Sanofi Aventis SA, the French company attempting a hostile takeover of Genzyme Corp., will cut 1,700 U.S. pharmaceutical jobs, or 25 percent of its American drug operations, to prepare for acquisitions and patent expirations.
The job cuts are part of a 2 billion euro ($2.8 billion) cost-reduction plan announced in July 2009, said Jack Cox, a spokesman for Paris-based Sanofi, in a telephone interview today. About 1,400 sales positions will be cut, as well as 300 jobs at company offices in Bridgewater, New Jersey, Cox said.
Products accounting for a quarter of Sanofi’s annual revenue will lose patent protection by 2013. The company is narrowing its business to three areas -- diabetes, atrial fibrillation, and cancer -- and is seeking partnerships and acquisitions to replace lost revenue. The drugmaker on Oct. 4 announced a tender offer of $69-a-share, or $18.5 billion, for Genzyme, the maker of medicine for rare genetic disorders.
“This is beyond just the patent losses,” Cox said in a telephone interview. “That’s a large driver, but it’s also restructuring the overall organization to prepare for a different future for this company.”
Sanofi fell 8.5 cents, or 0.2 percent to 48.96 euros in Paris trading today, after declining 11 percent this year.
The company has about 13,000 employees in the U.S., including 6,900 in its pharmaceutical operations unit, where the cuts were made today. Additional reductions won’t be necessary through 2013, “barring unforeseen events,” Cox said.
‘What We Expected’
“It’s what we expected the company to do,” said Jeffrey Holford of Jeffries International Ltd. in London, who has a buy rating on the stock. “It’s reassuring.”
By 2013, Sanofi faces competition from cheaper generic copies for more than six top-selling products, including Lovenox and Plavix to prevent blood clots and Eloxatin for colon cancer. Those three drugs alone accounted for more than $9.2 billion in sales last year.
“If you’re going to lose that many new drugs, then you have to lose people,” said Gbola Amusa, an analyst with UBS in London, who has a neutral rating on the stock. Amusa said he doesn’t consider the layoffs related to the battle to acquire Genzyme.
Sanofi announced its tender offer for Genzyme after the Cambridge, Massachusetts-based biotechnology company spurned its bid as too low and refused to negotiate. Genzyme urged shareholders to reject the offer yesterday, in a regulatory filing. Sanofi’s offer expires Dec. 10.
The Genzyme deal would be the biggest hostile takeover in the drug industry since the $64 billion transaction that created Sanofi-Aventis in 2004, according to Bloomberg data. Sanofi has announced 35 acquisitions in the past five years, with an average size of $1.6 billion and an average premium of 15 percent, according to data compiled by Bloomberg.
Any costs related to today’s announcement will be reported at the end of this year, Cox said. The company hasn’t yet determined those costs, he said.
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