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DBL%20Hendrix%20small.png College chemistry, 1983

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: derekb.lowe@gmail.com Twitter: Dereklowe

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« Those Me-Too Drugs | Main | Another Snow Day »

January 26, 2011

Abbott's Cutting Jobs

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Posted by Derek

Abbott is announcing 1,900 layoffs, about 2% of the company's work force. That's on top of the 3,000 that had been announced last fall, and this is not getting 2011 off to a very good start, is it? I'm told by primary sources that there have been cuts in research as a part of this latest round, but I don't have any firm numbers yet. . .

Comments (44) + TrackBacks (0) | Category: Business and Markets


COMMENTS

1. anchor on January 26, 2011 1:35 PM writes...

Here we go again! Disapproval from FDA or inconclusive/failed Phase 3 trial means more elimination from R and D for many companies. The season just started, I guess.

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2. Chemjobber on January 26, 2011 1:58 PM writes...

When, when, when will it stop?

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3. David Formerly Known as a Chemist on January 26, 2011 2:44 PM writes...

Elan also, who cut about 65 R&D position.

When will it stop, Chemjobber? I honestly don't think this is half done yet. I think American and Western European scientist positions will continue to be slashed and replaced with cheaper labor in Asia. I don't know whether to weep or cry.

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4. Reality Check on January 26, 2011 2:57 PM writes...

What about the current finances of Pharma which makes anyone think that big will not continue to become smaller?

It can and will slow down only when company's projected earnings and profits, adjusted for expectations of short term returns in dividends, are at a steady state flow with spends and expenses. Unfortunately, the cost of staffing people is a most expensive expenditure, and must be part of the equation to balance the in- and out-flow of money. Econmics 101.


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5. Luvyurnmr on January 26, 2011 3:50 PM writes...

90 research positions cut at Sanofi aventis in bridgewater, nj today.
I was one of them.
Happy New Year!

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6. Hap on January 26, 2011 3:54 PM writes...

....assuming that as you cut staff, you don't cut revenue. You can do that in the short term, because your products are already developed. In the long run, though, if you cut the people who develop your products, there won't be any more coming. You can outsource, but eventually the people who make your drugs will have you over a barrel, because you won't have drugs of your own (or will have fewer) and so will be dependent on them for your financial life. Cutting jobs makes sense to stave off financial starvation only if you have an idea what's wrong, and can free enough resources to fix it.

If you're starving, cutting off your limbs to decrease your caloric consumption is either a desperation move (assuming rescue will come, eventually) or suicide. I hope the financial people have an idea when the copters will come to take their companies home to the land of milk and profit.

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7. Hap on January 26, 2011 4:00 PM writes...

The other problem with R+D cuts is that R+D isn't the most expensive part - trials are. No one knows how to make those cheaper, though, and you can't cut them (because you won't have drugs). Marketing and sales cost a lot, but generate more, so cutting them wouldn't make sense. So if you have to cut, well, then it's R+D. All that seems to imply, though, is that cutting probably isn't a good idea, unless you need a stock bump now and don't care what it costs.

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8. GreedyCynicalSelfInterested on January 26, 2011 9:12 PM writes...

1900 Abbott jobs gone, 98000 more to go! Once they reach zero Western employees, the bleeding will stop.

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9. Jordan on January 26, 2011 9:17 PM writes...

I'm not very familiar with Abbott. Was the cut caused by the recession? Or it's part of the plan to prepare for the dreaded "Patent Cliff"?

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10. jackass on January 26, 2011 9:53 PM writes...

What a shame. In the state of the union address, a lady of 55 was introduced as a former factory worker who went back to school for a bs in biotechnology. The lady was introduced to demonstrate that the good old days of good employment are gone and we need to reinvent ourselves for the new (crappy) economy. Unfortunately, these new economy jobs are getting outsourced too. We may need new new economy jobs.

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11. reality check on January 27, 2011 12:33 AM writes...

to 7 (HAP): A bit off base here, since clinical trials, through phase 3 at least, are typically costed and counted within D in R&D.

It's time to stop trying to project that the picture in the future will be painted with the same brush strokes as yesterday's paint by numbers kit. Those days are gone, not to return. The future won't be the past or the present. It won't be, can't be.

The difference between Pharma and the government is that Pharma can't actually print real money...although in the past they have acted, spent, built great building, grew R&D monuments to themselves in exercises of mental self-gratification, gave themselves very nice offices, great bonuses as if they did have greenback presses...and in a manner of speaking it was the way. But in today's reality, unlike the government, Pharma can't continue to spend what it does not, will not have.

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12. Nick K on January 27, 2011 7:17 AM writes...

#2: Things are really bad if even Chemjobber is beginning to despair.

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13. Harry on January 27, 2011 7:30 AM writes...

Ahhhh you all are so negative- just wait for the next Chemistry Employment issue of C&E News. You'll find the we're so healthy we need to produce even more Chemistry PHD's!

Who are you going to believe? ACS or your own lying eyes?

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14. anchor on January 27, 2011 8:09 AM writes...

The most egregious act by the big pharmaceutical companies are the cuts in the sales and manufacturing divisions are announced widely and we all know where they stand. By contrast removal of PH.D's from the R and D are done on an ongoing basis (5 to 10 people at a time in what they call it as regular or rolling layoffs). Not that we seek an announcement on these unfortunate events but it gives public, a perception that all is fine. People who have been following these events knows it is not true. And as #13 says the C&E News, chimes along. Scumbags!

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15. BCP on January 27, 2011 10:08 AM writes...

#10 jackass glad I wasn't the only one with that reaction.

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16. Hap on January 27, 2011 10:23 AM writes...

But the economic picture is painted in those same broad strokes, is it not?, as well as the "cut or acquire your way to greatness" theories that justify the layoffs. These aren't new theories, nor do they acknowledge any sort of change in business model. Outsourcing R+D or buying R from smaller companies are new models, but they have significant risks to pharma and may not cost less anyway (depending on what the funding environment for small pharma and how many small companies there are competing for funding). Cutting research without understanding why or how to improve what your research produces is either a short-term survival move or stupid. No one's figured out how to generate products without spending money, and if you spend less, it will cost you later. The "new economy" model isn't going to make that problem go away.

Cutting R because you need money is a problem because the biggest costs are in trials - I wasn't arguing that trials should be cut instead of research jobs, but that cutting R to lower costs ignores the major part of the costs that pharma wishes to decrease.

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17. entropyGain on January 27, 2011 11:11 AM writes...

Every month or so this thread resumes and we decry the downward spiral of big pharma, the inequities in our industry, and the complicity of non-technical management. Perhaps it is a natural consequence of our investment ecosystem focused on quarterly results and CEO bonuses. Perhaps it is because we have no great technical leaders in the larger pharma/biotechs like Jobs, Brin or Page in high tech. I assert that the causes are irrelevant to the choices we must make as individuals.

Clearly, it is more difficult than ever to succeed as a drug-hunter in larger companies, and if we do, we usually remain a dairy cow -- fed enough to make some milk but slaughtered when the investors need a little earnings meat. Startups may not be any easier - undercapitalized, underresourced-- hunting with bow's and arrows again, starving often but eating what we kill.

So what can we as scientists do to help our industry? Maybe a little more public service and consideration for our peers. Accept that request to review a journal article or sit on a study section - don't let that crap get in the journals or get funded. Cut some slack to the startup pitching your BD group when you sit on the diligence team. Look hard at the data they have and try not to let your company spend hundreds of millions on red wine extract, but if that little startup doesn't have chronic data from your favorite 4 animal models, and yet the molecule is good, maybe you can help BD find a way to structure a deal to get the data and collaborate. When a restructuring does happen and there's ton's of unused "junk" lying around -- find a way to get it to the local startup community. We live on that "junk" a lot of the time.

One thing is for sure, domestic job growth for scientists will only come from small companies for the foreseeable future.

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18. MedChem on January 27, 2011 11:13 AM writes...

Haven't you guys heard that Pfizer's pipeline is so full and overflowing that they're actually trying to unload candidates? I'm sure Pfizer is not alone to think that. No wonder management is cutting research--"We've got enough stuff in the pipeline. Who needs those researchers anymore?"

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19. Chemjobber on January 27, 2011 11:32 AM writes...

12: Thanks for understanding me.

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20. quintus on January 27, 2011 11:57 AM writes...

@Chemjobber; I understand you very well. It won't stop till the stupid managers and MBas realise that the Asia move is totally wrong. Perhaps they should outsource their big paying jobs to Asia and see how they get on out on the street. They are idiots. Come the revolution, as they say!

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21. Nick K on January 27, 2011 1:09 PM writes...

#20 quintus: The MBA suits at the top of Pharma know full well that they won't be there very long. Therefore they aren't interested in the long term. All that counts for them is the short term share price. Outsourcing to China and India boosts the share price in the short term, but, of course destroys value long term. By that time the suits will be long gone, taking huge fortunes with them. The shareholders and employees get screwed.

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22. Curious Wavefunction on January 27, 2011 3:36 PM writes...

-Perhaps it is because we have no great technical leaders in the larger pharma/biotechs like Jobs, Brin or Page in high tech

Great point. Where are the Vageloses, Merckses and Janssenses?

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23. watcher on January 27, 2011 3:36 PM writes...

Interesting, that recent CEOs in big Pharma have lifetimes of about 5 years. Successful leaders in growth companies and newer technologies which drive today's innovation tend to have much longer life-spans in the job.

So, what makes the Pharma leaders look to the longer term future, when they are setting themselves up for personal compensation based on the company's shorter term "improvements"?

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24. CR on January 27, 2011 3:41 PM writes...

@ Nick K:

I understand most people state that management are not interested in long term goals only short, but...are they actually performing well in the short term?

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25. reality check on January 27, 2011 4:18 PM writes...

to Hap's "No one's figured out how to generate products without spending money, and if you spend less, it will cost you later. The "new economy" model isn't going to make that problem go away.

Cutting R because you need money is a problem because the biggest costs are in trials - I wasn't arguing that trials should be cut instead of research jobs, but that cutting R to lower costs ignores the major part of the costs that pharma wishes to decrease."

Big spending in R, often unfocussed and risky on new promising, emerging next generation "stuff" has gotten us to where we are today; history is not on your side. Why do the defenders think that continued greater spending now will give different results? Trends don't make it look promising. Rather, spending now will not protect, provide or guarantee future success (hmmmmm, should have been an investment broker).

Cannot recall a time in my 25+ years in the industry when sizable layoffs were not also associated with other internal saving actions, often cutting and stopping development compounds or trimming of extra "nice to have" clinical studies. Admit it, in all large Pharma there is always excess in both R and D that can legitimately provide cost savings. Except when groups are disbanded totally, I've never seen an area not continue to carry excess that couldn't still be pared more. And too, in many situations, the declared "discontinued compounds" tend to be already moribund or terminal, having been kept on life-support for various "strategic" or "personal" reasons. As these are already truly lost opportunities, their being eliminated is only an admission of their lack of promise to the future, losing nothing in terms of "future value" to health care, or company profits.

But even so, the concept that "we have to spend more now to provide for the future" are traditional, very familiar words. The arguement held sway and protected many jobs and fiefdoms in many companies for decades. But as the experiment has been carried out, analysis of more and more data from the experiment forces the need to pause, raising real questions about the R&D system's ability to continue paying for itself in it's present form. Very simply put, it's no longer self-sustaining (if it truly every was).

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26. Hap on January 27, 2011 4:47 PM writes...

I'm wondering where this utopia of drugs with no R exists. Can you point me to it (or better for everyone, point Andrew Witty or someone with power to it), please, because I don't think anyone's seen it yet. The outsourcing and inlincensing pushes are both designed to do that, but the heavy costs of trials mean that the money not spent in R is more than spent trying drugs that won't work. You need better hits, but cutting R almost guarantees you won't get them, because you don't have control over the places where the hits are winnowed. Can you cite examples of where cutting the "fat" (R) hasn't led to a shallow grave but an actual productive company?

Cutting the fat when you don't know what it is is the purview of a back-alley liposuctionist, and unless you want to end up where his patients do, it's inadvisable.

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27. RegSpecialist on January 27, 2011 5:05 PM writes...

The companies are cutting their R&D because they need to pay for bigger and bigger regulatory groups and larger clinical trials with greater oversight. The future for drug discovery is pretty bleak as the costs of trying to get drugs on the market has gone up, the ability to market those drugs has gone down, the risks of marketing drugs has gone up (where do you think all the money to the state's AG's comes from? Also, tort lawsuits cost a lot of money, that comes from somehwere as well) and the return goes down as pricing pressures increase globally. I know many chemists who have quit the labs to join the regulatory units of their companies or others. The FDA is hiring, by the way. I really enjoyed trying to discover drugs but know that our way of life is very much on the decline for a number of reasons. Its easy to point at our CEO's, etc and blame them but they didn't create the world we live in, they are just trying to deal with it as well.

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28. processchemist on January 28, 2011 5:03 AM writes...

@19

"Clearly, it is more difficult than ever to succeed as a drug-hunter in larger companies, and if we do, we usually remain a dairy cow -- fed enough to make some milk but slaughtered when the investors need a little earnings meat"

I think this is the main point. Life is hard for everyone, these days, but most of the european non public (or non truly public) pharma companies didn't butchered R&D as the public big ones are doing. I think it's a bit absurd that in the current financial climate investors keep asking two digits profits from pharma, and managements strive for this results no matter what's the mid term cost.

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29. Anonymous on January 28, 2011 8:12 AM writes...

I was laid off on Wednesday. The rest of us labrats have been comparing data on who was let go. It looks like the lower level PhDs and most recent hires got the ax. It makes sense because we have the least expensive severance benefits.
But if I were the European scientists this would make me worry. The company has over 100 more positions to eliminate. If they are saving money over here, that means they are going to have money to get rid of labrats in France and Germany. The unions make it expensive but not impossible.

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30. MIMD on January 28, 2011 10:39 AM writes...

Another brilliant company, shrinking their way to greatness.

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31. MIMD on January 28, 2011 10:45 AM writes...

Re: 27. RegSpecialist

I think we need to emulate one big pharma's early 2000's solution to its problems - put the computer people in effective charge of R&D. That way, they could eliminate the 100+ year-old nonprofit publications they offer, cut scientist access to informatics resources more, "standardize" platforms so as to become nearly useless to real R&D, and lay off the best and brightest IT personnel to boot.

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32. Chemjobber on January 28, 2011 3:19 PM writes...

@29: Sorry to hear it. Hope you land on your feet and you find another position soon. E-mail me if you would like what little help I can give at chemjobber /at/ gmaildotcom.

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33. reality check on January 29, 2011 1:47 PM writes...

Yes, Hap, investment is needed to discover new potential drugs. But, sorry Hap, the methods and approaches from the past 20 years are no longer working...financially, strategically, politically. Lots of reasons for this that don't need to be re-hashed. But the bottom line is change is needed; can't continue to spend money with declining returns...just look at the banks in 2008 & 2009 as model of what can happen when arrogance pretends that today's practices & polices won't have to be paid for. You probably will scoff, but the analogy is not that far off.
And of this week's announcment, let's remember that Witty is not in charge of Lilly.

We are only in the inital phases of a Pharma-crunch, just not so dramatically as the banks...but it's not different than the history of many other industries...steel, railroads, car manufacturing, clothes, shoes etc, which could not head-off their inevitable loss of power, dominance, profitability. No matter what you wish, what you want, what you dream, what you want to anticipate, the current model is simply not sustainable. It isn't, no matter how much one criticizes, pontificates, preaches, wishes, wants to see paychecks & bonuses continue and increase.

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34. Wallace Abbott on January 29, 2011 2:07 PM writes...

@29

I'm not sure what area you are in, but from the people I know who were let go, a lot of the chemists were BS/MS level folks with a good amount of experience. Some were at PhD equivalent levels.

The PhD chemists that I know were let go were all fairly senior. Abbott doesn't have that many 'young' PhDs in chemistry. The most recent hires in the chemistry ranks were all spared from what I know.

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35. still working on January 29, 2011 11:57 PM writes...

@29 adn @34

I have no idea who was laid off, but I would think its the BS/MS at PhD levels and the older PhDs. They generally cost the most for what you get. That and a little cleaning house too. That seems to be the industry norm.

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36. @35 on January 30, 2011 3:34 PM writes...

Perhaps it's unintentional, but your statements sound callous. Although some of those who were let go may have become complacent bureaucrats, I feel that the "cleaning house" justification is used too liberally in pharma. Unless they were superbly adept at political scheming, most of those "overpriced" BS/MS/PhDs climbed the corporate ladder because of their tangible accomplishments and skills. I feel especially bad for those downsized employees who live in Illinois, especially since their tax burdens will be increased to mitigate the state's budget deficit.

YOU may still be working, but for how much longer?

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37. Wallace Abbott on January 31, 2011 10:13 AM writes...

Sounds as if 35 doesn't work at Abbott, based on his comments.

One area was dissolved and hit the hardest, and the rest of the folks were cherry-picked. The term house-cleaning, unfortunately is quite true. Some of the folks who weren't part of the dissolved organization were either low performers or folks at or near retirement age. Some were just unlucky, I'd guess, fitting into the profile of people they need to move out to balance the age/experience levels.

The BS/MS level folks I know were almost all top-notch chemists, ones they'll have a hard time replacing with Chinese/Indian hands regardless of how cheaply they come.

Thanks for those clinical candidates, boys, here's your green folder.

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38. Feels like Mud on January 31, 2011 1:24 PM writes...

#37

Abbott....a promise for ...investor's

"The BS/MS level folks I know were almost all top-notch chemists, ones they'll have a hard time replacing with Chinese/Indian hands regardless of how cheaply they come."

As a green folder reciepent from the dissolved area (this group has had more clin. candidates in the last 5 years than any other)I want to thank you for that observation. And I can confirm that statement. Looking around at the peers that were separated, there is little reason or logic to it. IMHO, this is just the start and many more cuts will be pending the completion of projects. I would feel better about my situation if the whole group was let go, but this is the past and I'm thinking towards the future.

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39. cynical1 on January 31, 2011 2:01 PM writes...

I just wanted to make one point which I haven't seen mentioned when talking about all of these Pharma layoffs. I've worked in the industry for 25 years (but not at Abbott). I've worked for six companies but if you count all the M&As, I've worked for nine. I've seen a lot of layoffs over the years, including myself. But I have never seen a downsizing in the number of senior managers in research. The number of VPs and directors never change. For instance, when I was let go a couple of years back there was a 50% reduction in headcount in our chemistry division. There were 3 directors and one VP. All four of them were retained. Only one of the "management level" chemists was let go. So, they got rid of way over 50% of the working class chemists who spent all day in the hood.

Any turnover that I witness at the higher levels is only a replacement, never elimated positions. And every last one of these people who got the boot always lands another great paying job. The rest of us not so much. Therefore, it is hard for me to reconcile all of the cuts as simply cost savings in order to justify what I have witnessed.

Is this typically what others have observed?

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40. GreedyCynicalSelfInterested on January 31, 2011 4:47 PM writes...

@39

Makes sense to me. If you are not management, you are $(!~!

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41. AR on January 31, 2011 4:54 PM writes...

Hey #37 & 38 -

What or who are you trying to protect? Why not name the "area" that was dissolved?

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42. Hap on January 31, 2011 5:23 PM writes...

Yes, but in general liquidation is not considered a business model, just as killing everyone is a rebel province isn't considered liberation. Unless the cuts can magically make drugs appear in the pipeline where they were none, then mindless layoffs are basically liquidations where everyone but the upper management gets screwed. That's not particularly novel, or helpful, in the long run.

If doing the same old things in the same old way doesn't work, then why are the same cost-cutting measures seen as the solution? The old saw about insanity being the repetition of an action with the expectation of a different result comes to mind.

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43. DepakoteMe on February 1, 2011 8:37 PM writes...

#37 & #38
The first cut always hurts the worse... then you realise that bloody axe is still swinging and now it's headed for the rest of us. Another year for management to plan how to follow the Pfizer model and go virtual with a third of the staff. Productivity means nothing when marketed drugs are pulled and Ph3 failures start accumulating.

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44. Ernest Volwiler on February 3, 2011 9:27 AM writes...

#43

This wasn't the first cut, though. They let 200 some Discovery folks in 2007. This was round 2, just spread out more.

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