Genzyme Cutting 1,000 Jobs Over Next 15 Months

Xconomy Boston — 

Cambridge, MA-based Genzyme (NASDAQ: GENZ) is cutting 1,000 jobs over the next 15 months, as it faces intense pressure from shareholders to recover from manufacturing woes and deal with a takeover bid from Paris-based drug giant Sanofi-Aventis.

Genzyme CEO Henri Termeer described the job cut plan this morning in a memo to employees. The layoffs represent about 10 percent of the company’s workforce, he said.

“We are at a pivotal point in Genzyme’s history,” Termeer said in the memo. “In an external environment of increasing pressure to reduce health care costs, we must take actions to strengthen Genzyme to compete successfully. We have grown rapidly over the past two decades, increasing in size and diversifying our portfolio of products. Over the past year, our growth has been interrupted while we work to restore supply of needed therapies to patients and transform our manufacturing operations. The recent takeover proposal reinforces how important it is to take control and maximize the value we bring to patients and shareholders.”

This latest news comes after what has been a turbulent 15-month stretch in Genzyme’s history. The company, founded in 1981, has grown into one of biotech’s powerhouse companies and the world’s largest maker of drugs for rare genetic diseases. It had about 12,000 employees worldwide at the beginning of this year, $4.5 billion in revenue a year ago, and a stock market valuation of $18 billion in today’s trading. But a manufacturing nightmare began for the company when it said on June 16, 2009 that it had discovered a viral contamination at its Allston, MA biotech drug factory.

The ensuing decontamination process led to shortages of Genzyme’s two best-selling drugs. The shortages created an opening for competitors, and attracted activist investors such as Carl Icahn and Ralph Whitworth to shake up the company’s leadership.

Job cuts were first discussed as part of Genzyme’s new five-point strategy at an analyst day back in May, says company spokesman Bo Piela. The plan outlined initiatives to divest certain parts of Genzyme’s business, repurchase shares to boost the stock price, and make cost cuts, among other measures, Piela says. The company isn’t ready yet to say exactly when the job cuts will occur, or how many people will be affected in Massachusetts, because it is just beginning the cost-cutting process, Piela says. Genzyme also didn’t issue a formal statement to the media or investors today, although that is planned for next week, he says.

“We thought it was important to share the information with our employees first,” Piela says.

The cost cuts extend beyond just the 1,000 layoffs, Termeer said in the memo. There will clearly be a wider ripple effect throughout the New England biotech community.

“In addition, we are decreasing contract labor, freezing hiring for all but the most critical positions such as quality and manufacturing, and exploring opportunities to outsource parts of some functions,” Termeer said in the memo. “We are making these decisions in the next couple of months and they will be implemented over the next year.”

“For the first time in our company’s history we are faced with the need to make these painful decisions,” the CEO added.

Genzyme shares hardly budged as reports began to circulate about the layoffs. The stock was up 20 cents to $70.83 at 3:22 pm Eastern time today.