Wyeth warns of job cut woes

By Kirsty Barnes

- Last updated on GMT

Related tags: Wyeth, Pharmaceutical industry, Pharmacology

Wyeth is the latest big pharma firm to warn that major job cuts are
on the cards, amidst a series of drug approval setbacks and generic
erosion on profits.

The drug giant has said it may cut up to 10 per cent of its work force - the equivalent of 5,000 jobs - over the next three years, although as yet, "nothing is etched in stone."​ Wyeth management are currently undertaking a company-wide evaluation with the aim of "transforming its business and reducing spending."​ The company's final plans in this regard will be confirmed in March, said a company spokesperson. Given the firm's documented penchant for outsourcing or off-shoring anything in its business that is not a core function, the firm may increase its activity in this area as part of its plans. In order to stay competitive, Wyeth has said in the past that it looks to model its business not on that of other pharma companies, but of other successful big industries which have long relied on outsourcing or off-shoring all the non-core functions that can be done better by another company, to improve cost, time and other efficiencies. Wyeth last made large job cuts in 2005 when it reduced its US sales force by 15 per cent. Now, the firm is being motivated to make changes again, spurred on by a series of setbacks it has experienced in getting four of its drugs to market over the past year. Since the beginning of 2007, the US Food and Drug Administration (FDA) has delayed granting regulatory approval for Wyeth's schizophrenia drug Bifeprunox; Pristiq, a treatment for depression and menopause symptoms; Viviant, a drug to treat bone loss; and anti-constipation medicine methylnaltrexone. Moreover, its kidney cancer treatment Torisel; and Lybrel, a contraceptive, also experienced regulatory delays before finally being approved. Even short delays in getting drugs to market can cost pharmaceutical firms millions of dollars in expected earnings. Meanwhile, Wyeth is also feeling the heat from generic competition. In December, Teva Pharmaceutical unexpectedly released a generic version of Wyeth's Protonix heartburn medicine, which threatens to severely erode the drugs's revenue, which for the first nine months of 2007 raked in $1.45bn. Teva has now temporarily frozen sales of its copy cat version until the two firms come to an agreement over a dispute over the Protonix patent. Moreover, this year, Wyeth's biggest selling medicine, the antidepressant Effexor, is also expected to have to stave off generic competition when Sun Pharmaceutical Industries launches a tablet version of the drug. Sales of Effexor, which were $2.83bn for the first nine months of 2007, are expected to be substantially stunted as a result. Misery likes company, and so Wyeth may feel comforted by the fact that it is by no means alone in facing such woes. It is in fact one of the last of the pharma giants to announce such cost-saving and job-cutting plans. Over the past year or so, several of its peers, including Bristol-Myers Squibb, AstraZeneca, GlaxoSmithKline, Pfizer, Merck & Co., Roche, Bayer and Abbott have also announced changes to the face of their businesses in order to continue to compete in this fast-changing industry. All these firms have been affected by the soaring costs of drug development and increasing generic competition that are increasingly exerting pressure on company purse-strings and squeezing profits.

Related topics: Markets & Regulations

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