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Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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January 28, 2010

Your First Pharma Bloodletting of 2010: AstraZeneca

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Posted by Derek

As many had feared, AstraZeneca used their announcement of financial results as the cue to also announce another round of layoffs. I'd been hearing word that this might be coming, but didn't have a line on the size and timing. But it's 8,000 jobs over the next four years, and that Chemistry World link says that 1,800 of them will be in R&D. Another 1,700 R&D jobs will be affected as people and departments move around.

AZ has plenty of patent trouble coming (Crestor's expiration foremost), and plenty of legal bills. So I wouldn't necessarily say that today's announcement will end the layoff process, either, unfortunately. . .

Comments (23) + TrackBacks (0) | Category: Business and Markets


1. PharmaHeretic on January 28, 2010 2:09 PM writes...

But their business model is no longer based on finding and developing new drugs. It is based on creating fictional profits based on accounting chicanery.

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2. Hap on January 28, 2010 2:19 PM writes...

So, the remedy for not being able to develop enough drugs and overselling the ones you have is...laying off the people who find you drugs (who haven't been doing a good enough job, but probably a better job than the vacuum they leave behind)? Unless you have a (reasonable) plan to make the remainder of your R+D more effective, laying off people saves you money by killing your future. (I don't know whether "send our R+D to China and India" counts as reasonable or not yet.) You just got dinged for overselling, but if you can't find any drugs, what else do you have to do to make money?

There must be a parallel universe where this makes sense, but I keep thinking that a lot lately.

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3. metaphysician on January 28, 2010 2:38 PM writes...

Well, the *theory* of layoffs is, the company got too big, so you cut expenses, allowing you to get through lean times. You then can, once times get better, hire more people and increase production.

Of course, that logic depends on it being actual 'lean times' that are causing trouble, as opposed to something intrinsic to the company. And also requires that your layoffs leave behind a viable company.

I suspect the real logic is "I don't want the company to fail on my watch, so lets kick the can down the road. Either a miracle happens, or it fails on someone else's watch."

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4. PharmaHeretic on January 28, 2010 3:02 PM writes...

Who requires logic, reason, competence or ability? As long as suckers push up the stock price after layoffs are announced, it is all good. The management can continue to skim off their bonuses from fake profit numbers, till it all goes to hell.

Then they will move on the next healthy host, assuming there is one left.

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5. Anonymous on January 28, 2010 3:05 PM writes...

Crestor under patent challenge, Seroquel patent expires 2012, Nexium patent expires in 2014, the future looks grim for AZ

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6. ByeByeAZ on January 28, 2010 4:18 PM writes...

Speaking as a former AZ employee working in Discovery Research in the UK, I decided to leave the company around 18 months ago to pursue a slightly different scientific career.
I know for a fact my colleagues I left are having to work twice as hard on the same number, if not more candidate drugs, with less and less people in the department as anyone who leaves is not replaced. The brain drain going on in AZ is scary - the heads of Global R&D and UK Oncology have both left in the last year. I certainly don't expect AZ to exist in its current form beyond 2012-13, but will probably yield a nice cheap aquisition when Crestor, Nexium and Seroquel come off patent.

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7. Hap on January 28, 2010 6:23 PM writes...

It seems that layoffs in R+D (particularly for startups, when they commit their resources to their potential drugs already in the pipeline) are sort of like suicide notes, because you're killing your reason to exist in order not to die right now, but assuring that you probably won't be around much longer than that. (This is for the most part because the doom in pharma seems to be self-inflicted rather than imposed by the economy - otherwise, surviving the moment by laying off makes sense because if you survive, you may be able to thrive.)

With bigger companies who haven't produced enough drugs, paring R+D makes sense but only if they have an idea of why they haven't been productive enough and how to make themselves better - otherwise, they're spending less and making their future dimmer (same with outsourcing - if the same people are managing and don't have any idea what's wrong, then you're just buying cheaper ineffective research). That doesn't generally seem to be the case, though - the general cutting seems to be to cut costs (probably to increase stock price so various people can cash out before the roof caves in) without changing the reasons R+D didn't work (or didn't work well enough). In that case, while at least some of the blame should rest with the people who weren't able enough, the people who "guided" them are usually spared to kill again. In addition, the expensive people (who may have actually helped to develop the drugs whose expiries are being rued) are usually the first to be gone - thus the people who did good are punished, and the people responsible are spared.

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8. Anonymous BMS Researcher on January 28, 2010 6:59 PM writes...

I've survived a few rounds of layoffs like lots of folks in this industry; in the last round at BMS I said farewell to somebody with whom I had worked for over 10 years. Not fun. But the biggest problem is, I'm not convinced the reasons why I'm still at BMS have much to do with how well I did my job, as the correlation between a person's quality of work and probability of survival ain't all that high...

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9. RandDChemist on January 29, 2010 9:27 AM writes...

Not surprised...leadership gets scared and makes someone else pay the price.

Other than for self-preservation, why even try if you are at a company like AZ? The sword of Damocles will be over head for 4 years?

Instead of worrying about being productive, people will look for whose butt to kiss.

if jobs are truly superfluous, then they should be cut. That simple. It should not take poor financial results to spur cuts.

As Hap noted, cuts only make sense if they are part of a plan to be more productive or you know what was making a given area unproductive. Doesn't matter if it's R&D, Marketing, IT, or whatever.

Blind cuts are a waste and just cost the company. Repeated rounds of hiring and firing eventually affect morale and the company puts its very future at risk.

Is it me, or are the heads of all too many pharma company just flailing about? No vision, no leadership, just CYA.


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10. J-bone on January 29, 2010 10:24 AM writes...

I'm reading a book called "Disciplined Minds", and while I don't agree with the extent that the author takes some of his ideas, I do agree with his point that in the workplace creativity and independent thinking are not as valued as employers would have you believe. The real value is placed on being a soldier who conforms to the greater ideology and being willing to lay down when told to do so. Sounds like what you're describing with these cuts, where the creative thinking and good scientists are getting cut while the yes-men all stay on the payroll.

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11. Hap on January 29, 2010 11:03 AM writes...

Doesn't the success of that theory of management depend on the ability of management to come up with good ideas and to have an idea how to effectively carry them out? If you're not certain what ought to be done, then making sure that everyone is on the same page (and enforcing it by fiat) isn't helpful, because you aren't even sure that you're reading the right book.

The other problem with that theory is that, in order to command the respect necessary in that model, leaders have to "lead from the front". They don't have to do what their employees do, or know everything they do, but they do have to be willing to subject themselves to the risks that their employees subject themselves to, and to take whatever flak is necessary for their subordinates to do their jobs. It has to be clear that the leaders are interested not in themselves but in achieving the mission. When you reward the leaders and punish the subordinates for following their lead, then it's clear that neither the determination to achieve a mission nor the self-sacrifice that the leaders demand of others are present, and so the self-abnegation required for subordinates under that theory is unlikely to occur - people will try to secure their own safety and ends because those above them will not do so.

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12. Anonymous on January 29, 2010 11:06 AM writes...

Post #9 said it so well!

Deadweight should be cut period, regardless how the company is doing. But unfortunately management doesn't have the fortitude to do that in "good" times.

That said cutting researchers mainly for the sake of saving money is extremely shortsighted. I think a big reason is that upper management consists mostly of nonscientists who have no idea how innovation happens and how much it takes scientificaaly to meet those rediculous timelines.

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13. J-bone on January 29, 2010 11:57 AM writes...

Yea Hap, it's not a perfect example, and it's incomplete without more of the context that the author puts it in, but I didn't wanna bore people with all the details.

I guess I'm agreeing with his point that the more obedient and conformist you are the better equipped you are to succeed in these workplaces. So these business people running the pharma industry just look at the bottom line like they were trained to do, and see that "We could probably save $______ by shaving X number of scientists and ramping up the workload for the rest. Perfect!" But if someone were to suggest "Hey, we really need to keep scientists 'cuz they're sort of important to all the science that keeps this company running" that person would probably get the boot as well.

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14. Hap on January 29, 2010 1:16 PM writes...

I wasn't trying to complain that you left anything out. It just seems as if the conditions under which that philosophy seems likely to make a successful company don't seem to be met in pharma, so that the philosophy in management is either being stupidly applied (or simply unexamined) or being used as a smokescreen for the "sack and run" method of business management.

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15. Ace on January 29, 2010 1:38 PM writes...

So the WSJ reports that AZ keeps 8 research divisions. What are they?

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16. Jose on January 31, 2010 2:26 AM writes...

And now, we have round 2-
GlaxoSmithKline to axe 4000 jobs in US, Europe (AFP)

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17. Concerned_chemist on January 31, 2010 6:58 AM writes...

#16 query

Anyone else got any info on GSK layoffs.

They have just at the last minute cancelled a big leadership excercise and wondered if this had anything to do with this announcement? I've not seen anything on any of the news sites yet.

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18. petros on January 31, 2010 8:05 AM writes...

Sunday Times says
"BRITAIN’s biggest drugs company, Glaxo Smith Kline, is to axe up to 4,000 more jobs as part of its plans to restructure its workforce and focus increasingly on emerging markets.

The bulk of the cuts will be in America and Europe, and are part of the company’s efforts to shift resources away from low-growth territories into parts of the world with greater scope to expand sales."

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19. Concerned_chemist on January 31, 2010 8:15 AM writes...

Petros - I wil lgo an buy the paper now!

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20. Jose on January 31, 2010 8:37 AM writes...

Yes, all I can find is the blurb above (via google news alerts). Damn odd to have a press release on a Sunday.... scary times.

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21. anon on January 31, 2010 8:49 AM writes...

Big leadership exercise? The only one that I know of is the one in Atlanta that about 1/3 of our group is going to. That was cancelled? Hard to believe, starts on tuesday 2/2.

I personally haven't heard any rumours from the inside. Really scary - I'm in what was previously considered a satellite to a larger group in UK and we're only about 20 people plus around 7 students in chemistry. The top floor of our building has been empty ever since the MP/CVU bloodbath.

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23. oldtimer on January 31, 2010 5:32 PM writes...

GSK next, UK media Sunday. If Pfizer, AZ etc etc are doing it it must be right. Corporate lemmings appear to favout the death spiral, less R&D to less products to less income to less R&D .... Biotech is not the saviour for biology and cheap chemistry in India/China/Antarctica (they have some smart penguins down there) isn't the answer either.

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