Roche of Switzerland is set to announce details of a major strategyreview (Marketletters passim), which is expected to lead to thousands of job cuts at its pharmaceuticals division. It is believed that the cuts could involve around 8% of the company's workforce, and the Financial Times reported that more than 3,000 jobs are to be lost, around 40% of which will be in the USA at Roche's base in Nutley, New Jersey.
The dilemma facing Roche is the balancing act of cutting costs without damaging medium- and long-term growth. The firm's drug sales are flat and it also needs to boost operating margins for its pharmaceutical division, which is way behind the industry's leaders. Analysts at UBS Warburg said that "while cost savings from Roche would be welcome, we think this move will be unlikely to improve the 2001 margin, and that even in the longer term it will not reduce costs enough to have a material impact on the company."
Danger of making R&D cuts
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