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Insight & Intelligence : Oct 11, 2013
JobWatch: Novartis Trims California Workforce
Merck links layoffs to AstraZeneca venture; BI says bon voyage, Ben Venue.!--h2>
Novartis’ Vaccines & Diagnostics Division next month will eliminate some 50 of its more than 900 jobs in Emeryville, CA, as part of a realignment of the facility away from vaccine R&D and more toward diagnostics.
“The rationale for the changes is to align global functions and redeploy resources to meet the needs of the business,” Novartis told GEN in a statement earlier this week. “Novartis plans to strengthen the focus of the Emeryville site on its Diagnostics business and will continue its operations there related to pharmaceutical and medical research.”
Jobs being cut include global legal, IT, HR, finance, procurement, and vaccines research positions. Layoff date for the positions will be November 22, according to a WARN Act notice Novartis sent to California’s Employment Development Department.
“Most of the associates affected will be offered relocations to other Novartis sites in the U.S., primarily to the Division's global headquarters in Cambridge, MA,” Novartis added. “We will also assist associates in applying to other open positions within Novartis and are offering them outplacement, employee assistance programs, and other support services.”
The layoffs come as Vaccines & Diagnostics continues struggling to generate sales. The unit finished the first half of 2013 with an operating loss of $240 million, just below the $250 million loss for all 2012. However, January–June numbers are better than 1H ’12, when Vaccines & Diagnostics lost $269 million. And first-half net sales, at $738 million, were 14% above $648 million a year earlier.
MERCK: Venture’s Expected End Cited in Job Slash
In eliminating 8,500 jobs worldwide over the next two years, Merck & Co. has cited the need to bolster its pipeline, cut significant costs, and target more spending to highest-potential growth areas.
But in a conference call, Merck also linked the convulsive layoff to its expectation that next year it will lose rights to manufacture heartburn drugs Nexium and Prilosec in the U.S.—and with it, considerable revenue.
Merck expects AstraZeneca to exercise its option to buy Merck’s interest in the drugs between March 1 and April 30, ending a partnership stretching to 1982, when Merck agreed to develop and market products of AZ predecessor Astra in the U.S.
AstraZeneca referred GEN to its latest statement on the topic, inside its Full Year Results 2012: Barring unforeseen circumstances, “AstraZeneca now considers that exercise of the Second Option is virtually certain.” If AstraZeneca pulls the trigger, Merck would receive a final one-time $327 million, reflecting an agreed-upon, fair-value estimate of Merck’s interest in Nexium and Prilosec. That payment could rise in 2018, based on sales.
According to Merck’s latest 10-Q filing, the AstraZeneca joint venture generated $737 million the first half of 2013—$507 million in mostly Nexium-Prilosec revenue plus $230 million in equity income—compared to $662 million ($409 million plus $253 million) in January–June 2012. The venture generated more than $1.5 billion ($915 million plus $621 million) all last year.
“We are pretty certain that [the joint venture] will go away,” Peter N. Kellogg, Merck’s CFO, stated on the October 1 call. “That obviously will have an impact on the top line.”
A day later, Warner Chilcott said it will cut 88 jobs in Rockaway, NJ, following its $8.5 billion acquisition by Actavis. Debbie Hart, president and CEO of BioNJ, told GEN not all of New Jersey’s biopharma job news is bad. She noted Merck will keep its HQ in the state—though it will move to Kenilworth from Whitehouse Station, which will close along with Summit.
Hart also cited BioNJ’s Life Sciences Talent Network online job board. As of Wednesday, it featured dozens of positions from companies that include Celgene (35 jobs/all in-state), Allergan (20/all), Covance (92/10), and even Merck (13/10) and Actavis (12/2).
“Some of the pharma folks who have been laid off, the biotechnology companies are hiring them. Our talent is one of the main reasons why companies come here. And the talent continues to be pervasive,” Hart said.
BI: Bidding Adieu to Ben Venue
Boehringer Ingelheim will shutter its Ben Venue Laboratories plant in Bedford, OH, next year, idling all 1,100 workers.
Ben Venue said October 4 it projects the sterile injectables facility would lose $700 million over five years on top of $350 million already spent correcting manufacturing problems like those that led to a 2011 shutdown—and infamously included a 10-gallon can with urine in a storage area.
“The effort, magnitude of investment, and additional years required to remediate the facility before Ben Venue can return to sustainable production is not feasible,” the company stated.
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