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Roche Announces Cost-Cutting Effort; Confirms FY 2010 Outlook

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Roche announced today a cost-cutting initiative, dubbed a "Group-wide Operational Excellence initiative," that will be implemented in 2011-2012.

The Swiss pharmaceuticals, diagnostics, and life sciences tools giant provided few details about its plans, saying that over the coming months all parts of its organization will review and analyze their respective structures and processes. Roche intends to provide detailed decisions on the measures that will be taken and the potential impact on staffing levels by the end of the year.

It said that the initiative, which "aims to adapt cost structures and accelerate productivity improvements Group-wide," is in response to "mounting pressures to curb healthcare costs," particularly in the US and Europe, as well as "recent developments in late-stage projects in the Roche pipeline."

"We have launched this initiative from a position of strength," Roche CEO Severin Schwan said in a statement. "By contrast with many of our competitors, we are only marginally affected by patent expiries."

He added that the firm will focus its resources on "investments that will drive innovation and ensure the company's long-term success, while at the same time protecting our profitability so as to safeguard our financial flexibility."

Roche also confirmed its full-year financial outlook for 2010 — local currency sales growth in the mid-single-digit range. In July, the firm reported first-half revenue growth of 3 percent to CHF 24.64 billion ($23.6 billion).

Analysts who cover the firm expect cuts are likely to come in its pharmaceutical R&D operations and its primary care sales force in the US and Europe.

Roche recently has had some setbacks for its pharma business, which included delays for certain drugs in development, and regulatory-related issues. A US Food and Drug Administration advisory panel has recommended the agency revoke approval of the firm's Avastin (bevacizumab) for treating breast cancer — which the agency may or may not follow — and the UK's National Institute for Health and Clinical Excellence recently rejected Avastin for use in patients with advanced bowel cancer, citing cost concerns.

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