Roche Holding AG is set to focus on defensive cost-cutting steps - not a major strategic overhaul - when it unveils a new programme to shake up its flagship drugs division, financial analysts say.

Results of the strategic review that come amid sluggish pharmaceuticals sales at the Swiss health-care group, which employs 250 people in Co Clare, are due in the next few days. But they may not be enough to persuade financial markets that Roche deserves a higher valuation.

In fact, the steps may boomerang if investors get the feeling Roche is sacrificing investment in long-term growth for the sake of short-term profits.

Switzerland's Neue Zuercher Zeitung newspaper last week quoted Roche chairman Mr Franz Humer as saying the main point of the measures was to cut costs, primarily in marketing and manufacturing. Stepped-up licensing of other firms' products to boost sales growth was also likely.

Roche said two weeks ago that US operations may take the brunt of expected job cuts at the drugs division, which accounts for nearly two-thirds of Roche's global staff of 65,000.

These steps may disappoint investors hoping for dramatic moves, such as selling Roche's world number one vitamins business or merging with crosstown rival Novartis AG, which shocked Roche this month by buying a 20 per cent voting stake from disgruntled shareholder Mr Martin Ebner's BZ Group.

Lombard Odier analyst Ms Birgit Kulhoff said cutting costs at Roche to boost relatively low margins was far from easy.

"It is a difficult topic because it will have to walk a tight-rope. On the one hand, it has declining sales, so cutting marketing will be very delicate. You have to be very cautious so as not to endanger the remaining growth," she said.

Chopping spending on research and development would also provide only a temporary boost, she said, because the Roche drug development pipeline was not well stocked. Much of the fat had already been trimmed from administration.

"I would probably not expect too much from this restructuring package. It is going to be difficult," she added.

"It depends very much on what kind of package it can present and how it presents it, but I would not expect that to be the major trigger for the share price."

Roche non-voting certificates, its most widely traded form of equity, edged higher to around 137.75 Swiss francs (#90) yesterday, well above a 2001 low of 115.10 Swiss francs but still off more than 16 per cent this year. They have underperformed the Dow Jones Stoxx health-care index by more than 17 per cent.

Roche will no doubt shy away from taking an axe to its biggest block of costs this year - pushing its anti-obesity drug Xenical, which got off to a roaring start in 1999 but then failed to keep growing last year. It is spending lots of money to start a patient call centre and a new advertising campaign for Xenical, and may have to hire back any sales representatives it lets go should Xenical get approved for treating type 2 diabetes, as Roche hopes.

Bank Julius Baer analyst Ms Denise Anderson dismissed talk that a radical remake was in the works.

"I think there won't be any major news," she said, wondering if Roche would even go into much detail of where cuts would come.

Lowering production costs by closing down plants could stoke concern that Roche was writing off future sales prospects, while slashing marketing could crimp sales in the key US market.

"For marketing, it should not cut anything there. I don't see how that is possible. We recently made a chart of how many sales reps there are in the US for the different drug companies. Roche is so far down you can't even put it on the same page, basically," Ms Anderson said.

Roche cannot cut its sales force if it is really committed to Xenical, she added.

"Those kind of things really make me nervous. If they are really cutting in marketing - and I'm sure they won't say how many they will cut there - then you have to think things must be even worse than we think." Ms Kulhoff poured cold water on talk that Novartis and Roche could announce a full-blown merger that would create a giant able to compete head to head with sector leaders Pfizer or GlaxoSmithKline.

"I would exclude a full-scale merger right now. The cultural differences are too big and I also believe there can only be one CEO," she said.