Forest cuts jobs in restructure
Published on 04/12/13 at 11:10am
Forest Laboratories is restructuring and shedding jobs in a bid to save $500 million in costs by the end of the financial year 2016, as part of a plan called ‘Project Rejuvenate’.
More than one fifth - $110 million - of that figure is expected to come via redundancies and other ‘headcount savings’, with virtually no part of Forest immune from the chop. Only the sales force and those working on submissions for late-stage R&D programmes will escape Rejuvenate’s axe.
The New York-based firm wants 65%-75% of the savings to be made by the end of the financial year 2015, and says $270 million will come from ‘streamlining and realigning’ R&D, with another $150 million taken out of marketing and the remaining $80 million from a reduction in general, administrative and other expenses.
“Because our top priorities are maximising the potential of our launch brands and key products in our portfolio, as well as delivering the late-stage pipeline, we have specifically ring-fenced the sales force and colleagues with key responsibilities for submission of certain late-stage R&D programmes from Project Rejuvenate, to minimise disruption of these critical growth-driving activities,” explained chief executive Brent Saunders.
The idea is to make Forest more ‘nimble’ with a view to creating further growth through future acquisitions. Rejuvenate is designed to ‘flatten and broaden’ the operation, reprioritising what it spends money on and reducing low-value work.
The plan also involves giving money back to shareholders via up to $1 billion of share repurchases - a common corporate strategy followed by companies in pharma and elsewhere.
Forest says it will begin a $400 million repurchase programme before the end of this month.
Finally, the firm is to issue $1 billion in new long-term debt through an offering of eight-year senior unsecured fixed rate notes, proceeds from which will fund the buybacks and acquisitions.
“Forest has a strong balance sheet with more than $3 billion in cash and investments,” said Saunders. “By adding some leverage to the balance sheet, we can take advantage of prevailing low interest rates, return capital to shareholders and increase our ability to execute accretive deals in the short-term.”
Largely focussed on the US market, Forest works in five main therapy areas: central nervous system, cardiovascular, gastrointestinal, respiratory and anti-infective.