Biotech firms hand out the pink slips
San Francisco Business Journal
January 13, 2003
Uncertainty over future funding is prompting firms to thin their ranks now
Daniel S. Levine
Biotechnology companies, viewed by many in the Bay Area as the economic engine to supplant the sputtering technology sector, seem instead to be taking a cue from it: An increasing number are laying off employees.
In recent weeks Applied Biosystems Group of Foster City announced it would cut 400 staff and 100 contract and temporary employees. Incyte Genomics said it would cut 260 jobs or 37 percent of its staff and Deltagen Inc., which in October said it would slash 130 jobs, slated another 120 positions for elimination bringing its total to 250, or about 55 percent of the company.
"It's depressing. All we were hearing for the last two months of last year is that nobody is hiring at all. If they were doing anything, they were laying people off," said Pamela Bailey, director of Bioview.com, an online biotechnology career site. "With the economy and what's going on with Iraq and Afghanistan, people are paranoid, and Imclone didn't do wonders for biotech stocks. There are companies that are still hiring, but it's not the little companies or even the mid-sized companies."
During the second half of last year, an estimated 50 companies in the biotechnology industry announced layoffs, with most ranging from 10 percent to 30 percent of staff. To a large extent, the layoffs represent less of a performance crisis for the research-driven industry than a fiscal one. Companies have grown uncertain whether they will be able to raise money in the capital markets when they next need to. As a result, many have turned conservative, choosing to table early-stage programs and focus on their most promising products that are closest to market.
"There is a fair amount of new company formation that is hiring, but in general the lion's share of the small- to mid-cap companies are in a cash-preservation mode, assuming that the capital market for 2003 is going to be relatively difficult," said Scott Morrison, U.S. leader of the life sciences practice of Ernst & Young. "In general, most CEOs don't like their cash to be depleted below one or two years' cash on hand. They make moves well in advance to reduce the force, given their very negative presumptions about what the capital markets will look like between now and the next two years."
Observers of the biotechnology job market said there continues to be strong demand for certain types of biotechnology jobs, particularly at large biotechnology and pharmaceutical companies that are trying to increase their biotechnology presence. In particular, clinical researchers and quality-assurance personnel continue to be sought after.
At the same time, other workers laid off in the biotechnology industry may find greater competition for what jobs there are because people who have worked outside of the industry have been trying to move in as the buzz on the street continues to be that biotech is hot.
"You are getting a glut of candidates — more business development and sales types," said Rich Kneece, CEO of Mass Tech Corp., which operates the HireBio.com career site. "There are certain areas such as production where there is a dire shortage of people. If you have those qualifications, you are going to land a job."
Rather than see the current round of layoffs as some bursting of a bubble or structural change in the industry, industry proponents argue it is a natural evolution as companies mature and focus their efforts after a period of large investment and rapid expansion.
"I'm convinced there's steady growth, but it's not the exponential growth we were seeing in 1999 and 2000. I don't feel any alarm," said Sue Markland Day, president of the Bay Area Bioscience Center. "I'm not sure the slowdown is reflecting anything other than this overall stock-market crisis."