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The Blog of Drug Discovery News

Good news, bad news

As is so often the case, I greet stories of mergers with a sense of “yes, a company successful enough to be bought out by (or combine with) someone larger…congrats to them!” that is mixed with the “oh crap, more people are going to be jobless now, probably” feeling.

Case in point: Valeant Pharmaceuticals in California is laying off 500 people subsequent to the fall merger deal with the former Biovail, which had been Canada’s largest publicly traded pharma company…

Read more (and try not to weep; at least it isn’t the thousands upon thousands that so many Big Pharmas have announced are getting the axe in recent months, as ddn Chief Editor Amy Swinderman talked about here and here.)

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January 14, 2011 Posted by | Corporate, M&A activity | , , , , , | Leave a comment

Leaders, layoffs and losses

It’s been an interesting month in the pharmaceutical industry, with a few of the top pharma’s leaders leaving, more pink slips piling up and stocks morphing in the face of all of the change.

On Nov. 30, Merck & Co. Inc. announced its appointment of President Kenneth Frazier, who as Merck’s former chief counsel was instrumental in helping the pharma overcome its Vioxx litigation, as its new CEO. Frazier will succeed current CEO Richard Clark, who will reach Merck’s mandatory retirement age next year. Clark will continue as chairman of the board. Although analysts are optimistic that Frazier will see Merck through its next big challenge—the expiration of the Singulair patent, which accounts for 11 percent of the company’s sales—and continue Clark’s work on investing in the next generation of blockbusters, the announcement prompted a 4 percent drop in Merck’s shares to $34.64.

Recently retired Pfizer CEO Jeffrey Kindler speaks at the Reuters Health Summit in New York

Days later came the news that Pfizer Inc. Chairman and CEO Jeffrey Kindler abruptly announced his resignation after four years of leadership at the company. Although Kindler said he needed to “recharge my batteries,” analysts have speculated that he was forced out by a board and investors who are unhappy with Pfizer’s languishing stock price, late-stage clinical failures and a strategy emphasizing repeated acquisitions to boost revenue and cut costs as a way to improve the bottom line. The appointment of Ian Reid, Pfizer’s head of global pharmaceuticals, as Kindler’s replacement has also raised analyst concerns about Pfizer’s long-term performance and leadership. With Pfizer’s shares down 9.6 percent over the last year of Kindler’s tenure, shares rebounded on the resignation news, gaining 20 cents to $16.92.

With the holidays upon us, and many analysts taking a look at the highlights of 2010, layoffs are also making headlines. Fierce Pharma recently unveiled its annual top 10 layoffs list, highlighting the 10 largest job cut announcements by company. Counting the year’s total pink slips at more than 50,000 jobs, the list begins with AstraZeneca, which let 8,550 employees go this year, and counts job losses in the thousands at Pfizer, GlaxoSmithKline, Roche, Bayer, Abbott Labs, sanofi-aventis, Takeda, Novartis and Bristol Myers-Squibb. Given how often these companies made the front page of ddn this year with their merger and acquisition activity, these cuts are no surprise, as all of these transactions inevitably mean consolidation of resources.

With new leadership, more modest operations and the pressure of patent expirations, all of this should make for a very interesting 2011 in Big Pharma. As the Yieldpig blog notes, “with the dicey situation in Europe, stubborn domestic unemployment, a housing market that’s bottoming at best, and the great unknown of interest rates, equity portfolios should probably continue to play defense. Big, cheap, pharmas with sick dividend yields should help.”

December 10, 2010 Posted by | Corporate | , , , , , , , , , , , , , , | Leave a comment

More pink slips

Well, the topic is not a new one, and ddn Chief Editor Amy Swinderman did a bang-up job talking about the pharma layoff issue a month-and-a-half ago (click here), but it’s starting to feel like we’re gearing up for another round of these things.

Just over a week ago I posted a story about Roche restructuring/layoff plans (at our web site), and now this:

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Novartis Pharmaceuticals Corp. to cut 1,400 U.S. jobs

EAST HANOVER, N.J.—Novartis Pharmaceuticals Corp. announced Nov. 30 that it is restructuring its General Medicines field force in the United States to reflect changes in the product portfolio and align resources with strategic growth priorities. The company will reduce its General Medicines field force by approximately 1,400 positions. These changes will be effective Jan. 1, 2011.

The product portfolio within the Novartis General Medicines business is changing due to pending patent expirations and pipeline products. There are new product launches expected within the Primary Care business and significant growth momentum within the Specialty Care business that will drive long-term success. Given these changing dynamics within the portfolio, it is critical to realign the General Medicines field force to sharpen focus on the greatest opportunities for growth. The restructuring is expected to result in a one-time cost of approximately $85 million.

“NPC has a robust pipeline and the future growth potential for our organization remains strong. Proactively evolving our business model will enable us to focus our resources on key launch products and capture opportunities in both primary care and specialty medicines,” said Andy Wyss, head of Novartis Pharma North America and president of Novartis Pharmaceuticals Corp.

All reductions will, according to the company, be handled in “a manner consistent with the Novartis commitment to fair and respectful treatment of associates. Outplacement and other support services will be available to impacted associates as well as redeployment opportunities, where they exist, within the Novartis Group of companies.”

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Keep those résumés updated, everyone…

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December 1, 2010 Posted by | Corporate | , , , , | Leave a comment

Pink slips pile up in Big Pharma

We here at ddn are in the business of covering the business side of Big Pharma. But behind every headline touting million- or billion-dollar price tags for mergers, acquisitions and partnership deals, there are the untold stories of collateral damage.

Those stories are coming to the forefront lately as headlines are taking note of the number of pink slips piling up in the pharmaceutical and biotech industries.

According to the U.S. Bureau of Labor Statistics, unemployment in the United States was 9.6 percent in September. The unemployment rate has hovered around that figure for most of this year, but it’s about to gain a few percentage points, thanks to recently announced layoffs in Big Pharma.

According to PharmaManufacturing.com, the unemployment rate in pharmaceuticals and life sciences is estimated at 16 percent. Market research firm Reportlinker attributes pharma job losses to several factors. Besides the obvious ones—the economic downturn, the rising number of uninsured Americans and the impending 2011 patent cliff—the firm notes that action taken by the U.S. government as part of healthcare reform legislation will also impact Big Pharma.

“U.S. healthcare reform is set to improve coverage but this will be at the expense of containing healthcare costs,” Reportlinker says. “Although the pharma industry will benefit from the rise in insured individuals, measures such as the increased Medicaid drug rebate and Medicare donut hole discount will have an immediate negative impact on revenues out to 2014.”

Ed Silver, editor of Pharmalot, points out that these numbers may not tell the whole story, since not all job cuts are disclosed: “Some companies cut staff in dribs and drabs, and therefore are not required to file notices with their state governments. The implication is that job losses are greater than the survey implies.”

It can be argued that many of the layoffs are part of the life cycle of merger and acquisition activity. Consider the following:

  • Last year, Abbott Labs purchased Solvay’s drug business for $6.2 billion. Abbott is now cutting about 3,000 jobs in commercial, R&D, manufacturing and staff operations. The company will also close Solvay’s U.S. headquarters in Marietta, Ga.
  • Bristol-Myers Squibb Co., which recently acquired ZymoGenetics Inc. for about $885 million, plans to eliminate 3 percent of its headcount—or about 840 jobs—in the next few months.
  • After signing an agreement reportedly worth $1 million with the J. David Gladstone Institutes aimed at identifying treatments for multiple sclerosis, Alzheimer’s and other neurological diseases, Danish drugmaker H. Lundbeck A/S said it will cut 50 people from its R&D operations in the United States and Europe.
  • Just one month after agreeing to buy Penwest Pharmaceuticals for $144 million, Endo Pharmaceuticals is said to be in the process of laying off an unspecified number of sales managers and sales reps.
  • And most recently, sanofi-aventis—which in recent months has dominated our headlines with its many multimillion- and billion-dollar deals and plans to bring more companies into its fold—announced it will eliminate about 1,700 job in the United States, or about 25 percent of the company’s U.S. pharmaceutical operations division.

In announcing its recent agreement to acquire King Pharmaceuticals Inc., Pfizer Inc. focused on the “cost synergies” it expects to see from the $3.6 billion deal. According to Pfizer, it will take only three years for the dust to settle on the consolidation involved in the bolt-on acquisition. By then, it will have cleared a substantial patent expiration hurdle.

We’ll bring you the details of that acquisition in our November issue, but until then, what is your opinion of the mounting job losses we are seeing in Big Pharma?

October 15, 2010 Posted by | M&A activity | , , , , , | 1 Comment