Can Biopharma Steer Through the Stormy Seas?

January 1, 2010
Chitra Sethi

BioPharm International

Volume 23, Issue 1

The year 2009 was marked by recession, industry megamergers, and venture-capital scarcity. How did biopharmaceutical professionals fare?

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.

(HIROSHI WATANABE, GETTY IMAGES)

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.

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.

Chitra Sethi is the managing editor ofBioPharm International

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.

Methodology and Demographics

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."

UPTICK IN SALARIES

Despite the current economic scenario, our survey shows that the salaries of biopharmaceutical professionals increased in 2009. "The salaries might not have gone up as much as they have in the past, but they haven't gone down," says Ultee.

Others agree, noting that skilled staff continue to do well. "When you are changing jobs, the salary depends on your qualifications," says a senior regulatory affairs manager at a big biotech, who started his new job only three months ago. "Well-qualified people are getting comparable salaries [to past years]," he says.

Figure 1. Mean income in dollars or euros by gender

The numbers bear this out. As shown in Figure 1, the mean industry salary this year was $96,742 in the United States, a tad higher than the $89,760 figure of 2008, and €68,711 in Europe (approximately $99,859, converted at an average exchange rate over 2009 of €1=$1.45), compared to €62,721 ($85,927) last year. In the US, 39% of respondents earn more than $100,000 and 25% earn between $75,000 and $100,000. The salary breakdown among European respondents was similar: 34% earn more than €70,000 ($101,745) and 24% earn between €50,001 and €70,000 ($72,676 to $101,745). This year's survey showed that the US biotech jobs with the highest salaries included corporate management, plant engineering and design, and regulatory affairs (Figure 2).

Figure 2. Income in US dollars by primary job responsibility

Does all this mean it's easy to find a biotech job in the current market? "It depends on the person's level," says the QA professional. "At a higher level, change can be very easy, but for a younger person it might be difficult due to the current flux in the industry," he adds.

PharmStorm's Ruvolo thinks qualified people are always in demand, particularly in certain specializations, like QA/QC. "Quality assurance and quality control areas are always strong, and candidates with the right degrees will find opportunities." The senior regulatory affairs manager from a big biotech agrees. "In terms of regulatory affairs, there hasn't been much of a change, even with the downturn," he says. "It is hard to find people in this area, so recruiting hasn't been impacted."

The QA professional, who recently started a new job, says that he had plenty of opportunities when he was looking for a change. "Since I was willing to relocate, I didn't have problems getting a job. There were several positions and opportunities in the market," he says. He thinks being in a technical role helps. "Sales and marketing are more affected than other areas," he says.

Langer also notes that some new skillsets are in demand. "We've found that companies feel they need to bring in people with more global expertise and perspective," he says. "The biotech industry is no longer principally Western-centric, [and] there are more and more companies seeking information from, and about developing geographies," he adds.

ARE YOU SECURE AND SATISFIED?

Because of the economic situation and stresses on the pharmaceutical industry, we expected our survey respondents to have serious concerns about job security. Surprisingly, their sense of security hasn't changed much compared to last year. In 2009, 68% of respondents said they feel "secure," "very secure," or "extremely secure" in their current jobs (Figure 3), only down a little bit from last year's figure of 71%.

Figure 3. Do you feel secure in your current job?

Industry consolidation is affecting companies throughout the industry, however. More than half (53%) of our respondents have been through a merger, acquisition, or downsizing within the last two years), although almost half of them (49%) said it had no significant effect on them (Figure 4). The rest said their job responsibilities changed (32%) as a result of a merger or downsizing activity or that they chose to leave their companies voluntarily (8%).

Figure 4. Effect of downsizing, restructuring, a merger, or an acquisition

So are biotech professionals still confident enough to risk job changes in this economy? Our survey shows that a lot of people are sitting tight. The majority of respondents (65%) said they are not likely to leave their jobs in the next 12 months, compared to 60% last year. For those who expect to change jobs, the reasons are split between positive and negative: about a third (32%) cited involuntary departure but 25% said they would make a move for a better salary or more satisfying work (20%), as shown in Figure 5.

Figure 5. Reasons for possibly leaving current position

The job satisfaction levels of biopharmaceutical professionals show a similar trend to last year. The vast majority of our respondents (89%) are extremely satisfied, very satisfied, or satisfied with their jobs; only 11% are not satisfied (Figure 6). To probe further into the job satisfaction levels of industry professionals, we asked them about their greatest source of job satisfaction and their greatest source of job dissatisfaction. We received 516 responses to the question of satisfaction, compared to only 70 to the question of dissatisfaction.

Figure 6. Job satisfaction levels

"My personal contributions to the organization and appreciation for a job well-done are top sources of workplace satisfaction," says the director of process development at a medium-sized biotech. "In addition to the satisfaction of knowing that my efforts ultimately contribute to the health and wellbeing of our patient population, I also find it especially satisfying to know that I'm helping to develop therapeutics that I, or a family member, may someday need," he says.

The biggest source of satisfaction for Ultee of Laureate Pharma is the ability to turn discoveries into products. "To actually see those turn into something useful medical therapies is very satisfying," he says.

THE OUTLOOK FOR 2010 AND BEYOND

As the second decade of the millennium begins, one wonders if the consolidation activity that began in 2009 will continue in 2010 and beyond. Some even predict that the industry may whittle down to just a few big companies. If that were to happen, it would surely narrow opportunities for biopharmaceutical professionals.

Nevertheless, the people we spoke to are pretty optimistic. "The consolidation activity and its impact on jobs notwithstanding, there is an expectation of more jobs being added, not subtracted, from the industry in the coming years," says PharmStorm's Ruvolo. Her prediction is that overall there will be growth opportunities for individuals with strong skill sets and academic credentials, especially to fill positions in research, marketing, manufacturing, and QA.

Langer agrees. "Because healthcare in general is relatively recession-proof, and biotech in particular is an on-going hot field, I think generally that employment will continue cautious increases as new products reach the market and as new technologies are introduced," he says. He also points out, however, that companies are being cautious in how they hire and that much of the hiring may be with companies offering outsourcing services so that drug innovators can reduce their costs.

Steven Burrill, CEO of Burrill & Company, also thinks that biotech will be upbeat in 2010, as he notes that financing for small biotechs is already improving. "The companies that have survived the financial markets meltdown are well placed to adapt to the new environment that we now are entering," he writes in his column in this issue "Biotech in Good Shape for 2010".

And with the stabilization of the capital markets, we are seeing some encouraging signs of good things to come. From his vantage point at a CMO, Ultee sees these indicators firsthand. "We have seen an uptick in terms of visits from clients and significantly more activity as compared to the first six months," he notes. The majority of our survey respondents (68%) also think employment opportunities will rise in the next 12 months.

This winter might seem a particularly cold one but there is always a light at the end of the tunnel. To quote Albert Camus, "In the depths of winter I finally learned that within me there lay an invincible summer."

Chitra Sethi is the managing editor of BioPharm International, 732.346.3059, csethi@advanstar.com