Spare a thought and perhaps an aspirin for Bayer AG employees this morning who found out first via the wires that their company is planning to cut 4,500 of their jobs worldwide by 2012. Apparently a leak forced the German health care and crop science conglomerate to issue its press release yesterday, a day earlier than planned.
Friday, November 19, 2010
Precisely where the axe is going to fall remains unclear (since German law requires Bayer to discuss first with its employees and employee representatives before divulging its plans to the public; fair enough.) But a letter to employees at pharma division Bayer Schering Pharma from chairman Andreas Fibig reveals that this division will see headcount cut by 900 globally by 2012, not just in admin and support functions at HQ and in marketing and sales, but also in R&D and product supply.
Fibig's message emphasized growth, though (he was hardly going to dwell on job-cuts). This 'resource re-direction' is about mobilizing the (financial) resources necessary to fully exploit the company's key late stage growth drivers, including blood-thinner Xarelto (rivaroxaban), he said.
The cuts will affect 1,700 jobs in Germany across the entire group, although Bayer Schering AG's Berlin HQ "will remain important", we're told. But about 2,500 new jobs will be created, mostly in emerging markets -- 1,000 of those will be in pharma. The group plans annual cost savings of €800 million, starting in 2013.
Does this need explaining? Not really. Bayer is joining a pharma bandwagon when it comes to head-count cuts and efficiency improvements. Roche announced it was slashing almost 5,000 jobs Nov. 17, following similar moves by Bristol, Pfizer and others.
Like its peers, Bayer's being hit by generic competition, not least to its oral contraceptive Yaz in the US. Meanwhile Bayer's flavor of diversification (perhaps unlike Novartis') isn't apparently helping it weather the global economic storm much: having a Material Science division dragged the group's numbers down in 2009.
So these structural changes are all about becoming "better and faster", as Bayer management board chairman Marijn Dekkers puts it in the release. For pharma specifically, they're about wringing out the funds necessary to fund expensive late-stage development programs. Xarelto (which has already cost €2 billion to develop) was shown recently to prevent strokes in afib patients better than standard therapy with warfarin, raising the prospect of its taking a good chunk of the $14 billion-sized market for new blood thinners (even though it's behind Boehringer's Pradaxa).
That's certainly a shot worth taking, but hitting the target ain't a certainty: the drug still has to get past the FDA (it's approved in Europe and Canada for VTE prevention in patients that have gone through hip or knee replacement surgery), and there are hints of possible safety issues, at least in the stroke-prevention context. Sure, Johnson & Johnson helps pay for development, per the companies' 2005 deal, but 14,000- patient trials still cost a fortune (the overall development program will enroll almost 50,000 patients) And who knows what more FDA may require.
But while FDA is J&J's problem, Bayer hopes to launch Xarelto in four new indications in Europe and has other near-term launch assets including Eylea, Alpharadin, Riociguat and Regorafenib to think about. Plus China. Resources need to be shifted to China, says Fibig in his letter; "this isn't a downsizing exercise for us, but a shift of resources, resulting in a net positive effect on our workforce."