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Industry Layoffs Last year’s surgeAbout 14,000 jobs are projected to be lost in the biopharmaceutical industry. While many hoped 2024 would be a turning point, job cuts are continuing and the worst may not be over yet, said Arda Ural, health sciences and wellness industry market leader at EY Americas.
Bristol-Myers Squibb recently Announced Molting Plan 2,200 jobs available By the end of next year, 860 positions in New JerseyBayer is 1,500 And there may be more to come. Restructuring InitiativesOther companies include: Takeda Pharmaceuticals, Bolt Biotherapeutics and Novartis Some have taken the axe in recent months.
The same issues that caused an increase in layoffs last year Drugs whose patents are expiring Ural said the pharmaceutical industry remains plagued by problems and a lack of funding, and while the big pharma cuts get all the attention, they’re not the whole story.
Ural said pharmaceutical job cuts accounted for half of the industry’s total job cuts, with biotech and other life sciences companies making up the rest. But the drivers of pharma and biotech job cuts are different. Drug companies, in particular, appear to be shedding weight as they adjust to new financial circumstances.
“While selling, general and administrative expenses have been stagnant at 29% for decades, drug company research and development costs have grown since 2000 from 12% of sales to almost 18% last year,” Ural said. Loss of drug exclusivity could further exacerbate this equation if a company’s pipeline is not strong enough to make up for the losses.
“Of course, each company has a different story, outlook and portfolio composition, but generally, if you look at the industry as a whole, the picture looks like this,” Ural said.
Biotech headaches are often caused by the return to reality from the COVID-19 era investment highs. 2024 EY Biotechnology Industry Report It found that 31% of biotech companies will run out of funding within a year.
“About a third of biotech companies are not in business,” Ural said. “So what do they do? They have to adjust their cash burn and cash outflows.”
But not all biotech companies face the same challenges.
“Though 31% of biotechs lack the cash to sustain operations beyond the next 12 months, making it tough to survive in the current business environment, biotechs with later-stage assets have a much brighter outlook,” the EY biotechnology report said.
Ural said it was difficult to determine whether laid-off workers were returning to new roles within the industry.
““Unfortunately, we don’t have the ability to track these numbers over time,” he said, but some jobs are in higher demand than others. “The skills that are more in demand are digital, AI, and market access.” He said.
Adapting to a new reality
Despite these challenges, there are signs that the workforce is beginning to stabilize as companies adjust their policies and look to bright spots ahead.
“The innovation is very strong,” Ural said. “I’m very impressed with the quality of the thinking and the science.”
And the rise of AI has the potential to create many new industrial jobs.
Typically depicted as a job-killer, EY-Parthenon Report As AI plays a key role in drug development, it is likely to drive employment in the biopharmaceutical industry.
“While AI technologies have the potential to cause significant disruption in the labor market by automating some tasks and displacing workers, they will also create new types of jobs and roles across many sectors of the economy, helping to offset AI-related job losses,” the report states.
Leveraging AI for biopharmaceutical discovery, development, commercialization and back-office automation requires the support of staff with specialized skills.
“I’m optimistic about the effectiveness of AI in attracting new talent,” Ural said.
The report says the technology’s true potential lies in its ability to perform higher-order thinking roles, rather than replacing lower-level workers.
“It is likely a myth that AI will replace low-skilled jobs and make them redundant, and developed countries may initially see greater potential for workforce augmentation,” the report said.
This would be in line with the historical trend of job growth amid increased automation.
“Employment levels have risen steadily over the past century because new technologies often create more jobs than they destroy,” the report said.
The Road Ahead
Still, mass layoffs will probably continue at their current pace through the second half of the year.
“There are two potential positive catalysts we’ve been waiting for,” Ural said.
The first is the possibility that the Federal Reserve will implement a much-needed interest rate cut. European Central Bank They’ve already moved to cut interest rates from a record 4% as inflation finally starts to subside, but the Federal Reserve has yet to follow suit. Ural predicts those cuts will come in the fall, which could be a game changer for the industry. A pause on interest rate hikes It was the trigger He expects a surge in M&A deals to occur between the end of 2023 and early 2024. But until that happens, the outlook for the industry is likely to remain cautious.
“Companies expect fiscal policy to shift towards lower interest rates within the next six to 12 months, which could spark a recovery in biotech investment,” the EY biotechnology report said.
Another uncertainty is the upcoming November election, whose potential impact will not be clear until the votes are counted, although both candidates are well-known figures with well-understood policy priorities.
“If we get through these two periods of uncertainty, I think we can actually get back to normalcy in 2025, and the worst may be over by then,” Ural said.
