Bayer said today it will eliminate about 12,000 jobs worldwide by the end of 2021—approximately 10% of its total workforce—in a restructuring designed to cut costs, streamline operations, and shift pharmaceutical R&D toward external collaborations.
Of the planned job cuts, 1250 will be in Bayer’s core business of Pharmaceuticals. They consist of approximately 900 R&D jobs and about 350 positions at the company’s factor VIII facility in Wuppertal, Germany—which Bayer said it will shut down so it can centralize all production of recombinant factor VIII in Berkeley, CA.
Bayer is justifying the shutdown in Wuppertal by saying it needs to remain competitive in hemophilia in the face of increased competition as new products have been launched in recent years.
Bayer also said it would cut internal capabilities of its Pharmaceuticals R&D operations, with the savings to go toward additional external collaborations, as well as continue to develop its pipeline.
“Our future innovation model in Pharmaceuticals will follow a simple principle: Where an innovation comes from is less important than how we turn it into benefit for customers and patients,” Werner Baumann, Bayer’s chairman of the board of management, said in a conference call.
Baumann cited Monday’s FDA approval of Vitrakvi® (larotrectinib), the first cancer treatment with a tumor-agnostic indication at the time of initial authorization. Bayer co-developed Vitrakvi with Loxo Oncology. FDA’s approval on Monday of Vitrakvi (larotrectinib).
“We have a great example of how successful innovation can come about through external collaboration. That’s exactly how we want to move forward,” Baumann declared.
The restructuring, which had been speculated for months, will be carried out next year, Bayer said. The life sciences giant is weighing its options for exiting its Animal Health business, saying it will shift resources as a result to Pharmaceuticals, as well as to its consumer health and crop science core businesses.
Bayer is also assessing options for exiting its DrScholl’s foot care and Coppertone sun care consumer product lines. That continues a shrinking of its consumer health business. In July, Leo Pharma agreed to acquire Bayer’s global prescription dermatology unit for an undisclosed price, in a deal completed September 4.
Additionally, Bayer disclosed today that it in talks to divest its 60% stake in German site services provider Currenta, a joint venture of Bayer and specialty chemicals company Lanxess.
Bayer said roughly 1100 of the jobs it will eliminate are in its consumer health business, about 4100 positions are in its crop science business, where Bayer has absorbed operations of Monsanto, after completing its $63 billion acquisition of Monsanto on June 7. Another 5500 to 6000 jobs will be cut in Bayer’s corporate functions, supporting functions, business services, and country platforms operations.
A “significant number” of layoffs will occur in Germany, Bayer said, adding that additional details of the job cuts will emerge “in the months ahead.”
Bayer said its restructuring would generate €2.6 billion (nearly $3 billion) in annual savings from 2022 forward, but would require a one-time cost 1.7 times that number—about €4.42 billion ($5 billion).
Following the restructuring, Bayer projects that its core earnings will rise by about €1 ($1.14) per share, to €6.80 ($7.74) per share, with the company targeting €10 ($11.38) per share in 2022.
“Through the end of 2022 alone, we aim to invest a total of around €35 billion [about $39.9 billion] in our company’s future, with research and development accounting for over two thirds of this figure and capital expenditures for just under one third,” Baumann said.
“As we now proceed with these measures,” he said of the restructuring, “we are laying the foundation to sustainably enhance Bayer’s performance and profitability. With these measures, we are positioning Bayer optimally for the future as a life science company.”