Pharma giant AstraZeneca last week announced its intention to cut 3,000 jobs in an effort to increase productivity and reduce costs. The company is the latest big pharma to trim its workforce as the industry readjusts in a more challenging environment.
The cuts are part of a rationalisation plan anticipated to cost the company around $500m (€384m) in accounting charges over the next three years. The job losses represent 4.6 per cent of the firm's entire workforce, and come in the face of "challenges posed by patent expirations and pricing pressures from government and private sector players."
David Brennan, AstraZeneca CEO, sees the move as the latest step in an ongoing programme aimed at increasing productivity and cost efficiency.
"Our asset rationalisation programme is now in place," said Brennan. "We have to start looking across our entire business more aggressively to make sure that we're doing everything we can to utilise all of our resources in the best possible way."
AstraZeneca is not the only big pharmaceutical firm hastily restructuring its supply chain as a result of challenges currently confronting the industry in terms of patent expirations, cheaper outsourcing and threats from generic competition. Several major pharmas have been wielding the axe in an attempt to cut the cost of their manufacturing operations, with employees feeling the brunt of the tightening purse strings.
Pfizer, another huge player in the pharmaceutical industry, announced job cuts only a few weeks ago. The company announced plans to reduce its staff by almost 10,000 - 10 per cent of its global workforce - and shed 20 per cent of its European sales force in an attempt to save over $1bn by the end of 2008. From 2003 to 2008, the company will have also reduced its network of manufacturing plants around the world from 93 to 48 as part of its cost-cutting strategies.
In June 2006, Schering-Plough cut over 1,000 jobs (just over 3 per cent of its workforce) at manufacturing sites in Puerto Rico and New Jersey, in a bid to reduce costs in manufacturing operations and save the company $100m a year.
Back in November 2005, Merck announced plans to slash its workforce by 11 per cent (around 7,000 employees), closing five factories and three manufacturing facilities in the process. The cost-cutting measures were to save the firm up to $4bn by 2010.
As well as 'restructuring' the workforce, strengthening product pipelines also seems to be a key objective for pharmas hoping to maintain their positions in the industry. Competition from generics and block-buster drugs coming off patent are just two factors likely to have a significant impact on drug manufacturers and the pharma industry as a whole.
"Strengthening the pipeline, by enhancing our internal discovery and development and continued pursuit of external opportunities, remains the number one priority for the company," confirmed AstraZeneca.
Last week the company announced its acquisition of Arrow Therapeutics for $150m, in a bid to broaden its anti-infective capabilities, and has also signed deals with several partners to develop a range of drugs to treat diabetes, obesity and chronic obstructive pulmonary disease.
Pfizer also announced last week that it had acquired BioRexis Pharmaceutical for an undisclosed sum. The acquisition not only added to Pfizer's expertise in the development of novel diabetes treatments, but also gained the company a novel technology platform for developing new protein drug candidates.
Consolidation within the industry is also ever-present, with AstraZeneca alone having made several acquisitions of late, and hints of mega-mergers such as the recent rumoured pairing of Bristol-Myers-Squibb and French firm Sanofi-aventis. Tanabe and Mitsubishi Pharma have also just announced a merger agreement, valued at $4.3bn and set to result in Japan's fifth largest drug manufacturer.
The generics sector has also been consolidating of late, the market for these drugs having doubled in size since 2001. This is placing further pressures on pharmaceutical firms, many of which have been snapping up generics manufacturers in a bid to expand product portfolios and crowd out smaller competitors.
The heat on the pharmaceutical companies is likely to remain for the time being, as many are set to lose the benefit of high earning products as they fall off patent in the coming years. While they no doubt have contingency plans to cover themselves when the storm hits, it may well be the staff further down the ranks that end up suffering from the shake up in the industry.