The final months of 2018 brought pharma layoffs — lots of them. Sanofi and Boehringer Ingelheim each revealed in early December plans to cut hundreds of jobs in France. A few weeks earlier, Bayer said it would reduce its global workforce by 12,000, or roughly 10%, before 2022.
It's not the first year-end layoff spree, and chances are it won't be the last.
Drug companies are under pressure to curb expenses as R&D returns fall and competition rises. They're finding some relief through consolidation, using M&A to build scale in select therapeutic areas while simultaneously shedding assets judged non-core. The dealmaking creates what companies call "synergies," which is typically code for cost-cutting and further layoffs.
Pharmas have more restructuring to do in 2019. Many will create and shuffle around jobs throughout the process, but cuts are also likely. Where those hires and fires happen depends on the role and the market, according to experts familiar with life sciences recruiting.
Moving around manufacturing
Manufacturing plants faced some of pharma's deepest job cuts last year. Novartis in September disclosed it would be eliminating at least 1,800 jobs across production sites in Switzerland and the U.K. Around the same time, Bayer submitted a WARN notice showing its intent to lay off about 220 workers from a production site in the San Francisco area.
It's little consolation for employees who lost their jobs, but in at least a few instances the cuts were partially offset by job creation elsewhere. Novartis announced that along with the 1,800-plus layoffs, it would be adding 450 positions for a cell and gene therapy plant in Stein, Switzerland.
Novartis' moves exemplify a broader trend in drug production: companies shifting around resources to build their capabilities around technologies enjoying rapid growth, such as biologics or cell and gene therapy. The latter area recently saw manufacturing investments from Pfizer, Astellas and rare disease biotech Abeona Therapeutics — and industry watchers expect more money will flow to it in the years to come.
At the same time that they're shifting resources, pharmas have also kept up a strategy of moving operations away from markets where labor costs are high or products aren't doing as well. When that happens, companies are tasked with finding talent in the markets they're moving to.
"Quite frankly, it takes a little while to build up the right talent base for certain skills, specifically in the manufacturing space," said Greg Summers, senior vice president at Cielo, a recruitment process outsourcing and talent acquisition company, in an interview with BioPharma Dive.
That's even more true with emerging technologies. Jeff Marrazzo of Spark Therapeutics, which secured the first ever U.S. approval for a gene therapy to treat an inherited disorder, noted how his company had to bring together experts on antibodies, enzymes and gene therapy to build commercial-scale manufacturing operations.
"That cross-learning and cross-pollination is one of the most complex [pieces]. I knew it from the beginning and there's no silver bullet for that," the CEO told BioPharma Dive in January.
Assembling the right teams has been difficult even for the most advanced drug companies and in more traditional areas of drug development. Industry trade group PhRMA recently expressed concern over a "growing U.S. skills gap" in pharmaceuticals, forecasting that two million positions will go unfilled between 2015 and 2025 mostly because of STEM talent shortages.
Early last year, the Coalition of State Bioscience Institutes surveyed 354 life sciences hiring managers and human resources professionals. The survey found high-value manufacturing-related positions like quality and engineering were difficult to fill for more than 20% of responders.
Clinical research and R&D roles also proved challenging to recruit for, the CSBI survey determined. That's problematic, given R&D was the No. 1 area where responders said they planned to increase headcount over the next 12 months.
Competition is partially to blame for the recruitment challenges, as the number of clinical trials has grown exponentially across the last two decades. Newer technologies are part of the problem too.
Consultancies including EY and Deloitte have argued adoption of digital tools like artificial intelligence and real-world data analytics could make clinical trials more beneficial for patients and help life sciences companies stay competitive as big tech branches deeper into healthcare. Pharmas and biotechs are therefore trying to grow their research teams with tech-savvy employees.
But luring those employees away from pure-play tech companies hasn't been easy, suggesting a needed evolution in drugmakers' talent acquisition strategies.
"If you're a data scientist, if you're a technologist, you might not necessarily view this industry as the destination of choice," Summers said. "They're chasing the same talent that a Google or an Amazon is. Unless they secure that talent, I think they're going to have a hard time reaching some of their other objectives."
The chase appears to have intensified in the last few years. Both 2015 and 2016 saw more than 58,000 technical job listings for the life sciences industry, up from around 46,000 in 2014, according to data from labor analytics provider Burning Glass Technologies.
Every new job dedicated to AI or similar processes, however, carries the threat that many more positions will be lost as the industry automates some parts of drug development, manufacturing or, one day, potentially even prescribing. Such threats haven't materialized just yet, but plenty of concern remains.
The total view
Thousands of pharma sales reps, scientists and manufacturers learned last year they would be losing their jobs. It's impossible to quantify the toll that takes on them and the reputation of their employers.
But the picture becomes fuller — and, to a degree, more optimistic for the whole sector — when looking at total workforce, which includes all the outsourced work that goes into drug development and launch.
"You see those layoffs and you would think the pharma sector must be down, and actually it's not the case," said John Ebeid, senior vice president of Randstad Life Sciences.
Whereas many large drugmakers shaved down their workforce internally, contract research organizations (CROs) and contract manufacturing organizations (CMOs) have been hiring to keep up with a recent boom in business.
"We're seeing now more job orders that are coming from the CROs or the vendors, because they're trying to ramp up and scale to support the new programs, projects, partnerships that they're getting with the pharma companies," Ebeid said.
Thermo Fisher's acquisition of Patheon and the merger between INC Research and InVentiv health highlight the pressure to gain scale that CROs face to meet market demand.
Noteworthy, though, is that both transactions also carried significant "synergies", or expected cost savings. Thermo Fisher estimated they'd amount to $120 million by year three following the Patheon acquisition's close. INC Research and InVentiv, which now operate as Syneos Health, expected $100 million in annual run-rate cost synergies would be fully realized within three years of the deal's close.
On the CMO side, Catalent in January said a $14 million expansion to its biologics plant in Indiana would grow the facility's workforce by 36. WuXi Biologics last May said a new €325 million biologics plant it was building in Ireland would create 400 jobs over the course of five years. Lonza too hired hundreds of employees in 2018 as the Swiss company expanded operations.
Both Ebeid and Summers foresee this type of work factoring more prominently as pharmas weigh creating and eliminating jobs.
"We're starting to see a lot of organizations ... looking more broadly at the full talent landscape and saying: 'If we're going to grow the organization, do they have to be full-time people? Can we bring in some contractors? Can we actually outsource some of this work?'" Summers said.
"Right now, we're starting to see a bit of an inflection point in organizations that are actually focusing on total talent," he added. "It's something that's probably going to cause us to reevaluate how we account for layoffs, because some of those resources might be coming back in different ways."