GSK opened up their books today, and the magnitude of their Avandia problem has become clear. This was a big part of the company’s sales, and the recent cardiovascular worries have really knocked down the numbers. The response, as has been the trend this year, is for the company to announce layoffs.
And man, have there ever been layoffs in the industry this year. There’s a list of the larger ones over at FierceBiotech, and it does not make for cheerful reading. In January, Pfizer announces 10,000 job cuts and closes their Ann Arbor site. That same month, Bayer-Schering closes the doors on research buildings in Connecticut and California (layoffs which were announced in 2006 and are thus not on the Fierce list). Bayer-Schering, who really should have run that B-S initial thing past a couple of native English speakers, announces 6,100 more job cuts in March. In July, AstraZeneca doubles down on its earlier layoff announcement and says that 7,600 jobs will disappear, and J&J announces a 4% reduction in its workforce (5,000 jobs). Then in August, Amgen cut over 2,000 jobs of its own.
In September, most everyone held on to the jobs for the moment. But Novartis said this month that they’re going to trim over 1200 positions in the US, mostly through attrition. And now we have GSK with disappointing earnings and an announcement of unspecified layoffs, and bear in mind, this is just the news from the big outfits. The usual turmoil has been going on among the smaller companies (Idenix, Palatin, Sonus, and others), whose fortunes depend more on single drugs.
What a year – and hey, there’s still time to announce more layoffs before the holidays, so we may not be through yet. It’s tempting for some people to look at a list like this and say “Outsourcing! China! India!”. And I can’t deny that some of these jobs have headed there, just as some possible hiring expansions have been muted for the same reasons at other companies.
But outsourcing isn’t the whole story. Many of these job cuts have been in the sales forces, and they’re definitely not outsourcing the sales reps to Shanghai. Ditto for the people in Regulatory Affairs and Legal. Outsourcing is changing the size and shape of layoffs, but it’s not providing the motive force for them. That force, simply enough, is just that we’re not selling enough drugs, mostly because we don’t have enough good drugs to sell. Some areas have had too few projects even to start with (anti-infectives?), and everyone has had too few make it all the way through the clinic and the FDA.
And some of those failures have been extraordinarily large and expensive. Unfortunately, this has been the case for a while now. Over the last few years, we’ve had drugs that have failed terribly late in the clinic (torcetrapib, among others), drugs that have made it through trials but failed at the FDA (rimonabant, among others), and (most expensively of all) drugs that have made it to market and been pulled back early in their product lifetimes, after the big promotion money’s been spent and before any of it gets made back (Bayer’s Baycol and Pfizer’s Exubera – among others).
Add in the ones that never lived up to their planned potential (Iressa, Macugen, yes, yes, among others) and you have a gigantic revenue shortfall. Now, it’s true that not all of these would have made it under any conditions. Drugs fail. But do they fail like this, so relentlessly and so expensively? And it’s not that we aren’t killing all sorts of stuff off earlier in the development pipeline – no, these things are what’s left after the dogs are gone.
What to do? If I knew how to answer questions like that, I'd be dictating this from the deck of my yacht. The glass-half-full perspective is that there sure are a lot of opportunities for anything that can open up some new therapeutic areas or help with drug failure rates in the existing ones. It won't take much, considering where we're starting from. Yesterday I was encouraging people to try out some high-risk ideas, and here, in case anyone was wondering, is an excellent place for them.
Disclosure: no positions