Roche and Daiichi Sankyo Announce Layoffs Amid Restructuring of Key Antibiotic Product Lines

On March 1, industry sources reported that, according to Roche employees, the Rocephin antibiotic team at Roche received layoff notices, requiring them to leave by the end of the month on March 31.

As for the reasons behind the layoffs, it is reported that they may be due to Rocephin sales representatives failing to meet sales expectations, and given the impact of the pandemic, there has been a significant decrease in pediatric patients, leading to a substantial decline in antibiotic usage.

It is understood that Roche’s severance package follows an “N+3” formula, where N is calculated based on the average salary of the preceding 12 months, and the “3” represents three months’ base salary. For employees unwilling to depart, Roche has also offered internal job bidding as an alternative solution.

Data indicates that Roche’s Rocephin is a long-acting, broad-spectrum third-generation cephalosporin antibiotic. It exhibits enhanced activity against Gram-negative bacteria and greater stability against β-lactamases compared to first- and second-generation cephalosporins. Compared with other third-generation cephalosporins, it offers advantages such as a longer half-life, strong tissue penetration, and minimal toxic side effects. Clinically, it is generally used to treat infections caused by susceptible organisms, including meningitis, abdominal infections, bone and joint infections, skin and soft tissue infections, genital infections (including gonorrhea), renal and urinary tract infections, and preoperative infections.

Rocephin was launched in Switzerland in 1982, received approval from the U.S. FDA in 1984, and its original patent expired in 1996. Following the patent expiration in 1996, numerous pharmaceutical companies in China began producing generic versions of ceftriaxone sodium. Ceftriaxone sodium is one of more than 20 cephalosporin antibiotic formulations approved for clinical use in China, and it is included in both Category A of the National Reimbursement Drug List and the National Essential Medicines List.

Today (March 2), Jincheng Pharmaceutical announced that its subsidiary’s Ceftriaxone Sodium for Injection has passed the consistency evaluation of quality and efficacy for generic drugs. As of now, including Jincheng Pharmaceutical, a total of four companies have obtained approval for this drug; the other three are Qilu Pharmaceutical, Kelun Pharmaceutical, and Shandong Runze. Moreover, data shows that among the applications for consistency evaluation of injectables, Ceftriaxone Sodium for Injection has the highest number of submissions, with 57 acceptance numbers.

With the fifth round of volume-based procurement approaching, the number of Ceftriaxone Sodium products that have passed consistency evaluation fully meets the requirements for centralized procurement. Under the influence of a series of policies, it is understandable if Roche decides to disband its sales team for this product.

Other industry analysts have stated that it is unclear whether Roche’s recent layoffs indicate its intention to divest the distribution rights for Rocephin, with Yiteng Pharmaceutical suspected as the potential acquirer. As early as March 2018, Roche Pharmaceuticals (China) formally granted Yiteng Pharmaceutical the promotion and distribution rights for its recombinant human erythropoietin product (brand name: Rocormon®) within mainland China. The two companies already have an established foundation for cooperation.

Previously, Eli Lilly China announced that it had reached an exclusive agreement with Yiteng Pharmaceutical, a Chinese pharmaceutical company, to grant Yiteng the promotion and distribution rights for its two antibiotic products, “Ceclor” and “Vancocin,” within mainland China, effective January 1, 2017. If Yiteng Pharmaceutical secures Roche’s Rocephin this time, its portfolio in the antibacterial drug sector will be further expanded. Currently, Roche has not responded to this news, and we will continue to monitor the situation.

At the beginning of 2021, news of layoffs and product line optimization and adjustment in pharmaceutical companies emerged one after another. Today, there is a revelation that Daiichi Sankyo is currently undergoing layoffs, which involve the anti-infection and respiratory analgesia product lines. The laid-off employees are mainly concentrated in areas outside Beijing, Shanghai, and Guangzhou, primarily targeting representatives with low output and short tenure.

It is reported that the severance package for this layoff is as follows: For employees with less than one year of service, N+3; for those with one year or more of service, N+5 (the compensation amount is calculated as: N × average monthly salary from the previous year + 3/5 × base salary).

In addition to layoffs, Daiichi Sankyo is set to implement other major strategic initiatives, including organizational restructuring. It is reported that the company plans to merge its cardiovascular, anti-infective, and respiratory/analgesic business lines, although the specific timeline for this consolidation has not yet been announced.

According to the analysis, the reason for Daiichi Sankyo’s significant internal restructuring is that its respiratory and analgesic product line (Loxoprofen Tablets) and its anti-infective product line (Cravit Tablets) were included in the fourth batch of the National Centralized Drug Procurement.

From the perspective of China’s policy direction, drug price reductions are an inevitable trend. Volume-based procurement will further expand across China, creating price linkage mechanisms. With the emergence of generic drugs, the profitability of non-patented medications has already fallen below that of new drugs. In the future, the market share of generics that have passed consistency evaluations will rise rapidly, accelerating the substitution of imported original research drugs, thereby impacting multinational pharmaceutical companies.

In addition to the merger of product lines, Daiichi Sankyo announced at a board meeting on February 26 that it had passed a resolution to transfer the manufacturing and sales rights in Japan for 11 mature drugs, including the antihypertensive Acecol and the antibacterial Banan, to Alfresa Pharmaceuticals, a subsidiary of Alfresa Holdings.

As per the resolution, six out of eleven mature products were transferred to Alfresa Pharma through a corporate spin-off, effective December 1, 2021, while the remaining products were separately transferred to Alfresa Pharma starting December 2, 2021. Upon completion of the spin-off, Daiichi Sankyo will receive approximately JPY 3.7 billion from Alfresa Pharma.

Daiichi Sankyo has stated that it will concentrate more of its corporate resources on the oncology sector while optimizing its business operations. In alignment with this strategy, Daiichi Sankyo recruited Ken Takeshita from Gilead’s cell therapy division at nearly the same time, appointing him as Head of Global R&D and Interim Head of Clinical Research, with the appointment taking effect on April 1.

Currently, it seems to have become an industry trend for multinational pharmaceutical companies to spin off their mature products in order to focus on high-value disease areas. Previously, Pfizer spun off its non-patent brand and generic drug business unit, Upjohn, and merged with Mylan to establish Viatris. After the split, Pfizer successfully shifted its focus to biopharmaceuticals. Additionally, Merck & Co.'s primary care and women's health division also "branched out" to form a new company, Organon.