March 12, 2009
Swiss drugmaker Roche, which has run its U.S. operations from a campus in Nutley for 80 years, plans to shed more than 1,500 jobs in New Jersey and relocate major operations to California as part of a $46.8 billion deal to take over the biotech powerhouse Genentech.
Roche will keep the heart of its business -- some 1,600 researchers and scientists -- in Nutley to work on new medicines to treat cancer and metabolic disorders such as diabetes and obesity. A contingent of scientists who are studying treatments for inflammatory diseases at Roche laboratories in Palo Alto, Calif., also will eventually be moved to Nutley.
"Roche is changing the nature of the Nutley campus," spokesman Al Wasilewski said today. "We don't see it as leaving."
Most of the 1,500 job cuts will be in commercial operations, largely sales and marketing personnel, he said.
The merger of Roche and Genentech, announced today, reflects further erosion of one of New Jersey's leading industries. In January, Pfizer set off an expected wave of industry consolidation when it announced it would acquire Wyeth, another New Jersey pharmaceutical company. And on Monday, the mega-merger of Merck and Schering-Plough was announced.
Roche, which already owned more than half of Genentech, agreed to pay $95 a share for the remaining 44 percent of the South San Francisco-based biotechnology company. The agreement ended a long, and at times tense, corporate struggle between the two companies. In July, Genentech's board of directors rejected Roche's initial offer of $89 a share. After lowering its offer once to $86.50, Roche upped the bid on Friday to $93 a share, signaling an apparent compromise in the talks.
As part of the deal, Roche's U.S. pharmaceutical business will begin operating under the Genentech name. One analyst, Michael Latwis with Decision Resources, said forfeiting the Roche name was a "small concession."
"Genentech is really the major growth engine," Latwis said. "Roche's portfolio is not growing nearly as fast without Genentech's products."
What disappears with the name, however, is some of the storied history of a drug company that became a landmark as it added office buildings and laboratories across 125 acres straddling Nutley and Clifton.
Wasilewski said the company is redoing a campus master plan to determine what can be done with the buildings being vacated. Other buildings, including the Roche Tower, are already being renovated.
"What we're doing is reconfiguring the landscape of the campus," he said.
The new wave of consolidation -- as well as worsening economic conditions -- weighed on some Roche employees today as the finality of the Genentech deal set in. Fewer pharmaceutical companies mean fewer opportunities for them to move around the industry.
"I think a lot more people are afraid than when they first heard (about the merger)," said Patricia Woelpper, who has worked at Roche for 18 years. "Where are we going to go?"
Inside the Park Pub restaurant, a short distance from the Roche campus in Nutley, an engineer who asked to remain unidentified said managers have been bracing employees about the sale for some time.
"They have over-communicated the information," he said, sitting with a co-worker at lunch time. "You can't be upset, but there's still that uncertainty. Who stays and who moves on?"
Created in 1896 in Basil, Switzerland, Roche moved its U.S. operations to Nutley in 1929. The business began producing vitamins -- a business it later moved to Warren County -- and then returned to making medicines, including widely-used tranquilizers such as Librium and Valium. Roche developed several other leading medicines for Parkinson's disease and psoriasis.
The company began its collaboration with Genentech in 1980, reaping huge profits from cancer medicines such as Avastin and Herceptin. But Roche also pushed out its own key products, including Neupogen for cancer and Hivid, the company's first HIV-antiviral drug.
Latwis, the analyst with Decision Resources, said Roche's takeover of Genentech locks up its ability to continue to access Genentech's strong portfolio. The need to push out new medicines is one of the forces driving consolidation in the pharmaceutical industry, but now that pressure is compounded by intensifying generic competition, intensifying regulatory scrutiny and a global economic recession.
Return to In the News