Nestlé is beating a retreat from topical dermatology drug R&D. The rethink of R&D priorities is set to cost up to 450 people their jobs and could result in the closure of a R&D facility.
Vevey, Switzerland-based Nestlé made a big move into dermatology in 2014 when it acquired the half of Galderma it didn’t already own for $3.6 billion and spent a further $1.4 billion on aesthetic products from Valeant. But with the field moving from topical to systemic products and an activist investor pressuring the food and drink giant to improve margins, Nestlé is changing up its strategy.
The cuts, news of which was first reported by Nice-Matin, will affect as many as 450 of the 550 people who work at Galderma’s R&D site near Nice, France. Nestlé is hoping about 300 of the employees will take buyouts. Another 100 staffers are set to move to a new oral and injectable prescription drug R&D facility at an as-yet-unidentified location close to a hospital and university. Nice lacks such a location.
In parallel, Nestlé plans to spend 12 months assessing its options for the Nice facility. Closing sites in France can be a tricky business, leading many companies to seek buyers rather than simply shutter their facilities. This is likely to be Nestlé’s preferred option. Management at the Nice facility have also spoken of their desire to retain a presence in the region, although priorities at the top of the business could steamroll such wishes.
Those priorities are evolving in the face of pressure from activist investors. Nestlé has already outlined cost-cutting measures and possible divestitures as it seeks to improve its profit margins and prospects.
The actions are the latest phase of a long-running move away from low-margin food and drink brands and into higher-margin sectors such as healthcare. Buying Galderma was intended to further this agenda, but a slowdown in sales and a shift from topical to systemic drugs have caused the unit to turn from a solution into a problem.