Genzyme said it expects a broad cost-cutting program that includes laying off 1,000 employees over 15 months will boost profitability and allow it to invest in areas crucial to its business, such as manufacturing.
The Cambridge, Massachusetts-based biotechnology company, which recently rejected an $18.5 billion takeover offer from French drugmaker Sanofi-Aventis, confirmed the job cuts on Wednesday.
"Reducing our operating costs will allow us to operate in a more cost-effective way and become more profitable, and it creates capacity for us to invest in critical areas," said Bo Piela, a spokesman for Genzyme.
Piela declined to immediately say how much the company expects to save, or the likely impact on earnings, but he said the job cuts will account for about half of the savings identified by the company as part of a plan announced in May to enhance shareholder value.
The remainder of the cost savings will come through a combination of more efficient procurement of goods and services, as well as reduced expenditures on high-cost items such as travel, Piela said.
Genzyme is working its way through a manufacturing crisis that forced it last year to temporarily close its Boston manufacturing plant. The closure led to a shortage of two key drugs, hurting sales and sending its stock price plummeting.
Genzyme's shares fell from a high of nearly $84 in 2008, before the manufacturing crisis, to a low of $45.39 in May, their lowest since July 2004. The offer from Sanofi-Aventis of $69 a share has lifted them again. They were trading at $70.27 in early trading on Wednesday.
Piela said the cost savings will allow the company to put more resources into ensuring it maintains top-notch manufacturing facilities and will allow it to focus more on its drugs for rare genetic disorders and its experimental drug to treat multiple sclerosis.
"We have spent the past few months evaluating the company and the plan we are executing on what we said we would deliver," Piela said.
