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Big pharma becomes a smaller employer as biotech booms

Date June 18, 2014

Big pharma has become a different employer over the past decade. From megamergers and the push into emerging markets to the dramatic restructuring of sales and R&D departments, the shape and spread of their staff has shifted. Over the same period, however, the size of their employee roll call has actually changed very little.

At the end of 2013 big pharma employed only 3% fewer people than it did in 2003, a drop of almost 31,500, data collected by EvaluatePharma reveal. While huge redundancy programmes affecting thousands might still be making headlines these topline figures do not paint a picture of a dramatically shrinking industry. Conversely, for an image of spectacular expansion look no further than the world just outside big pharma – other $30bn-plus drug companies more than doubled their headcount over the past decade, adding more than 130,000 employees (see tables below and  click here for our free full report).

The slow shrinking of big pharma employment, top 5 
  No. of employees – year end                 
  2003  2008  2013    Change 12-13  Change 08-13  Change 03-13    % change 12-13  % change 08-13  % change 03-13 
Novartis  78,541  96,717  135,696    7,972  38,979  57,155    6%  40%  73% 
Johnson & Johnson  110,600  118,700  128,100    100  9,400  17,500    0%  8%  16% 
Sanofi  33,086  98,213  112,128    154  13,915  79,042    0%  14%  239% 
GlaxoSmithKline  100,919  99,003  99,451    (37)  448  (1,468)    0%  0%   (1%) 
Roche  65,357  80,080  85,080    2,991  5,000  19,723    4%  6%  30% 
Total big pharma (15 companies)   957,055   937,589   925,580     (7,245)   (12,009)   (31,475)     (1%)    (1%)    (3%)  
For the full table please see the report 

The above analysis, constructed from data found in annual reports, covers a period when a number of megamergers were struck that had a huge impact on individual companies.

Pfizer completed two in the past decade – its move on  Pharmacia in 2003 caused its year-end employee number to balloon to 122,000 and then fall gradually until it bought  Wyeth in 2009. In 2004 the merger of  Sanofi-Synthélabo and Aventis created  Sanofi-Aventis, today’s Sanofi, and Merck moved on Schering-Plough in 2009.

Novartis, currently the biggest pharma employer, began to consolidate Alcon in 2010, which had a marked impact on its staff numbers – the eye specialist employed 15,700 before it was taken over.

Acquisitions will always have an impact on headcount and none so more than the megamerger, both through the instant boom in staff numbers and the inevitable “synergies” that are pursued in the years following, when big headcount reductions are typically made.

But in the past decade these companies have also been travelling over huge patent cliffs and through an R&D productivity crisis. Their responses to these problems have arguably shaped their patterns of employment just as much as the megamergers that, in certain cases, were considered the answer.

The substantial cuts to US sales forces that occurred ahead of big patent expiries will be one of the biggest employment shifts. More recently it has been R&D departments that have borne the brunt, as a result of various initiatives designed to improve the return on investment in drug research.

So it is interesting that, despite these huge restructuring programmes, total big pharma employment has actually shifted only marginally over the 10-year period. The push into emerging markets and huge expansions in workforces employed outside Europe and the US will be the main reason for this.

Last year saw a small retraction in employment at big pharma, and it seems likely that a gradual reduction in staff numbers will be the trend for the next few years. This will be driven by an increasing focus on niche or specialised therapy areas that require smaller sales forces and the ongoing intense pressure on boards to keep improving profitability.

If trends for divestments and demergers do gather pace, this group of companies could quickly lose big chunks of their employees to new organisations.

The growth of the other $30bn+ drug makers, top 5 
  No. of employees – year end                 
  2003  2008  2013    Change 12-13  Change 08-13  Change 03-13    % change 12-13  % change 08-13  % change 03-13 
Baxter  51,300  48,500  61,000    10,000  12,500  9,700    20%  26%  19% 
Teva  10,960  38,307  45,000    (948)  6,693  34,040     (2%)  17%  311% 
Novo Nordisk  18,756  27,068  38,436    3,705  11,368  19,680    11%  42%  105% 
Amgen  12,900  16,900  20,000    2,000  3,100  7,100    11%  18%  55% 
Actavis  3,983  5,070  19,200    1,500  14,130  15,217    8%  279%  382% 
Total other (14 companies)   120,857   171,003   251,023     30,989   80,020   130,166     14%   47%   108%  
For the full table please see the report 

Pharma management teams might be keeping a close eye on headcount, but the industry’s other big beasts are moving in the opposite direction.

Almost without exception the companies in the analysis have added staff over every period analysed. For many, like Teva, Valeant and Actavis, this has been done largely via acquisitions. But others, like Novo NordiskGilead and  Regeneron, have been growing almost exclusively organically.

Novo Nordisk is perhaps the most remarkable company in this regard. The diabetes giant has not bought any other company in the past decade yet has more than doubled its headcount, steadily expanding each year and creating almost 20,000 jobs in total.

Gilead has been more active on the M&A front, but these acquisitions have been skewed by research-stage companies that tend not have more than a couple of hundred employees. It has grown its employees more than fourfold in 10 years, with a big jump last year before the launch of its new hepatitis C drug,  Sovaldi.

In fact all the big biotechs – CelgeneBiogen Idec and  Amgen – have been strong job creators on the back of organic growth.

Drug launches are also likely to be at least partly responsible for the hiring sprees – Sovaldi in the case of  Gilead and  Tecfidera in the case of  Biogen Idec, for example.

While it is clear that big pharma will continue to dominate the employment prospects of the drug development sector, the firms working in their shadows represent a hugely important source of job creation.

For our full report, which includes:
• The biggest employers outside big pharma
• The sector’s biggest hirers last year
• The sector’s biggest hirers over the past five years
• The sectors biggest hirers over the past 10 years
please click here.

Source: EvaluatePharma

To contact the writer of this story email Amy Brown in London at AmyB@epvantage.com or follow  @AmyEPVantage on Twitter

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