February 13, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
Here at BioSpace, we like to think of ourselves as romantics all year round, not just on Valentine’s Day. But we couldn’t help but ask, as we put together this month’s seasonal feature, are biotech companies out there really spreading the love?
What we found was an unfortunate no. Though the Nasdaq Biotech Index is at its highest point in years and corporate earnings have continued to balloon well past consensus estimates, some biotech workers are getting the worst kind of Valentine there is: A pink slip.
Below is our list for the five worst offenders this Valentine’s Day, with one company literally handing out pink slips the day before Cupid’s visit. We hope this time next year we will have a more loving group to cover, but until then, don’t worry, worker bees—there are plenty of fish in the sea!
SANOFI
Leading the pack only because it is the most recent, French drugmaker Sanofi has fired around 100 employees at its Boston research and development facility, the company confirmed Wednesday morning, with most of the cuts occurring in its oncology and global R&D departments.
Bloomberg News reported that as part of the purge, Tal Zaks, head of the group, will leave, while oncology will now be wrapped into global R&D. All of the cuts are part of a larger push by Sanofi to streamline its existing pipeline while keeping an aggressive presence in the competitive cancer space.
A spokesperson confirmed the cuts and issued the following statement:
“Sanofi communicated a natural evolution of its research and development organization that will prioritize its focus and investments in exciting areas of science and medicine,” said Sanofi. There was no comment on Zaks.
Sanofi has faced an uphill battle in recent months to keep its reputation as a desirable place to work alive and well. The French drugmaker said Thursday that it will name a new chief executive in mere weeks, as it attempted to put to rest rumors that the company could not find any executives willing to take the reins after it unceremoniously ousted its previous CEO last fall.
“The announcement will be before the end of the first quarter,” Chairman Serge Weinberg, who has been acting CEO since Chris Viehbacher was fired in October, told Reuters in Paris last week.
Weinberg also said that when the company announces financial results at the end of the first quarter, Sanofi projecting a 1.5 percent quarterly earnings per share growth and is betting that a weak euro could help push up its profits.
INTERMUNE
The worst has come to pass for some workers at biotech darling InterMune, who will be losing their jobs after new acquirer Roche said it will be consolidating its operations and will lay off 170 of the company’s workers by mid-February. The slated delivery date for the dreaded Pink Slip Valentine? February 13.
Roche did not comment on what other operations may be streamlined in the process.
That will leave Brisbane, Calif.-based InterMune with around 280 workers, most of whom are waiting anxiously to see if Roche, the parent company of another Bay Area biotech favorite, Genentech, will keep them on in their current positions. Analysts and investors alike have lauded the acquisition as a good fit and haven’t had any problems with possible consolidations across silos.
“I think a major game-changer in 2014 was Genentech/Roche complementing their outstanding discovery capabilities with a solid M&A strategy, focused around Seragon, InterMune, and NewLink,” told BioPharma Dive in December.
In related news, InterMune Chief Executive Officer Dan Welch hasn’t wasted any time capitalizing on the company’s $8.3 billion sale to Swiss drugmaking giant Roche, announcing in January that he would become an executive partner at Silicon Valley venture capital shop Sofinnova Ventures, which specializes in VC investments all across the biotech and healthcare sectors.
“I have had the opportunity to work with many members of the Sofinnova team throughout my career. We share a strong commitment to developing innovative therapeutics and companies that can address unmet medical needs and create value for investors,” said Welch in a statement. “I’m very pleased to join them and look forward to contributing to the firm’s continued success.”
InterMune began attracting interest from Big Biotech companies two years ago for its pipeline, and Roche’s bet on it paid off when the U.S. Food and Drug Administration gave idiopathic pulmonary fibrosis drug Esbriet the stamp of approval a scant two weeks after the sale in October. A course of Esbriet, which helps provide significant relief for patients with the fatal lung disease, costs around $94,000 annually. Happy Valentine’s Day, InterMune!
ABBOTT
The sheer amount of time Abbott Vascular has been dragging out its own culling has landed it a list on this year’s Valentine’s Worst Offenders.
Abbott said in December it will lay off 100 employees at its plant in Temecula, Calif., as it continues its restructuring plans announced in 2012. The same plant lost 200 jobs in July 2012 and will bring the total number of employees there down to 1,700 from a high of 4,000 in 2012.
“We’re making adjustments to our workforce to increase efficiencies and remain competitive in a challenging global environment,” company spokesman Steve Kelly said in a statement to The Press-Enterprise.
Parent company Abbott Laboratories said that the plant, which makes equipment for cardiac surgery and recovery such as stents and scaffolds, will soon have a timeline for the exact date of the layoffs. The plant was acquired by Abbott when it snapped up heart device maker Guidant Corporation for $4.1 billion in cash in 2006.
Abbott said in 2012 that it will cut at least 700 jobs in Puerto Rico, California and Chicago, a year after slicing more than 1,900 positions all across the U.S. Illinois was hit the hardest in that wave of cuts, losing 1,000 jobs—-a loss Abbott said was a direct result of stricter healthcare regulations globally.
A report in Med Device Online said that in the last two years, “recent layoffs, along with waning investment in the medical device sector, are perhaps the reasons why revenues from the medical device excise tax have fallen short of estimates.”
The report quoted a column in The Federalist by David Hogberg that said followed the industry-wide trend, saying “medical device makers such as Medtronic , Boston Scientific , Stryker, Abbott Laboratories , Johnson & Johnson , and Smith & Nephew all announced layoffs.”
SYNGENTA
In terms of size, Syngenta Ag is right up there with the widest ranging cuts—and considering how much the state of North Carolina did to keep it around, it can be ranked as one of the most personally devastating.
The world’s largest crop chemical producer said two months ago that it will eliminate or relocate nearly 1,800 jobs as it attempts to streamline operations with a goal to save $1 billion by 2018, the Swiss company said in a statement.
The firm said 500 positions will be definitively cut, but did not specify where or when those cuts will take place. Syngenta has 28,000 employees in 90 countries around the world, with 3,400 on its payroll in Switzerland alone.
“We remain committed to Basel as our headquarters and value this country’s position as a center for business and innovation, as evidenced by our significant ongoing investments here,” said Mike Mack, Syngenta’s CEO, in a separate statement. “We undertake to carry out the planned job reductions and relocations in a socially responsible way.”
Syngenta has been slammed by increased competition in its sector, including growing encroachment from agribusiness giants like Monsanto, a squeeze which has been reflected in its share price, which fell more than 9 percent this year. As such, the company is trying to implement programs in its research and development programs, including outsourcing, which it projects could save it as much as $50 million in 2015.
The limited bright side? Any jobs relocated will likely be moved to locations with a lower cost of doing business, both for wages and taxes, a plan Syngenta hyped as potentially saving it $100 million in 2015.
Stateside, the company appears to be going forward with a planned expansion in North Carolina’s Research Triangle, saying its Research Triangle Park site “will continue to be strategic research facilities of global importance.”
“For example, we are investing $94 million in the expansion of Syngenta biotechnology facilities in RTP,” Paul Minehart, head of corporate communications for Syngenta’s North American operations, told the Triangle Business Journal, although he could not confirm that the 150 new jobs at the site by 2018 would remain unchanged.
“Some of the positions have been filled and future employment decisions will be made throughout 2015,” he said.
The state of North Carolina bet heavily on Syngenta, approving up to $2.98 million in state incentives to lure the company to the area.
GLAXOSMITHKLINE
Another Southern offender is GlaxoSmithKline , who announced at the end of 2014 that it will lay off 900 jobs in North Carolina’s Research Triangle Park as part of a $1.6 billion streamlining of the company away from research and development and towards developing its existing drug pipeline.
Glaxo said in a Worker Adjustment and Retraining Notification letter filed with the state that 350 of those employees will lose their jobs in the first quarter of 2015, while an additional 450 will lose their jobs in the three month period after that round. The remaining employees targeted will be laid off later in 2015, said the WARN letter. The most likely candidates to lose their jobs are biologists, chemists, statisticians, engineers, clinical development scientists and others, predicted analysts.
The company stressed that at least some of the North Carolina jobs will be relocated elsewhere, with as many as 450 potentially finding jobs with suppliers like Parexel International .
“Also, GSK and Parexel have signed a letter of intent regarding the creation of a dedicated GSK business unit within Parexel,” said the firm. “It will provide a variety of clinical development services and be largely based in the RTP area. Under the agreement, approximately 450 employees currently working in R&D in RTP will be offered roles at Parexel.
The cuts are part of a global restructuring announced last month that the company said could save it more than a billion dollars in annual expenses over three years.
“Some R&D roles will be relocated to the Philadelphia area and some staff will be offered relocation,” the company said in a statement emailed to BioSpace. “We will be working with local employers to support staff securing re-employment. In the US, we are reshaping and reducing the size of our commercial and R&D operations (now 17,000 employees) to be more agile to flex with shifting market demands.”
Glaxo swill now be concentrating its drug research work in the Philadelphia area, said a Glaxo spokesperson.
“Cuts are not being made across the board but are strategic, focused changes to allow GSK to operate more efficiently,” said the company. “This is not a change in our strategy, which has helped us deliver more new medicines than any other company in the industry in the past 18 months. This is a rescaling of work to reflect market forces that were anticipated but that have accelerated and are affecting the entire industry.”
The indecision over when and where Glaxo would make its cuts has frustrated many insiders, as well as biotech community members concerned about how to plan their next moves. “Shocking lack of information being conveyed by #GSK,” tweeted Charles Henry, whose Twitter handle describes him as a “scientist by profession.”
Glaxo has struggled in recent months as sales of its respiratory drug Advair have skidded 14 percent globally from the first nine months of 2013 compared to the same period this year. Sales for the same drug dropped 24 percent in the U.S. during that same period. But Deirdre Connelly, president of North America Pharmaceuticals for GSK, said the firm would work hard to spread the cuts throughout the company’s American territory.
“The reduction of jobs in our US Pharmaceuticals business will affect employees in Philadelphia, RTP and the field,” said the statement. “Retail sales teams focused on launching new medicines to the market will largely not be affected. Our proposed changes to R&D will sharpen the focus in discovery and development and reduce funding in certain areas of the pipeline.”
AMGEN
Sadly, we’ve saved the worst for last. The world’s third largest biotech, Amgen , announced last month that it will cut an additional 5 percent of its workforce, or 1,100 jobs, in addition to the 2,900 it had already projected it will lose as it restructures. That’s a whopping 4,000 pink slips to send out—-and a huge horde of people left hanging and worried.
Still, it’s not like Amgen couldn’t afford the postage. The company saw record high third quarter earnings and revenue and had a blockbuster period for its flagship drugs, despite having to take $375 million haircut related to massive restructuring moves announced last summer.
Amgen told analysts during their Business Review Day that it will reduce its employee base by a further five percent. So far, it has announced it would cut more than 2,900 jobs as it closes plants and realigns its assets in preparation for the launch of a parade of new drugs and therapies.
Amgen earned $2.30 per share, exceeding analysts’ average expectations by 19 cents, and said it now expects 2014 adjusted earnings of $8.45 to $8.55 per share, an even steeper climb than the enhanced estimate it provided in July of $8.20 to $8.40 per share.
Amgen now projects full-year revenue of $19.8 billion to $20 billion, a jump from its previous estimate of $19.5 billion to $19.7 billion. Revenue was up 6 percent in the third quarter to $5.03 billion, beating the Wall Street consensus of $4.96 billion and pleasing analysts in the process.
“Third quarter performance was solid driven by strong revs and OpEx control...As we are already more than five percent higher than consensus in full year 2015; this bodes well for the stock,” wrote Citigroup’s Yaron Werber, head of biotech research.
The company will need that money, however, as it braces itself for a further $150 million restructuring charge slated for the fourth quarter, and attempt to shore up net profit, which fell during the third quarter.
“We are looking for better clarity on where operating margins can go in 2015 and onwards at the business review day tomorrow to boost confidence in the long-term outlook,” wrote Werber in a note to investors. “We think it is unlikely that Amgen will split itself up as we previewed in our recent note.
