The first half of 2014 has seen less job-cutting by biopharma companies than a year earlier, at least according to one recent report.
The latest monthly job report by Challenger Gray & Christmas, released July 3, showed that biopharmas announced plans to eliminate 4,215 jobs between January and June of this year, down more than one-third (37%) from the 6,709 jobs announced as being jettisoned in the first half of 2013.
One possible reason is this year’s slowdown in patent-cliff expirations for blockbuster drugs. Treatments generating just under $50 billion in combined annual sales will lose patent protection during 2014, Bloomberg has estimated. Five big pharmas account for more than half ($35.7 billion) of that: Sanofi, Novartis, Roche, AstraZeneca, and Eli Lilly.
Those numbers sounds reassuring after the $117 billion in combined sales lost by blockbusters going off-patent between 2011 and 2013. But next year, drugs with a collective $65 billion in annual sales will fall off the proverbial patent cliff. That figure rises to about $99 billion for medicines losing protection during 2016–18, according to YCharts.
What we’re seeing, then, is the calm between waves of job reductions. In addition to the patent-cliff, several mega-deals have been talked about, if not already in the works, in recent weeks. The most notable of these is AbbVie’s effort to combine with Ireland-based Shire, which would be the largest “inversion” merger intended to re-domicile a U.S. biopharma like the Abbott Laboratories spinout in a tax-friendlier nation. AbbVie, which hopes to re-domicile in the U.K., has until July 18 under the kingdom’s M&A laws to formalize a takeover offer, or hold off for six months.
The largest potential 2014 deal didn’t occur during the first half—Pfizer’s unsuccessful offers to buy AstraZeneca, the biggest of which was $69 billion. Under U.K. M&A rules, Pfizer cannot propose another offer until late November, but could do so in late August if AstraZeneca initiates talks or is pressured by investors to do so. In either scenario, no outsider can say for sure that Pfizer won’t try again with a sweeter offer that just might prompt at least a hearing by AstraZeneca.
While this year’s job news appeared to be better, January–June 2014 saw disclosures of several significant job reductions that reflect how the industry continues to consolidate, forcing several companies to contract. Among them:
Novartis: More than 1,400 jobs, including all roughly 525 employees at a manufacturing plant to be shut down in Suffern, NY; about 400 jobs at an R&D/manufacturing site in Horsham, West Sussex, U.K.; and up to 500 pharmaceutical division support jobs in its headquarters country of Switzerland. Novartis said it would create an equivalent number of Swiss jobs in research and manufacturing, though a Swiss newspaper later reported that about half those jobs would be shifted to Hyderabad, India.
AstraZeneca: Weeks before Pfizer’s takeover attempt, AZ cited the patent cliff when it disclosed plans in February to ax an additional 550 jobs by 2016, bringing to 5,600 the number of positions it has committed to eliminating by 2016. The 550 reflect in part the planned shutdown of an R&D site in Bangalore, India, which affected all 168 staffers; as well as an IT restructuring and a planned exit from branded generics in some emerging markets.
Amgen: The biotech axed 252 U.S. sales, operations, and other corporate functions employees at its Thousand Oaks, CA, headquarters earlier this year; laid off 200 manufacturing employees in Longmont, CO, effective April 30; then cut 70 additional positions as of August 8.
Most of Amgen’s 70 affected workers were information systems staffers, the rest commercial employees. “The majority of the positions were eliminated due to recently outsourced work. Each of the individuals notified was offered comprehensive severance benefits that provide cash, health insurance, and career transition services,” Amgen spokesman Cuyler Mayer told GEN.
The first layoffs of the second half have surfaced, with Actavis confirming that it will shut down two Forest Laboratories sites in Earth City, MO, in June 2015. The shutdowns will idle approximately 190 employees in distribution/logistics, packaging, resource planning, quality, purchasing, information technology, research and development, human resources, finance, and trade sales.
Actavis will also shift warehousing and distribution-related activities to other facilities, principally its Gurnee, IL, distribution center. Actavis bought Forest Labs for $28 billion, in a mega-deal completed July 1.
“As we progressed through the integration planning process we have defined the overlap in the functions that previously supported two separate businesses as well as facilities that could be consolidated following the close. It became clear that the operations at our two facilities in Earth City are duplicated in other areas within the larger combined company,” Actavis said in a statement furnished to GEN.