Alex Philippidis Senior News Editor Genetic Engineering & Biotechnology News
Report shows CROs key to industry-wide job growth; Newron opens U.S. office.
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.
BIO/BATTELLE: Contract Research Fuels Job Growth since 2001
During its recent convention in San Diego, the Biotechnology Industry Organization (BIO) joined Battelle in releasing their every-other-year report on job growth in the life sciences.
Not surprisingly, “State Bioscience Jobs, Investments and Innovation 2014” played up the industry’s stronger job performance compared with the overall U.S. economy. “Bioscience” employment grew 7% between 2001 and 2012, compared with just 1% growth across the entire U.S. private sector. All that growth took place before the economy tailspun into recession starting in 2007; between then and 2012, bioscience jobs shrunk 0.4%, compared with a 3.1% private-sector reduction.
A closer read of the report shows how much worse the numbers would have been without job growth by research, testing, and medical labs. Through outsourcing, biopharmas shifted more of their work to CROs explaining why jobs within the labs segment outpaced four other segments between 2001–12 with 28.1% job growth—including 9.7% growth from 2007–12—for a total 467,563 jobs.
The “drugs and pharmaceuticals” segment fared worst, with employment shrinking 7.1% between 2001 and 2012 (down 10.9% between ‘07 and ‘12), to 284,331 jobs. In between, agricultural feedstock and chemicals employment shrunk 1.5% (-1%), medical devices and equipment grew 1.5% (+1.4%), and “bioscience-related distribution” by businesses that coordinate delivery of bioscience products rose 6.3% overall, but fell 3.9% from 2007–12.
“Output is going to grow. This is not a declining industry,” Mitch Horowitz, vp and managing director, Battelle Technology Partnership Practice, and a member of the project team that compiled the report, told GEN. “As for the level of productivity growth, if we don’t do something to improve what we compete on, which is the ability to do innovation, there’s going to be some real challenges for us, and likely we’ll see declines in jobs.”
That echoes the findings of a report released earlier this year by Pharmaceutical Research and Manufacturers of America (PhRMA) based on a Battelle survey of senior executives. That report warned that the U.S. stands to lose up to 149,000 biopharma jobs, a 4.5% decline, by 2022 unless Washington enacts industry-friendlier policies. In that case, the report added, employment would grow 4.8% by retaining those jobs plus creating 185,000 additional jobs.
NEWRON PHARMA: U.S. Office Opens
Newron Pharmaceuticals, a CNS and pain therapy developer based in Italy, expanded into the U.S. on July 8 with the opening of an office in Morristown, NJ. The new U.S. unit followed Newron’s recent submission to the FDA of an NDA for safinamide for use as an add-on therapy at any stage of Parkinson’s disease.
Stefan Weber, Newron’s CEO, told GEN this week that having a U.S.-based representative available for interaction with the FDA was one reason for the Stateside expansion, but not the only reason. Newron’s orphan compounds will undergo clinical development work that will mostly, if not exclusively, be performed in the U.S. At least one if not more of those compounds is expected to successfully complete pivotal studies and win FDA approval, allowing for commercialization.
“Given the orphan/ultra-orphan nature of the disease, this commercialization won’t require an extensive sales force, but a small number of medical liaison managers. These activities would be integrated into the operations that we will have built by that time in Morristown,” Weber said.
Two executives will operate from Newron’s U.S. office:
- Stephen M. Graham, Ph.D., executive director, clinical development, who previously served as senior director, clinical development at Forest Research Institute. He has more than 20 years of experience in CNS clinical development, including earlier positions at Novartis and Boots.
- William Leong, Ph.D., senior director, chemistry/manufacturing/controls (CMC). He formerly served as Celgene’s senior director and head of process chemistry at Celgene, and earlier held positions there and at Schering-Plough.
Weber said none of Newron’s existing staff will move to NJ, for the moment; “Operations are expected to be expanded in the future.”