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Monday 5 May 2014

Pfizer: In Drug Mergers, There's One Sure Bet: The Layoffs


Flurry of Mergers, Hostile Bids Make Pharma Employees Nervous

Since 2005, Pfizer Inc. PFE -1.28%  has eliminated more than 56,000 jobs world-wide—a number roughly equal to the population of a large suburb. More job losses could be on the way.

Health-care companies have unveiled a flurry of mergers or hostile bids in recent days, topped by Pfizer's roughly $100 billion pursuit of U.K. competitor AstraZeneca AZN.LN -0.15%  PLC. Companies are taking advantage of their large cash reserves and rising stock prices to pursue takeovers. In Pfizer's case, the prospect of paying less tax by moving the company's official headquarters to the U.K. from New York is another motivation.

The M&A activity has pharmaceutical employees nervous. A large number of layoffs over the past decade has already forced many big-pharma workers to seek jobs elsewhere.

Some have found it hard going. Scott Nass, 49 years old, lost his job as an account manager for Roche Holding AG ROG.VX -1.28%  in Nutley, N.J., in 2009, when Roche gained full ownership of Genentech Inc. After a two-year stint helping Princeton University raise money to support academic research, Mr. Nass is now a substitute high-school teacher and looking for full-time work.

Mr. Nass said he finds it hard to get back into the health-care business. "I am quite bitter. It's been a painful process and I am disillusioned as to how decisions are made in the industry," he said.

Others have remained in the industry—often finding work in smaller drug companies or in contract research organizations, which conduct clinical trials for pharmaceutical companies.

Paul Rogers was a 16-year veteran at AstraZeneca about five years ago when he finished an assignment to cut about half the positions from a 180-person, U.S.-based marketing unit—including his own job. He was able to find a job at Shire SHPG -0.80% PLC's U.S. unit before being recruited two years ago to Ironwood Pharmaceuticals, IRWD +2.25%  a small Cambridge, Mass., pharmaceutical company, where he is vice president of marketing.

While he'd been happy at his old job, "I learned that there is life outside of AstraZeneca," Mr. Rogers, 50, said. At Ironwood, which launched its first and so far only product—the irritable bowel syndrome drug Linzess—16 months ago, he finds "a great sense of ownership," he said.

"At big pharma, you struggle to have that feeling of being an owner and not just an employee," he said.

Since 2009, the pharmaceutical industry has announced more than 156,000 job cuts in the U.S. alone, according to Challenger Gray & Christmas, a company that big firms hire when they're laying off employees, to help them find new jobs.

In recent years companies have also slashed jobs in Europe, though they've added tens of thousands of positions in emerging markets, trying to take advantage of fast-growing economies there.

In Western countries, pharmaceutical jobs are high-paying; the average salary of a U.S. pharmaceutical scientist in 2013 was $141,500, according to an American Association of Pharmaceutical Scientists survey.

Angst these days is running especially high in the U.K., which views health care as one of the country's most important sectors. London-based AstraZeneca so far has rebuffed Pfizer's overtures, but Pfizer says it remains eager to do a deal.


"AstraZeneca is strategically significant for the U.K. economy. We expect the U.K. government to pay special attention to this bid and do everything possible to protect jobs and to support the U.K.'s knowledge base," the country's biggest union, Unite, said this week.

Vince Cable, Britain's business secretary, said Pfizer Chief Executive Ian Read has "made contact and informed me of his intentions." Mr. Cable said he stressed the importance of the U.K. retaining "high-skilled jobs and long-term investment in research and development."

Pfizer said Monday it would achieve "synergies" with the AstraZeneca deal if it comes to fruition, including in the combined companies' businesses in cancer and cardiovascular drugs. Pfizer didn't quantify the expected savings.

Pfizer has squeezed cost savings out of past megamergers. After its $68 billion acquisition of Wyeth in 2009, Pfizer closed six of 20 research sites world-wide, including in New Jersey, New York, North Carolina and the U.K. Pfizer currently has more than 77,000 employees.

Merck MRK -2.35%  & Co. has similarly cut thousands of jobs, many as a result of its $50 billion takeover of Schering-Plough in 2009. Merck has about 76,000 employees.

Sales positions have been particularly hard hit, due to patents expiring on top-selling drugs, and physician restrictions on seeing sales reps.

ZS Associates, a sales and marketing consultant, estimates the industry's U.S. sales force has fallen by 40% from its peak of more than 100,000 in 2006.

R&D jobs also have been eliminated, as a result of mergers and because companies are increasingly buying more experimental drugs from outside biotechs and academic labs.

Valeant Pharmaceuticals VRX -1.29%  International Inc. says it plans to cut R&D spending if it succeeds in its unsolicited, nearly $46 billion bid to acquire Botox maker Allergan Inc. AGN +0.72%  Allergan hasn't accepted the offer.

Job cuts also could result from other recently announced deals, including an exchange of assets between Novartis AG NOVN.VX +0.72%  and GlaxoSmithKline GSK.LN -0.61% PLC, and Novartis's plan to sell its animal-health division to Eli Lilly LLY -0.74%  & Co.

Some industry experts think pharmaceutical companies have already cut so much that further large layoffs are unlikely.

"I just don't think that these companies are as fat as they were five years ago," said Dan Mahony, a health-care fund manager at Polar Capital in London.

Others say particular skills will remain in high demand.

These include knowledge of regulatory processes, expertise in drug reimbursement, and experience in translational medicine, the process by which basic science is translated into medicines, said Karl Simpson, chief executive of Liftstream, an executive recruitment practice in London.

http://online.wsj.com/

Graham


5 comments:

Anonymous said...

Turned my computer on and caught sight of this.

Should we be feeling sorry for the pharmaceatical companies? Whatever industry you work in, it just ain't easy. We fight for jobs, we do our best to survive and we now have to work longer before we get our pensions. That's if we're lucky to get a pension.

Bankers, chemists, even the local Tesco employer is finding it tough going. Of course, the higher up the chain you are the bigger the payout you get.

Life can be shit, it's how we deal with it what counts.

Me, I'm trying to stay clear of too many drugs

Paul B

Lowcarb team member said...

Me, I'm trying to stay clear of too many drugs

That's the way we look at it too Paul, LowCarb enables to keep medication to a minimum.

Cheers
Graham

Galina L. said...

The people who attended university in Moscow with my husband now work all over the world. We keep receiving news about their job losses. The first one who lost his position couple years ago worked for Astra-Zeneca in Sweden. Since then he went off-radar, and I don't know how he is doing. Some our friends lost job in cancer research American companies who had filials in Canada and enjoyed low Canadian dollar exchange rate, but it is not the case any longer, and they moved everything back to US. Highly qualified people do not always have a good job security. Personally, I think that the pharm industry is in a crisis, they need a new cash cow like Lipitor used to be, and there is nothing like that in sight. My husband is glad now that he doesn't work for a pharm company during last 15 years.

Anonymous said...

I agree Galina, I too think they need a new cash cow. They are in crisis but is is right for Government to get involved?

Martin

Galina L. said...

I am not for involving government into promoting pharm products, and I think most cash cows poisonous.