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630 jobs, San Francisco 597 jobs, and San Diego 256 jobs. Whether there are good matches between the skill sets of those laid off and those seeking to hire new employees remains to be determined in all locations.
When Eli Lilly acquired ICOS in 2006, Bruce Carter, then the CEO of ZymoGenetics, remarked, “For the biotech industry in Seattle, it’s a very bad thing – it’s an industry where the bigger it gets, the bigger it gets.” Unfortunately, I think the converse is also true: the smaller it gets, the smaller it gets. And to me it feels like we are slowly diminishing year by year. It’s death by a thousand cuts, with a few deep gashes mixed in.
Recent Job Losses Are Only a “Blip”?
I’ve seen predictions that most of the laid off workers will find jobs here, as well as comments from others who characterize these layoffs as just a “blip” on the local biotech scene. I agree that most of these people will find jobs, but it won’t happen quickly, many won’t be in Washington state, and some may not even be in a traditional biotech setting. I’ve posted on my website a summary of Seattle area biotech layoffs starting in 2002 with Amgen’s acquisition of Immunex. Some of the figures are rough estimates since the companies wouldn’t release the actual number of displaced employees. The total number of biotech jobs lost in the Puget Sound region in the past dozen years: about 5,200. The numbers are actually a bit worse than that because final layoffs were not announced when many companies (e.g. Corixa, Targeted Genetics, Allozyne) shut their doors.
The Washington state life sciences industry just surpassed the $1 billion mark, which is great news. Unfortunately, tracking hiring is problematic in the biotech sector. Jobs are filled in drib and drabs, and many are ambiguously classified as “life science” positions. This term encompasses agricultural science, medical devices, academic faculty jobs, and a great many others. We can’t readily see how biotech is faring compared to other parts of the sector, such as medical devices or academic positions, which is why I’ve suggested the term “life sciences” should be retired. I believe there are fewer biotech jobs now than there were a dozen years ago, even as other bioscience sector employment has grown. Seattle does have a lot of biotech companies, but most of them could hold an all-employee meeting in your average sized living room without needing to rearrange the furniture. This is not likely to change substantially in the near future. If you didn’t find the layoff numbers convincing, take a look at Luke Timmerman’s national geographic analysis of biotech companies that had, as of December, at least $100 million in cash and short-term investments. Seattle was the only city on the list that had fewer such companies in 2013 than it did in 2003. Many of the other cities, such as Boston, San Diego, and San Francisco, have expanded their biotech sectors greatly during this time.
What Happens To The People When Biotechs Get Acquired?
There are some patterns that are repeatedly seen:
1) Keep all of the employees and add additional resources. This rarely seems to happen; I don’t recall seeing many (any?) examples of this in Seattle.
2) Keep “key” employees and send the rest packing (e.g. Immunex, ZymoGenetics).
3) Strip out the assets and close the doors (e.g. ICOS, Corixa).
The fate of the employees generally depends on the motives for the acquisition. These principally occur for the following reasons:
1) Acquire marketed drug(s) to expand offerings in an already strong product area, or a new pipeline of medicines in development to add revenue later.
2) Diversify the larger company into a new therapeutic area.
3) Control a key platform technology that can be used to build into new products as well as bring in licensing fees.
4) Acquire a company to keep its technology out of the hands of competitors.
How this all works out depends on the acquirer’s ability to accurately evaluate the assets of the company they’re buying. Sometimes this works out well, other times not so much. It often takes years to figure out if an acquisition was worthwhile, although sometimes these deals blow up quickly when diligence is not done as carefully as it should be.
There are three current outcomes for most young biopharma companies: they fold, get bought out, or live in the middle ground long enough until they drift one way or the other. This explains the appeal of “semi-successful” companies that survive and thrive. As noted above, there’s no practical way to identify companies that are going to be “semi-successful” at an early phase of their growth and development. I use the term to illustrate the somewhat idiosyncratic nature of the biopharmaceutical business. It may be hard to imagine how one could lure a “semi-successful” company into moving to Washington state, since most of its value is contained in the collective skillset of its employees, and not the revenues produced by its drugs. However, it can happen, as evidenced by Sarepta Therapeutics’s (NASDAQ: SRPT) move from the Puget Sound region to the Boston area. The announced rationale for that move was the unavailability of workers in the Washington state region with experience in developing drugs for orphan diseases. Why such individuals couldn’t be recruited here was left unexplained.
We do have a number of collective science skill sets here that are strong, including immunology, cancer research, diabetes, gene sequencing and genomics, and world health. These may be areas that we want to focus future investments on for competitive reasons. One issue that we need to come to terms with is dealing with Amgen’s departure from Washington state. What does it mean for our biotech community? I’ll share my thoughts on that in tomorrow’s post.
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