You Can Blame Bristol-Myers' Layoffs on Failed Launch of Me-Too Diabetes Drug
Bristol-Myers Squibb (BMY) will lay off 3 percent of its 28,000 employees -- about 840 jobs -- following its failed launch of the diabetes drug Onglyza and the imminent demise of its blockbuster blood thinner, Plavix. Plavix's revenues for BMS were $1.6 billion in Q2 2010, or 34 percent of the company's sales. When Plavix's patent expires in 2012, and cheap generics flood the market, BMS will probably have to lay off a lot more than 3 percent.
Executives at Sanofi-Aventis (SNY) will be watching the layoffs at BMS closely -- Sanofi is BMS's marketing partner of Plavix, and that company is just as dependent on its revenues.
BMS had every reason to believe that the recent launch of Onglyza might come to its rescue. Onglyza is a me-too version of Merck (MRK)'s Januvia, which is a massive success. Januvia made $600 million for Merck in Q2. Onglyza should have captured 20 percent of that market simply by showing up and providing an alternative for doctors and patients who like that class of drugs. Instead, Onglyza is almost certainly a money-loser for BMS. It made only $28 million for BMS in Q2.
One possible reason for the failure is the price. Onglyza costs roughly the same amount as Januvia. This means that doctors are given a choice of two similar drugs, but Merck's version has been on the market for years and has an established safety record. When you've got a choice of two products at parity and one has a safety record that the other doesn't, it's not hard to figure out who will win that contest. BMS needs to wake up and start a price war if it is to start cutting its losses in this category.
So whose jobs will go? Clearly anyone working on the Plavix brand ought to update their resume. "Ong-loser" is still in launch phase and BMS may yet need its staff there if it wakes up and smells the price discount coffee.
CEO Lamberto Andreotti also might want to check out these threads on CafePharma, the anonymous gossip site for pharmaceutical sales reps. It turns out that BMS Studio, the company's internal ad and graphic design agency, is wildly unpopular. Managers are desperate to use outside resources rather than the Studio.
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