Can Biopharma Steer Through the Stormy Seas? - The year 2009 was marked by recession, industry megamergers, and venture-capital scarcity. How did biopharmaceutical professionals fare? - BioPharm

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Can Biopharma Steer Through the Stormy Seas?
The year 2009 was marked by recession, industry megamergers, and venture-capital scarcity. How did biopharmaceutical professionals fare?


BioPharm International
Volume 23, Issue 1


(HIROSHI WATANABE, GETTY IMAGES)
The past year was one of stormy seas for the biopharmaceutical sector. Not only did the recession result in lack of capital and tighter budgets, but the industry was also rocked by megamergers. It was a double blow for the pharmaceutical industry, which has been struggling with its own challenges, including drug safety problems, patent expirations, and dwindling pipelines. "There isn't a rich multitude of new drugs in the pipeline and this is driving the mergers and acquisitions," notes one quality assurance professional from a Big Pharma company.

The mergers and acquisitions he refers to, of course, are this year's megamergers—Pfizer's $68 billion acquisition of Wyeth and Merck's $41 billion buyout of Schering-Plough. And as everyone knows, following a merger, redundant functions are eliminated to streamline operations. So far, Pfizer has announced plans to cut close to 20,000 jobs, and Merck is expected to eliminate about 15% of its workforce.


Chitra Sethi is the managing editor of BioPharm International
Maryellen Ruvolo, president of PharmStorm, an online recruitment portal, notes that these layoffs follow heavy job losses last year. "This is on top of the almost 22,000 pharmaceutical jobs lost in 2008," she says.


Methodology and Demographics
Small biotechs, on the other hand, may have new drugs in development, but their dependence on venture capital makes them vulnerable to instability in the financial markets. After last year's banking collapse caused lending to all but evaporate, many start-ups found themselves starving for cash. "The loss of venture capital for smaller biotechs also has affected employment for those companies," notes Ruvolo.

The year might seem like a dark cloud, but it did have a silver lining. Despite the turbulent economic climate and the pharmaceutical industry's own challenges, the salaries of biopharmaceutical professionals increased in 2009, BioPharm International's fourth annual salary survey shows. But how significant is this growth? And does that mean biopharmaceutical professionals are feeling secure in the current economic climate? Our survey finds out.

ECONOMIC WOES?

When we asked our respondents how the economic downturn affected them, we received a mixed response. Some of you said that the slow economy had a "minimal impact" or "no affect" on your company. Several of you cited "downsizing" and "reduction in budgets" as the major effects, but many more cited "a focus on cost savings," "more work with fewer resources," and "hiring freezes" as the primary effects. Not many, however, cited major job losses. Unlike other sectors of the economy, where the recession has led to layoffs, the pharmaceutical industry's experience has been mostly belt-tightening.

This is true, at least, for companies that have strong drug pipelines. "Fortunately, with the exception of typical cutbacks during a downturn, the biopharma segment as a whole hasn't suffered as badly as many other US industries," says a director of bioprocess development at a medium-sized biotech company. "My own employer has had an exceptional year, which included a successful IPO and the announcement of plans to expand a domestic manufacturing site."

Similarly, the QA professional at a Big Pharma company says that his company wasn't affected by the slow economy because of its portfolio of life-saving drugs. Another Big Pharma QA professional echoes that idea, saying the impact has been less severe compared to other companies because his company has several drugs in the pipeline. "And we are cautiously hiring people to move those [drugs] to development," he adds.

But even though big companies seem to have been recession-proof, contract manufacturing organizations have taken a big hit because their customers, primarily small biotechs, are having trouble raising money. "In the difficult financial climate, they can no longer rely on VCs or IPOs, and their sources of revenue have dried up," says Michiel Ultee, vice president of process sciences at Laureate Pharma and a member of BioPharm International's editorial advisory board. "Some of our customers, which are fairly small biotechs, had reduced the number of runs, delayed or stopped the project, and then restarted when they got more money," he says. Things started picking up in the last quarter, he adds, although demand has not yet come back to earlier levels.

Eric Langer, president of BioPlan Associates and a member of BioPharm International's editorial advisory board, says that his biotech market research organization has found that companies of all sizes are more concerned than ever about ensuring their resources are being used wisely. "As budgets get tighter, companies are less willing to spend now, worry later," he notes. "They're after more and better business analysis before they commit resources, people, or funding to new technologies, activities, or business areas."


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