HMR trims R&D costs in bid to pump up profits

19 January 1998 00:00  [Source: ICB]

Hoechst Marion Roussel (HMR) has ordered its country operations managers to cut 5% off costs, equivalent to DM460m ($250m) from the company's 1999 global budget, in a drive to pump up profit margins.

The majority of cost savings are expected to come from the R&D division's DM2.3bn budget - a figure equal to 17% of the value of its sales. This is 'substantially above' the pharma- ceutical industry average of 14-15%, according to HMR. Restructuring of its R&D division (officially called Drug Innovation and Approval) was 'not fully addressed during the initial round of rationalisation' at the merger in 1995, says the company. The division will be directed to reduce time-to-market for likely high-earning new products. The main R&D centres - at Frankfurt, Germany, Romainville, France, Kansas and New Jersey, US - will remain, with research still focused at Frankfurt. Each country manager has a cost-saving target but will have discretion on where to make the cuts. HMR expects some will cut sales and general administration staff rather than R&D.

Discussions with local workforces are to begin immediately. HMR chief executive Richard Markham urged them to 'work closely and constructively to achieve common long-term goals', though agreement is not expected until March.

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However, HMR Deutschland chief Heinz-Werner Meier says he will cut up to 600 jobs from his R&D programme by the end of this year - which should contribute savings of DM95m on the 1999 budget. However, HMR central works council's fears that the cuts could prove more extensive led to a demonstration in Frankfurt on 16 January.

HMR in France emphasised that the cutbacks would not affect any of its existing chemical or pharmaceutical production facilities.

• Novartis has revealed it intends to end pharmaceutical manufacture at 35 of its 62 production sites worldwide by the year 2000. Some of the facilities will be closed, some sold, and others merged with agrochemical production plants on the same sites, said a spokesperson. The plan is part of the restructuring programme begun in 1996, intended to reduce the number of jobs worldwide by 10 000 within three years.
  
  

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