Bayer HealthCare announced today a structural realignment of its global pharmaceutical research and development organization. The company also outlined its future U.S. pharma site plan, and said that New Jersey will be home to its U.S. headquarters for pharmaceuticals. These moves follow Bayer?s acquisition of Schering AG, Germany in June 2006 and are part of the company?s plan to integrate its pharmaceutical operations with those of Schering AG and Berlex Inc. (the U.S. subsidiary of Schering AG).
As part of this change, research programs and activities now dispersed in various sites will be consolidated into three major research and development sites (Berlin and Wuppertal, Germany and Berkeley, California). The Berlin research group will take leadership for Diagnostic Imaging, Oncology and Gynecology/Andrology research and Wuppertal will be core for the company?s Cardiology research. Both locations have significant capabilities and activities in target discovery, lead generation and optimization, drug metabolism and pharmacokinetics, toxicology and clinical pharmacology.
With the global consolidation of research activities, research operations at U.S. sites in West Haven, CT and Richmond CA (including the biological development group now co-located in Richmond) will close. The company will relocate remaining departments and functions presently based in West Haven into headquarters locations in New Jersey.
Wayne and Montville, New Jersey will be headquarters for the company?s U.S. pharmaceutical commercial operations and Global Oncology and Specialized Therapeutics business units, and home to U.S-based Global Drug Development groups and other business support functions. Employee groups transferring from other U.S. sites will move over the next 12-18 months.
“The changes in Research and Development will leverage the combined assets of Schering and Bayer to maximize both the output and effectiveness of our global drug discovery and development programs. They also give us the flexibility to substantially lower our ongoing infrastructure costs,” said Arthur Higgins, Chairman of the Board of Bayer HealthCare AG and Chairman of the Board of Management of Bayer Schering Pharma AG. The company anticipates the consolidation of research activities to be largely complete by the end of the first half of 2007.
The company will create a global center of excellence for oncology research in Berlin. “The productivity of our oncology research group in Berlin is enhanced by its close working relationships with other co-located R&D functions, and the proximity of this group to our center of excellence for lead discovery in Wuppertal will further enhance productivity,” said Marc Rubin, member of the Board of Management of Bayer Schering Pharma AG and head of the company?s Research and Development organization.
In addition to housing the state-of-the-art Kogenate biological manufacturing facility, Berkeley will remain an important global R&D center for protein-based biologics drug discovery and development and will continue to be home to the company?s Global Hematology/Cardiology business unit. “Located in the heart of the world?s most active biotech corridor,” Rubin continued, “we expect this facility to become our research center of excellence and anchor for continuing work in hematology as well as immunology/inflammation.” The company will continue operations in Washington State for the manufacture of Leukine, the company?s white blood cell growth factor.
Bayer anticipates that approximately 600 U.S. positions will be eliminated by these changes, primarily in research. Over time we anticipate an additional 200 U.S.- based positions will be eliminated by the overall reorganization. After one-time costs of approximately $350 million, of which approximately $200 million are non-cash related, these measures will enable the company to reduce overall R&D costs by over $210 Million per year by the end of 2008.
In summarizing the strategic impact, Gunnar Riemann, Member of the Board of Management of Bayer Schering Pharma AG in charge of the Regions of Latin and North America said, “These changes will unlock opportunity for new drive and focus in the U.S. We can now bring together a critical mass of functions into a cohesive U.S. Headquarters unit that blends the best of Bayer and Berlex talent and knowhow.”
“Ultimately,” Riemann continued, “Our goal is to create a high-performance U.S. organization that is lean, market-focused and capable of driving superior growth in one of the largest and most important pharmaceutical markets in the world.”
Employees whose positions are eliminated will receive severance packages commensurate with the normal policies and practices of the respective companies and the company will provide a comprehensive support package to displaced employees to ensure a smooth, respectful transition. The company will also work with state and local governments as well as economic development authorities in the communities where locations are closing to try to minimize, to the degree possible, the impact to those communities.