PharmExec Blog

What Is Behind the Genzyme Job Cuts?

Troubled biotech Genzyme’s (Cambridge, MA) planned elimination of over 1,000 jobs (10% of its 12,800 workforce, according to the Boston Globe) over the next 15 months is not related to the takeover bid from French giant Sanofi Aventis, the company has said.

“This is something we’d be doing regardless,” said spokesman Bo Piela, adding that the layoffs were reported to stockholders back in May as part of a five-point cost-cutting plan. The company’s public announcement at that time confirmed there would be cost reductions — in light of its reduced 2010 forecast — but did not specifically mention job cuts.

Genzyme rejected Sanofi’s $18.5 billion takeover bid last month, saying the offer of $69 a share undervalued the company. Genzyme CEO Henri Termeer later wrote in a staff memo that the takeover proposal “reinforces how important it is to take control and maximize the value we bring to patients and shareholders.” But he also wrote that, for the first time in the company’s history, Genzyme is faced with the need to make “painful decisions.”

The company is set to face a further 1,900 job losses when it sells its genetic testing business to Laboratory Corp. of America Holdings (LabCorp) for $925m later this year It has said however that these employees will be offered new contracts when the sale is completed. Nonetheless, the The five-point plan will also the divestment of two other, ‘non core’ units, diagnostic products and pharmaceutical intermediates — proceeds from which may be used to finance the second half of the company’s $2 billion stock buyback in a move to reduce share price volatility.

The company will begin to implement the job cuts before the end of this year.

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