IHS Global Insight Perspective | |
Significance | Approximately 4,500 positions, including roughly 1,700 in Germany, are to be cut by 2012 in a restructuring plan that will cost the pharma company 1 billion euro. |
Implications | The announcement comes as Bayer's sales and earnings are under pressure from generic products, growing R&D costs and the effects of healthcare reforms in the United States and Europe. |
Outlook | The 1-billion-euro restructuring plan will allow it to save around 800 million euro per year as of 2013. |
Bayer Axes 4,500 Jobs
Bad news continues to flow in Europe where Bayer AG (Germany) has been the latest pharmaceutical company to announce job cuts in order to refocus its resources towards growth and innovation. The 1-billion-euro (US$1.37-billion) restructuring plan unveiled last week by the German company will allow it to save around 800 million euro per year as of 2013. About half of this amount is to be reinvested in R&D projects, marketing and emerging markets. A total of approximately 4,500 jobs, including roughly 1,700 in Germany, will be axed by 2012 while some 2,500 new positions will be created over the same period, particularly in the emerging markets.
New Eye Drug Matches Lucentis in Late-Stage Trial
Meanwhile, Bayer reported progress in its development pipeline as two Phase III studies demonstrated that its experimental drug VEGF Trap-Eye (aflibercept ophthalmic solution), developed in collaboration with U.S. biotech Regeneron, dosed every other month is as effective as Lucentis (ranibizumab, Roche, Switzerland) dosed every month. The primary endpoint was statistical non-inferiority in the proportion of patients who maintained (or improved) vision over 52 weeks compared with ranibizumab.
In the North American study, 95% of patients receiving VEGF Trap-Eye 2 mg every two months achieved maintenance of vision compared with 94% of patients receiving ranibizumab (Lucentis) 0.5 mg dosed every month. In the international study, 96% of patients receiving VEGF Trap-Eye 2 mg every two months achieved maintenance of vision compared with 94% of patients receiving ranibizumab (Lucentis) 0.5 mg dosed every month.
Outlook and Implications
A high level of investment will be needed in the next few years as Bayer's revenues will increasingly be under pressure from generic competition and rising R&D costs. Bringing new products to the market and expanding activities in the emerging markets will in that context be the next challenges for Bayer Healthcare whose third-quarter sales jumped 8.5% year-on-year to 4.3 billion euro, albeit growth in its pharma division only matched the prior-year period when adjusted for currency and portfolio effects. Bayer Healthcare's revenues are anticipated to slightly grow only after adjusting for currency and portfolio effects during 2010 due to pressure from generic competition and healthcare reforms.
The German giant follows Roche (Switzerland) which announced a drastic cut last week in response to government austerity measures and as a result of setbacks on the R&D front. Both companies unveiled their cost-cutting plan a few days after the German parliament passed a major austerity reform (AMNOG) which is expected to cost more than 2 billion euro per year to manufacturers of innovative drugs. The reform which put an end to free pricing in Germany will add to the constant pressure felt on the P&R front in Europe, and to the healthcare reform recently implemented in the United States.
On a more positive side, Bayer HealthCare and its U.S. partner Regeneron are planning to seek regulatory approval for their eye drug in the first-half of 2011 in Europe and the United States. Based on results from the two late-stage trials, VEGF Trap-Eye appears on track to be a serious rival to the blockbuster Lucentis (ranibizumab, Roche, Switzerland). Lucentis generated revenues of almost 1.1 billion Swiss francs (US$1.1 billion), up 29% y/y, over the first nine months of 2010.