And so, the drugmaker is, indeed, eliminating thousands more jobs, as reports indicated earlier this week. Where will they be coming from? Well, 3,750 jobs are being slashed from sales and marketing and assorted administrative operations. Another 2,200 positions are being eliminated from R&D and the remaining 1,300 will come from operations, as more supply chain outsourcing takes place.
The cuts, which are designed to save $1.6 billion annually, by the end of 2014, underscore the fallout expected from patent expirations on some of its biggest sellers, notably the Crestor cholesterol pill, the Nexium acid reflux med and the Seroquel antipsychotic. The drugmaker warned that profits will fall as much as 18 percent this year, but will buyback $4.5 billion in stock to appease investors (see here). The layoffs are in addition to 21,600 positions already eliminated since 2007.
The layoffs continue the recent acceleration of job cuts in the pharmaceutical industry. Recently, Takeda Pharmaceuticals announced plans to eliminate 2,800 jobs (see here), Teva Pharmaceuticals is shedding 1,500 positions (read this), Sanofi axing hundreds of workers (read here) and Novartis is slashing 2,000 jobs in the US (see this). This morning, Challenger Gray & Christmas noted that 4,071 pharma jobs were eliminated last month in the US, the third-highest industry tally, behind retailing and the financial sector (look here).
In recent weeks, AstraZeneca had already disclosed plans to eliminate 400 jobs in its commercial business and US headquarters, and another 1,150 jobs from the US sales force, as more use of 'digital technology' and call centers are made to reach physicians. Overall, the number of sales and marketing regions has been reduced from five to three, and smaller countries are being clustered as they share more services in order to lower costs.
In R&D, neuroscience is taking a big hit. The drugmaker is forming what it calls a 'virtual' neuroscience Innovative Medicines unit that will include a small team of around 40 to 50 scientists who will work on discovery and development externally with partners in industry and academia, such as the Karolinska Institute in Stockholm. They will be based in Boston and Cambridge in the UK.
As a result, an R&D site in Montreal, where 132 people work and that focuses on neuroscience, will be closed. And another in Södertälje in Sweden will also lose neuroscience jobs, although this facility is also the largest AstraZeneca manufacturing site and a base for commercial business covering the Scandinavian markets, so this remains open (see this).
The latest cuts amount to a third phase. Two years ago, AstraZeneca indicated plans to reduce its overall headcount by 10,400 jobs. Between 2007 and 2009, the drugmaker eliminated 12,600 positions, a move that saved $1.6 billion annually, although that figure rose to $2.4 billion by 2010. The cuts announced that year were designed to save $1.9 billion annually by 2014.
axe pic thx to brittgow on flickr
13 Comments
Virtual neuroscience really means this: There will be 40-50 scientists in Beantown and Sweden designing the protocols on their laptops and emiling them to the worker bees in China making $1.43/hour and working 72 hour weeks fueled by biscuits and caffeine, who are actually doing the work. Weekly web conferences and the Beaners are updated no muss no fuss. Everything is project specific. No permanent staff, no big time US salaries or benefits.
Esssentially, "no muss, no fuss".
Comparing AZ's layoffs to the other three is a bit specious, in terms of trend-making. All the others are conducting layoffs as part of post-merger "synergies": Takeda/Nycomed, Teva/Cephalon, Sanofi/Genzyme. AZ's are a straight-up cost-cutter.
Hi Gil,
Thanks for writing and that's a good point, although I wasn't trying to compare the reasons, but simply note that big drugmakers were cutting lots of jobs.
I should have added, for instance, that Novartis also announced sizeable cutbacks recently and that was not the result of a notable merger.
Anyway, I appreciate the comment.
Cheers ed
@oii No, the virtual scientists with the virtual knowledge sit in UK and USA, no one will remain in Södertälje/Sweden. Its a completely US/UK company and Sweden has to bleed because they didnot join UK into isolation within the EU by making a veto against the new EU federal budget rules. The benefits and salaries go to the waterhead above and: investment bankers and consulting firms. AZ made 2 billion before taxes last year.
They completely erase the traditional bussiness model and create "virtual knowledge centres". I heard a lady from PwC talking on that, no joke, virtually everything will be outsourced in Pharma-furture. At least till the next change in direction, let's say in about 5 to 10 years.
That's too bad. I used to work with a Swedish company, Medivir, and always thought that the Swedish scientists were top notch.
China is open to out-sourced business. We welcome only Chinese to apply, who can put, at least 100 h a week, stay in the dormitories, survive on cookies, caffeine and of course nicotine. The risk is yours and we may ship you sub-standards quality of product. You like our cheap labor, no human rights, no strike outs, no alacrity, no litigation, no lying lawyers and no QC. Welcome!
Re merger: you could argue that AZ is still living through the post-merger fallout. When are these mergers ever declared 'done'?
Re AZ I think the real beneficiaries of their outsourcing are the large CROs, not China. AZ declared last year that it awarded its entire clinpharm work to Quintiles. Other companies have awarded vast amounts of work likewise (Pfizer to Icon and Parexel) so it's not just firing Western employees in favor of Chinese workers (although they are just as smart and educated), it's a shift in the way pharma is going, as keiner has said.
It's not news that pharma's success in the R part of the equation (or Discovery) has been diminished - hence academic collaborations, buying biotechs etc etc - but the D part is under fundamental change too. CFOs like variable costs and CROs fit the bill very well.
Watch this space.
@oii - was Medivir before - or after - you got the Boots, so to speak?
Actually, AZ is shifting clinical trial work to India, not China. And while the Indians and Chinese are smart & educated, they are often sorely lacking in experience.
Medivir was post Boots. Development partner, not employer.
India, China, what's the difference. Reminds me of the scene from "Animal House", when the Deltas go up before the judicial board, defended by Hoover and Otter:
"Otter: Point of parliamentary procedure! Hoover: Don't screw around, they're serious this time! Otter: Take it easy, I'm pre-law. Boon: I thought you were pre-med. Otter: What's the difference?"
No doubt the industry had to make big changes to adapt to the ubiquitous Patent Cliff and headcount cuts would have to be part of that response. The scope of these cuts has been surprising to me, however. As an old knowledge management hand, I worry that short-term thinking is cutting companies' ability to function in the long term.
Collaborating with CROs has demonstrable benefits and relying heavily on third-party clinical service vendors is the right choice in many cases. But moving core management of R&D (via clinical trial operations) outside the organization potentially means losing some fundamental understanding of the science of your therapies.
A case has been made in the past that "pharma" companies should completely move to being marketing and sales organizations and leave the science to partners. If companies are going to do that, it should be a deliberate decision with careful planning and shouldn't be done in reactionary quarter-steps. It could be a successful play for some companies, but getting stuck halfway seems like a dangerous path that will only result in even less productive R&D and lost reputation in the larger medical community.
Drug API Drug Finished Product Capsule Procurement Protocol Development Clinical Plan Development Pharmaceutical Development Manufacturing Commercial Ops Regulatory Affairs Quality Control Pharmacovigilance Medical Writing Sales Marketing Biostatiscics Bioinformatics Clinical Operations Auditing Payroll Transporation Shipping Communications PR preclinical discovery preclinical pharmacology preclinical toxicology ADME Business development
All of the above are part of the "Organization" that Adam cites. However I can run a virtual company from my bedroom, like Hugh Hefner did, outsourcing each one of the above, and getting a tax break for running my pharma comppany out of my home office. All I need is a laptop, an international cell phone and an internet connection. Let them spend the bricks and mortar money on building new Starbucks. My far flung employees are gonna need the coffee.