Alex Philippidis Senior News Editor Genetic Engineering & Biotechnology News
See which companies swung the sharpest employment axe last year.
The pace of job-cutting may not be as frenetic as in recent years, yet biopharma companies continued to eliminate positions in 2014. They offered a variety of reasons, from the need to recoup patent-cliff losses, to the desire for greater efficiency, to the perception of greater opportunity through a restructuring of operations.
The number of jobs cut by the top 10 in 2014 was 12,206—less than half the 28,112 jobs slated for elimination by the Top 10 Job-Cutting Companies of 2013.
Interestingly, only five of the top 10 companies this year were the “big pharma” heritage companies most typically associated with layoffs in recent years. The other five were either biotech giants—whether through marketed products or through piling up acquisitions—or smaller biotechs. Of the biotechs, three implemented job reductions as a result of cost-cutting or “synergies” that followed acquisitions.
Following is a list of the 10 companies ranked by the number of job cuts disclosed during 2014, through press releases, public filings, and/or news reports. Each company is listed with details on the job cuts, the rationale for the reductions as explained by the company, and the projected costs and benefits in terms of expenses and charges against earnings, as well as estimated savings and improvements to operations.
Number of job cuts disclosed: 170 jobs
Details of jobs: The pharma giant disclosed plans to eliminate 170 positions at the Brisbane, CA, site that was headquarters of InterMune before its $8.3 billion acquisition, completed September 29, 2014. Disclosure came through a Worker Adjustment and Retraining Notification (WARN) Act notice to California’s Economic Development Department (EDD) dated December 10, 2014. The job cuts would be effective February 15, 2015.
Rationale: The positions were duplicative of jobs at Roche’s Genenetech subsidiary, located three miles south in South San Francisco, CA, Genentech spokesman Terence Hurley told GEN, adding that InterMune employees may be transitioned into similar positions at Genentech whenever possible.
Projected costs and/or benefits: Without breaking down the cost or benefits of the InterMune layoffs, Roche reported January 28 that it its global restructuring efforts in 2014 generated a combined CHF 416 million ($450 million) in net income on CHF 655 million ($709 million) in operating profit.
#9. Salix Pharmaceuticals
Number of job cuts disclosed: 200 jobs
Details of job cuts: Company disclosed in January 2014 it was eliminating all 200 positions based at the former San Diego site of Santarus effective in March, through a Worker Adjustment and Retraining Notification (WARN) Act notice filed with the state of California Employment Development Department.
Rationale: The job cuts were part of a planned shutdown following Salix’s January 2, 2014, completion of its approximately $2.7 billion acquisition of Santarus, announced November 7, 2013. The shutdown ended the combined company’s operations in California.
Projected costs and/or benefits: Severance for laid-off workers was part of the total $1.95 billion cited by Salix as the sum of non-recurring costs associated with combining its operations with Santarus’ operations.
#8. Agilent Technologies
Number of job cuts disclosed: About 300 jobs
Details of job cuts: Company said on October 14 it will eliminate about 300 jobs based in its nuclear magnetic resonance (NMR) business, which is being discontinued. Most of the jobs to be eliminated are in Santa Clara, CA, and in Yarnton, U.K., and will be cut “mostly within the next 12 months,”
Rationale: Agilent said it was exiting its NMR business because it had not met growth and profitability objectives. The company stopped taking new NMR system orders immediately, but said it is continue to meet commitments from customers for orders in progress and for ongoing support contracts—as well as continue to provide service on all installed NMR systems.
Projected costs and/or benefits: Company recorded approximately $68 million in restructuring and other related costs associated with the closure of NMR, according to its Form 10-K report for the fiscal year ending October 31, 2014, filed December 22, 2014. They included severance and other personnel costs related to the 300 laid-off employees, and non-cash charges related to intangible asset impairments and other asset write-downs including inventory.
“As of October 31, 2014, substantially all employees are pending termination under the above actions and approximately $2 million was paid under the above actions,” the company stated in the Form 10-K, adding: “We expect to substantially complete these restructuring activities by the end of fiscal 2016.”
Agilent also said its exit from NMR is expected to add approximately $10 million to operating profit in its fiscal year ending October 31, 2015, in line with its forecast back in October when announcing the job cuts. Back then, Agilent also said it expected total revenues to decline by $20 to $30 million.
#7. Pierre Fabre
Number of job cuts disclosed: 551 jobs
Details of job cuts: Company said December 9, 2014, it will cut 272 R&D jobs by 2016, by shrinking from 948 to 653, maintaining operations in France’s Midi-Pyrenees (Toulouse-Oncopole, Castres, Gaillac) and Haute-Savoie (Saint-Julien-en-Genevois) regions. All but 17 of the R&D jobs to be eliminated are in France; the rest are based in Barcelona, Spain. Pierre Fabre also said it will eliminate 279 additional jobs from its sales force, which will shrink from 928 to 547 positions.
Rationale: The layoffs have been blamed on a “very weakened” pharma operation due to what the company terms “insufficiently productive” R&D “and significant loss of activity in France” due to mandatory government price cuts on older drugs and rapid ramp-up of generics. The company also cited losses to its smoking cessation products due to the rise of electronic cigarettes.
Projected costs and/or benefits: Job cuts are part of a restructuring effort called Trajectory 2018, which also included an expansion of the company’s skin cosmetics operations in the U.S. and Asia. The company has not furnished the projected costs or benefit figures for Trajectory 2018.
#6. Boehringer Ingelheim
Number of job cuts disclosed: 500 to 600 jobs
Details of job cuts: Company disclosed plans to eliminate 500 to 600 jobs in Germany by the end of 2016 without layoffs through “natural attrition, retirements already agreed, and the expiry of temporary contracts,” according to a statement issued and translated from German.
Rationale: The planned job reductions resulted from “the changing competitive and market environment,” according to the company statement. The company cited growing pressure to contain prices for treatments, mentioning specifically its experience with Trajenta® (linagliptin), an oral DPP-4 inhibitor developed through a collaboration with Eli Lilly.
Projected costs and/or benefits: Job cuts are part of the company’s “Journey” expense-reduction initiative, projected to save the company about €450 million ($509 million) over two years. Part of the savings will be achieved by shifting global functions to locations outside Germany, Boehringer Ingelheim said.
Number of job cuts disclosed: 730 jobs
Details of job cuts: Company has not disclosed details and locations for the 550 positions whose elimination was announced February 6. The 550 includes all 168 staffers affected by the company’s shutdown of an R&D site in Bangalore, India, as well as “a transformation of the IT organi(z)ation and infrastructure” and a planned “exit from branded generics in certain Emerging Markets to further reduce costs and increase flexibility.” In December, company disclosed it will shut down its manufacturing plant in Westborough, MA, by the end of 2015, idling all 180 workers.Workforce will shrink from a total of about 29,600 employees at the end of 2013. The layoffs announced in 2014 brought to 5,600 the number of jobs slated for elimination through 2016.
Rationale: Part of a comeback strategy by CEO Pascal Soriot following years of clinical setbacks involving drug candidates the company hoped would make up for sales revenues to be lost from “patent cliff” expirations of top-selling drugs. Company expanded the “Phase 4” restructuring initiative announced in 2013, which initially called for eliminating 3,900 jobs—2,300 in selling, general, and administrative (SG&A) positions, the other 1,600 in R&D, and increased to a total 5,050 the number of jobs slated for elimination through 2016.
Projected costs and/or benefits: In its third quarter 2014 results, released November 6, 2014, AstraZeneca cited total restructuring costs of $1.167 billion related to Phase 4 during 2014. A full-year total for 2014 may emerge when the company releases fourth-quarter and full-year 2014 results on February 5.
Projected costs and/or benefits: In its fourth quarter and full-year 2014 results, released February 5, AstraZeneca cited total restructuring charges of $1.391 billion related to Phase 4 during 2014. That charge includes $261 million incurred on integration of businesses acquired in the year and due to the planned shutdown of the Westborough, MA, plant. The company has said the job eliminations announced in 2014 will raise the anticipated cost of Phase 4 by $700 million, to a total $3.2 billion—but will generate an additional $300 million in annual savings—raising total projected annual savings to $1.1 billion.
#4. GlaxoSmithKline (GSK)
Number of job cuts disclosed: 900 jobs
Details of job cuts: Company disclosed plans to cut 900 R&D positions based at Research Triangle Park. Half those jobs would be eliminated in the second quarter of next year, and the rest by the end of 2015, according to a letter submitted to the N.C. Department of Commerce. About half those jobs may be shifted to a dedicated GSK business unit within Parexel: “Approximately 450 employees currently working in R&D in RTP will be offered roles at Parexel,” GSK said in a statement at the time. “Some R&D roles will be relocated to the Philadelphia area and some staff will be offered relocation.” GSK had 2,500 R&D employees and contractors based at RTP at the time. The company said its restructuring would affect its US R&D and commercial organizations, with GSK planning to consolidate the majority of its R&D organization into two major centers, in the Philadelphia area and Stevenage (U.K.).
Rationale: The job cuts were part of a company-wide global “Pharmaceuticals” restructuring announced in October. GSK said in its statement it was “reshaping and reducing the size of our commercial and R&D operations (now 17,000 employees),” and adding: “Cuts are not being made across the board but are strategic, focused changes to allow GSK to operate more efficiently.”
Projected costs and/or benefits: GSK has offered an estimated total cost for the restructuring of £1.5 billion (about $2.3 billion), but ultimately benefit the company by delivering £1 billion (about $1.5 billion) in annual cost savings over three years, with about half of that expected in 2016 enabling it to be more agile to respond to changes in market demand. The company took a charge of £243 million ($372.5 million) during Q4 2014 in connection with the restructuring. The company is seeking to bounce back from a sharp decline in sales of the asthma/COPD treatment Advair following the loss of exclusivity and competition from newer inhalation therapies.
Number of job cuts disclosed: 1,750 jobs
Details of job cuts: In announcing the completion of its $66 billion acquisition of Allergan on November 17, 2014, Actavis committed itself to carrying out elimination of 1,500 filled jobs—13% of company’s workforce—and 250 vacant positions over five years that was initially announced by Allergan on July 21, 2014. Allergan said the jobs cuts will not affect nearly all (94%) of “customer-facing personnel” or current clinical-phase pharma R&D programs, and that any reductions in drug discovery programs would not impact approvals during its 2014-2019 “strategic plan” period.
Rationale: Job cuts were part of a restructuring—dubbed “Project Endurance”—that Allergan hoped would quash interest among shareholders in a $53 billion hostile takeover proposed by Valeant Pharmaceuticals International, with its potential for even more drastic cost-cutting. Valeant lost Allergan after being outbid by Actavis.
Projected costs and/or benefits: Project Endurance has been projected to save $475 million annually: “Such savings will come from efficiencies and reductions in spend across the commercial organization, general and administrative functions, manufacturing and the research and development organization,” Allergan said in announcing the restructuring. Actavis has said its Allergan acquisition would generate another $1.8 billion in annual cost reductions or “synergies.”
Number of job cuts disclosed: 2,663 jobs
Details of job cuts: The company ended 2014 as it began, engaged in vigorous cost-cutting. In December, Novartis filed a Worker Adjustment and Retraining Notification (WARN) Act notice with the state of New Jersey Department of Labor and Workforce Development disclosing plans to lay off about 200 people from its primary care sales force in East Hanover, NJ—part of a total reduction of 243 staffers, with the remaining jobs cut through “vacancy management and other means,” the company told NJ Advance Media on December 16.
In April, the company said it would shed 215 pharmaceutical development staffers from East Hanover, and another 20 from other locations nationwide. Two workforce reductions were disclosed in February: 760 nationwide sales and support staffers nationwide from the pharmaceutical and general medicines division, confirmed February 6; and about 400 jobs through the shutdown of an R&D/manufacturing site in Horsham, West Sussex, U.K., confirmed February 26.
A month earlier on January 22, 2014, Novartis disclosed plans to eliminate all roughly 525 jobs at a manufacturing plant to be shut down by 2017 in Suffern, NY; followed a day earlier by the company saying it would eliminate 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.
Rationale: The East Hanover layoffs reflected the company transforming its primary care field force into a field force focused on cardiovascular treatments, one of three therapeutic areas of focus (cardiovascular and respiratory, immunology and dermatology, and neuroscience). The Suffern and Horsham shutdowns were part of Novartis’ global strategy to create manufacturing centers of excellence worldwide, a spokeswoman told GEN at the time. The total number of production sites that have been or are being restructured or divested rose to 24 last year, the company stated in its Annual Report 2014.
The strategy, unveiled in 2010 by CEO Joseph Jimenez, is intended to better support the company’s future product supply chain and maximize productivity. In 2013, Jimenez announced plans to cut R&D … and began a strategic review that led to the company announcing a quartet of deals totaling $28.5 billion last year: Novartis bought the cancer business of GlaxoSmithKline (GSK), sold off most vaccine operations except flu vaccines to GSK, formed a consumer health joint venture with GSK, and sold its animal health division to Eli Lilly.
Projected costs and/or benefits: In the Annual Report 2014, Novartis said it incurred net restructuring charges of $700 million. The company set aside $333 million in restructuring provisions “based upon management’s best estimate and adjusted for actual experience.” Novartis then added $504 million in continuing operations, mainly related to reorganizations in the Pharmaceuticals Division.
Number of job cuts disclosed: Up to 4,522
Details on job cuts: Company said October 28, 2014, it added an additional “approximately 600 and 1,100 positions” to the 2,400 to 2,900 positions it said would be eliminated companywide on July 29, 2014. The addition raised to between 3,000 and 4,000 the number of positions to be jettisoned by the company by the end of 2015, representing up to 20% of total workforce. The July job cuts—buried in the company’s second-quarter earnings results press release—included a shutdown of company operations in Seattle (610 employees at the “Helix” campus) and its suburb of Bothell, WA (another 50); as well as the Colorado communities of Boulder and Longmont (a combined 650).
Even before those announcements, Amgen was actively shrinking its workforce: On June 4, the company cut 70 mostly information systems positions. Most of those jobs were based at the company’s Thousand Oaks, CA, headquarters: “The majority of the positions were eliminated due to recently outsourced work,” Amgen told GEN at the time.
Amgen started 2014 by reducing its workforce. On January 30, Amgen told 200 Boulder and Longmont manufacturing employees it would eliminate their jobs by “idling” the company’s Epogen anemia drug manufacturing facility. That would enable the company to bring the facility back to full manufacturing capacity faster than if the building were shuttered, a company spokeswoman said at the time. Earlier in January, Amgen told 252 Thousand Oaks staffers their jobs were being eliminated effective April 30. Affected positions were U.S. sales force, operations and other corporate functions,” a spokeswoman told GEN.
Rationale: Part of company-wide “re-engineering process” launched in 2013 “to ensure clear reallocation of resources to invest in our continuing innovation and the launch of our new pipeline medicines.” Plans include an approximately 20% reduction in staff and an approximately 23% decrease in the company’s facilities footprint by the end of 2015. Amgen has also sought to address criticism by activist investor Daniel Loeb and his Third Point that the company has underperformed for investors and should divide into two drug companies—one focused on established brands, the other on growth opportunities through developmental treatments. Amgen Chairman and CEO Robert A. Bradway has told analysts he doesn’t see how a breakup would deliver greater value for shareholders, but has not ruled out the idea.
Projected costs and/or benefits: The July and October job cuts are expected to ultimately generate up to $1.5 billion in annual savings and a 15 point adjusted operating margin increase by 2018. The company has said the jobs cuts will result in combined pre-tax restructuring charges ranging between approximately $935 million and $1.035 billion—of which $376 million in restructuring costs was incurred during the third quarter of 2014. Nearly all of that ($323 million) was costs associated with job separations. “We expect that substantially all remaining restructuring actions and related estimated costs to be incurred will occur during the fourth quarter of 2014 and in 2015,” the company said in its Form 10-Q third quarter 2014 filing, submitted October 29 to the U.S. Securities and Exchange Commission (SEC).