Roche made big news in the pharmaceutical business today when it said it is cutting 4,800 jobs as part of a major restructuring plan. And, no surprise, hundreds of those job cuts are coming from its biggest U.S. asset, South San Francisco-based Genentech.
About 350 to 450 people in Genentech’s manufacturing group in South San Francisco will lose their jobs, in addition to 100 at the company’s manufacturing plants in Vacaville, CA, and another 90 people in Oceanside, CA, according to Genentech spokeswoman Robin Snyder. An additional 200 positions from other departments throughout Genentech are being eliminated, although some of those cost savings will come through choosing not to fill open positions, Snyder says.
Taken together, this could represent about 840 jobs that will be wiped out. Genentech, the biotech industry trailblazer founded in 1976, currently has about 13,000 employees companywide. About 8,800 of these people work at the company’s flagship campus in South San Francisco, Snyder says. She added that none of the cuts will be made among Genentech’s scientific staff, or in early drug development. The cuts that are being made will occur between now and the end of 2012, Snyder says.
When asked what the cuts say about Roche’s commitment to Genentech’s operations in Northern California, Snyder said “Genentech is the biggest site in the entire organization. It is very committed to Genentech.”
The handwriting has essentially been on the wall for a lot of the manufacturing operations in South San Francisco. As far back as 2006, Genentech said it was planning to shift the manufacturing group on campus away from commercial output, and gear it more toward producing batches for use in clinical trials, Snyder says.
Roche has held a majority ownership stake in Genentech since 1990, but it allowed the biotech pioneer to operate essentially as an independent company until it paid $46.8 billion to acquire the whole company in March 2009. At the time the deal closed, Roche said it wanted to preserve the Genentech’s legendary culture of creativity and independence.
One of the bigger surprises in the Roche news was that the company is dropping it efforts to discover new treatments that use RNA interference technology. This is supposed to represent a new paradigm of gene-silencing technology that reaches targets inaccessible by traditional antibody and protein drugs like those made by Genentech, or conventional small molecule pills that Roche and other pharma giants sell.
This revelation had a negative impact on a couple of leaders in the RNAi field—Cambridge, MA-based Alnylam Pharmaceuticals (NASDAQ: ALNY), and Vancouver, BC-based Tekmira Pharmaceuticals (NASDAQ: TKMR). One way to interpret the news would be to say that Roche has more confidence in the future of protein drugs like Genentech’s blockbusters trastuzumab (Herceptin), bevacizumab (Avastin), and rituximab (Rituxan), compared to the outlook it sees for RNAi drugs—none of which have earned FDA approval as of yet. Another way to look at it would be that this creates an opening for smaller competitors. Either way, it will be interesting to see which projects get green-lighted at the new, leaner Roche R&D machine.
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