Genentech, Roche Find New Balance Three Years Post-Merger

5/29/12Follow @arleneweintraub

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from Genentech’s manufacturing operations in South San Francisco, Genentech’s scientific staff was largely shielded from the budget axe.

But 900 jobs were eliminated from the Nutley site, amounting to a 38 percent reduction in headcount. The sprawling campus, which sits proudly on one of the main highways leading to New York City, had always been Roche’s U.S. headquarters. But after the acquisition, Roche moved its U.S. headquarters to South San Francisco and rebranded all its old products as Genentech drugs. The company shifted the focus of the Nutley site away from administration and manufacturing and towards research.

Roche CEO Severin Schwan estimated that the layoffs would save the company $2.4 billion in 2012. Still, the Nutley shakeup was a blow to New Jersey, where virtually all of the area’s Big Pharma companies were making similar cuts.

To maintain the productivity of the Roche/Genentech pipeline—and raise the probability of generating more T-DM1-like successes—the company has done much more than just restructure its research sites. It has also prioritized the development of personalized medicine, even going so far as to set out specific five-year goals for making products that are aimed at specific patient populations. And it has defined its therapeutic priorities beyond oncology, bolstering separate research groups in virology, immunology, and neurology.

The first step in the transformation was figuring out how to preserve as much of Genentech’s independence as possible. To that end, the company created two discovery groups: Genentech Research and Early Development, which encompasses everything happening in South San Francisco, and Pharma Research and Early Development, which includes all of Roche’s research operations around the world. The two groups develop their own compounds up until what the industry refers to as “proof of concept,” or the end of the phase 2 studies that precede the pivotal phase 3 studies. At that point, molecules are handed to a single group within Roche, which handles the late-stage trials and the commercialization.

Joe McCracken, who had been head of partnering in Asia for Roche, moved to Nutley in the wake of the layoffs to run the business development and licensing group. One of his responsibilities was to raise morale, so he made an effort to focus on the positive aspects of the change. “The site went from a place that was losing its identity to one that consolidated its identity around the purpose of conducting important basic research, and translating that research into medicine,” he says. “I think that was a great move.”

Although the East Coast and West Coast research sites operate independently of each other, they share the goal of strengthening Roche’s presence in personalized medicine. And uniting the two companies has eased that process. Roche is one of the world’s leaders in diagnostics—the development of tools that can detect genetic mutations that will make some patients respond well to certain drugs. Genentech was one of the pioneers in personalized medicine with trastuzumab, which is approved to treat breast tumors that are partly driven by … Next Page »

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