Roche is refocusing its resources as it works to rebalance its businesses in pharmaceuticals and clinical laboratory testing
Roche Diagnostics is pumping $300 million into its North American headquarters in Indianapolis. At the same time, the Roche research and development campus in Nutley, New Jersey will be closed. Collectively both actions are a sign of the company’s confidence in the growth prospects for clinical laboratory testing, molecular diagnostics, and genetic testing.
Many pathologists are aware that Roche Diagnostics has experienced rapid year-over-year growth in its molecular diagnostics business. The company wants to expand its facilities to support further growth in this sector.
Roche to Build Training Center for Its Medical Laboratory Customers
The in-vitro diagnostics (IVD) giant will invest $300 million over the next ten years into its northeast Indianapolis campus, a story published at WISHTV.com reported. Ground will be broken this fall at the 160-acre campus on a $70 million commercial education center.
Roche will use the site to train about 1,500 customers annually on how to use the company’s products, according to coverage published by FierceMedicalDevices.com. The plans also include refurbishment of existing buildings, the purchase of manufacturing equipment for new diabetes care test strips, and upgrades to its information technology capabilities.
Indiana Governor Mitch Daniels joined executives from Roche to announce the plans. They expect the expansion to create many as 100 new jobs by 2017. Roche will make one of the largest capital private investments in the city’s history, indicated Jack Phillips, who is President and Chief Executive Officer at Roche Diagnostics. He was quoted in a story published at Indystar.com.
Investment in Diagnostics Division Is Part of Roche’s Global Plan
Roche’s investment in its diagnostics division is part of a global restructuring by Swiss drug maker Roche Holding AG (OTCQX: RHHBY). It comes in the wake of the company’s $6.7 billion attempt earlier this year to acquire Illumina (NASDAQ:ILMN). Illumina is a California-based company that is developing next generation gene sequencing technology.
Roche has now shifted focus to building its molecular diagnostics business. It will do this primarily through internal projects and partnerships, noted Fiercemedicaldevices.com. Company officials stated that Roche will continue to consider options and opportunities to expand its leadership position in clinical laboratory testing and molecular diagnostics.
Roche Is Closing Nutley Campus, Cutting 1,000 Jobs
Even as it expands in Indianapolis, Roche will downsize in other business areas. Roche recently announced that it will close its 127-acre campus in Nutley, New Jersey. The move is designed to save money by consolidating research and development programs in its pharmaceuticals business. Roche will cut 1,000 jobs as a result of the reshuffling.
According to a report published by nj.com, Severin Schwan, Ph.D., Roche Chief Executive Officer, sent an e-mail to the company’s employees worldwide to explain these decisions. “[G]iven the challenging environment we face and our own growth prospects, we need to free up resources that we can invest in the most promising projects with the highest likelihood of success,’’ he explained.
By closing the Nutley facility, Roche expects to generate annual savings of $379 million per year. However, Roche will continue to employ 400 people at its diagnostics facility in Branchburg, New Jersey.
Some experts were not surprised that Roche was closing its Nutley facility. “The writing was sort of on the wall,’’ observed James W. Hughes, Ph.D., M.C.R.P., Dean of Rutgers University’s Bloustein School of Planning and Public Policy. “Once the top management leaves and you know Genentech is where the important [pharmaceutical] research is taking place, the future becomes questionable.’’
In 2009, Roche moved its U.S. headquarters from Nutley to South San Francisco as part of its takeover of Genentech. At the time, that move meant the loss of nearly 1,500 jobs in New Jersey, the nj.com writer reported.
Dark Daily readers will recognize this story as a confirmation of our observations in an e-briefing earlier this year. It concerned the increased demand and untapped opportunities in molecular diagnostics testing. (See Dark Daily, “Frost & Sullivan Report Identifies Molecular Diagnostics as Fastest-Growing Sector of Clinical Pathology Laboratory Testing”).
Pathologists and clinical laboratory managers can interpret the Roche restructuring as an indication that IVD diagnostics in general—and molecular diagnostics and genetic testing in particular—will remain a strong growth sector for the foreseeable future.
—Pamela Scherer McLeod