of a cost-cutting review that could lead to layoffs.

Abercrombie, who joined Hoffmann-La Roche to head the Nutley operations in January, told employees that the setbacks may come at their expense. The company also hired an outside consultant, McKinsey & Co., to review cost-cutting measures.

A month later, Abercrombie announced further cost-control measures, including a hiring freeze, stopping international travel, limiting off-site meetings, and delaying capital projects.

"I fully recognize that anticipated change can lead to anxiety and concerns. I am also aware that Roche has been in a state of evolution for some time," Abercrombie wrote in a Feb. 21 memo. "While it is too early to speculate on the outcome of this process, I cannot rule out that some people may lose their jobs."

The company confirmed in April that it was considering significant layoffs. Abercrombie blamed setbacks with several prescription drugs.

Chief among them was lagging sales of Xenical, a groundbreaking weight-loss drug that failed to reach high expectations. Hoffmann-La Roche expects sales to pick up once the drug receives U.S. approval as a treatment for diabetes.

The company also cited delays in product approvals; manufacturing issues leading to product shortages; a mild flu season slowing sales of the drugs Rocephin and Tamiflu; and negative publicity about Accutane, an acne drug allegedly linked to suicides.

Outside the sprawling campus on Route 3 on Wednesday, several employees refused to speak about the layoffs, while others were reluctant to give their names.

"It's been very different the last three months," said a woman who identified herself as a data specialist who has worked at Roche for 12 years.

"And it's going to get worse," one employee said as she walked back to work at lunchtime.

The company will offer two severance package options to laid-off employees, Hirsch said. One includes two weeks' pay plus one week of pay for each completed year of service. However, if the employees agree to waive all legal claims against the company, they will receive two weeks pay per completed year of service plus 12 weeks additional pay and extended medical benefits, Hirsch said.

Connie Iannicelli, who has devoted more than 30 years to Hoffmann-La Roche, expressed no bitterness toward the company Wednesday.

Born and raised in Nutley, Iannicelli started after high school as a quality-control clerk and has since earned promotion to a supervisor of package design.

"I'm a very happy Roche employee, and if I'm one of the unfortunate ones to lose my job, I will go on," she said.

Employees weren't the only ones sweating the firings. Located across Route 3 from Hoffmann-La Roche, The Red Chimney restaurant gets 40 percent of its lunch crowd during the week from the drug maker, said co-owner Steve Anagnos.

"They're faithful customers to us and to many businesses in the area," Anagnos said.

Hoffmann-La Roche has been located in Nutley since 1929.

Of the 3,000 worldwide job cuts in the pharmaceutical division, 200 will be in a research facility in Palo Alto, Calif., 700 in Britain, and 600 in Basel. Roche Holding Ltd., also a major manufacturer of vitamins and diagnostics, employs 65,000 people worldwide, 41,000 in pharmaceuticals.

Roche said that it would look to strengthen its pharmaceutical portfolio by licensing in new compounds and through product acquisitions and alliances, while continuing to focus research on seven therapeutic areas, including cancer and AIDS.

"Not only will we concentrate on optimizing our cost structure, but we will also continue to work actively on strengthening our sales," said William M. Burns, head of Roche's pharmaceuticals division.

Roche has been lagging behind its industry peers, both in operating margins and market share, said Mark Ravera, an analyst with Mehta Partners, a healthcare investment adviser.

Whereas Roche once led the industry in sales, it now holds about 3 percent of worldwide drug sales, compared with market leaders Pfizer and GlaxoSmithKline, which hold about 7 percent each, Ravera said.

"Their position in the pharmaceutical pecking order has been slipping," Ravera said.

Ravera said that a major merger or acquisition may be needed to boost the company's current and future product offerings.

"This will help the bottom line," Ravera said of the job cuts. "But over the longer term, they're going to need something to help their top line, to boost their sales."

Wednesday's announcement marked the third round of major layoffs at the Nutley plant in 16 years. In 1985, Hoffmann-La Roche fired 1,000 workers to cut costs. About the same number lost their jobs in 1994, following a merger with Syntex Corp.

The layoffs also were a topic of conversation at the Park Pub, across Kingsland Street from the campus. Sitting at the bar, one Denville resident, who said he's had family and friends employed by the company, spoke about how job cutbacks have changed Nutley and the surrounding communities over the years.

"This used to be a lifetime job," the man said, mulling over a cup of coffee. "Not anymore."

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Staff Writer Lewis Krauskopf's e-mail address is krauskopf@northjersey.com

-- K (infosurf@yahoo.com), May 31, 2001