By Bruce Japsen
Posted Wednesday at 9:51 a.m.
Abbott Laboratories said Wednesday that it would cut 1,900 jobs, or 6 percent, of its U.S. workforce in the wake of a series of disappointments in its drug development pipeline, triggering a restructuring of pharmaceutical commercial and manufacturing operations.
Of the cuts, about 1,000 would be in manufacturing operations in Illinois where the largest concentration of Abbott’s estimated 90,000 employees around the world are at its sprawling headquarters in the northern Lake County suburbs of Chicago. The company said about half of the job cuts would take place now with the remainder over the next several years.
The North Chicago-based drug giant said last week, for example, that it would hold off seeking U.S. approval of an experimental psoriasis drug treatment after feedback from the Food and Drug Administration, which has concerns about the drug’s safety. Abbott has not disclosed the issues with the drugs but analysts and studies have indicated potential risks to the heart.
In addition, Abbott has not been able to bring other treatments to market. In December, it decided to stop developing the cholesterol drug Certriad, which combines drugs already on the market.
Abbott cited “the challenging regulatory environment” for the decision to cut jobs. The company said costs of the “cost reduction initiative” would be nearly $300 million over the next several years.
“It’s frankly more difficult to get products approved,” Abbott Chairman and Chief Executive Miles White said Wednesday morning on a conference call with analysts and investors that lasted more than an hour. “There’s an awful lot of pressures on this industry. At the end of the day, you manage all of these things.”
Though the pharmaceutical industry was a critical supporter of U.S. health reform legislation signed into law last year, White complained that the environment in the wake of the overhaul would also contribute to challenges. Such pressures, analysts say, include health plans watching their expenses more closely and being unwilling to approve drugs and medical products that offer patients little benefit yet are priced higher than older cheaper medications.
Company observers say the job cuts were needed because the company is no longer expected to reap new revenue from the cholesterol drug Certriad or the psoriasis drug in 2011. Drugs such as Certriad are criticized by health insurers and consumer groups because they combine older treatments to extend drug company monopolies for brands that are not all that innovative.
Despite drug development problems, Abbott has made aggressive strides to bolster its drug development operation, which had an effect on fourth-quarter profits. White said the company has to continue to make sure its “pipeline is robust.”
Abbott said fourth-quarter 2010 profits dipped 6 percent thanks in part to costs of restructuring and integrating recent acquisitions. The company said earnings fell to $1.4 billion, of 92 cents a share in the fourth quarter last year, compared to $1.5 billion, or 98 cents a year earlier.
Abbott attributed the dip to costs related to a “restructuring of its U.S. pharmaceutical business to streamline commercial and manufacturing operations.” In addition, the company had expenses related to its integration of its acquisition last year of Solvay Pharmaceuticals.
Excluding such items, which the company accounted for as after-tax charges of $346 million, or 23 cents a share, Abbott said profits would have risen nearly 10 percent in the fourth quarter, to $2 billion.
“Despite a very challenging environment, 2010 was another productive year,” White said.
Abbott’s sales were strong overall, rising 13.4 percent, to $9.9 billion, in the fourth quarter. The company’s sales continued to be driven by global pharmaceutical sales and its flagship biotech drug Humira, which is prescribed for a variety of autoimmune disorders such as rheumatoid arthritis and psoriasis.