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Trimming the fat
ABBOTT PARK, Ill.—As it works toward shedding the metabolic disease discovery and development part of its pharmaceutical business, Abbott Laboratories revealed in late February that it would cut nearly 200 drug research jobs, primarily from the company's offices in northern Illinois. In an unrelated move, the company is also eliminating "several hundred" sales rep positions, related to the $3.7 billion acquisition of specialty drug maker Kos Pharmaceuticals Inc., in November.
The roughly 200 scientific jobs are a small portion of the research and development workforce, notes Abbott spokesperson Scott Stoffel, given that the company employs some 7,000 scientists on its global staff of 65,000 and spent more than $2 billion on R&D in 2006. But it is significant in that it represents an entire area of study—a research unit that deals with the early discovery of treatments for metabolic disorders, primarily obesity and diabetes. The company's other four primary research areas, which aren't set to experience cuts in the foreseeable future, are immunology, infectious disease, neuroscience and pain, and oncology.
"We reshaped the pharmaceutical discovery strategy to concentrate on fewer specific diseases and better position the company to discover and advance medications," Stoffel says. "Metabolic disease largely involves obesity and diabetes, and these have turned out to be particularly risky markets that just haven't met our threshold for success. Obesity has been particularly risky. In general, we felt the metabolic disease area was challenging scientifically and that our resources are best utilized by focusing on fewer areas where we can make the greatest impact for patients."
For Abbott, the monetary investment isn't worth the return, speculates Dr. Kenneth G. Krul, senior analyst with Kalorama Information, noting that the diabetes market, for example, is already loaded with products that work well.
"Metformin is still the most-prescribed product for Type II diabetes and probably will be for a long time to come." Krul says. "In recent years, we've had a couple of new compound classes come out, but none has expanded and, frankly, they haven't added a whole lot to the pot. A lot of old products have been phased out, but what we've got is pretty much doing the job—plus, with alternative-delivery insulin, it is likely that a lot of Type II diabetics will eventually find themselves on once-daily dosing."
As for obesity, Krul says, lipids represents a very busy market, adding "Where else do you really have to go? In my opinion, Abbott pulled in its horns because they decided there wasn't enough bang for the buck."
Stoffel said the drug discovery positions are being eliminated on a "staggered" basis and employees will leave Abbott on different dates depending on their work. There is no specific time frame for the cuts to be completed, and any metabolic disease drug candidates already in development will continue to be pursued.
"It's only the preclinical staff that we're touching," he says. "We're not shutting down drugs already in the pipeline."
The sales jobs that are being cut are directly related to the acquisition of Kos Pharmaceuticals, but they are not simply cuts for the sake of recouping money, Stoffel says. As Abbott works to integrate the entire company into its fold, it has found that there is duplication in the ranks of sales representatives, particularly in the primary care sales force. To reduce the overlap, cuts will be made at both companies. At this point, Abbott isn't providing a breakdown of just how many jobs would be cut from each side. However, Stoffel does say that Abbott expects the integration of Kos to be largely finished by the end of the first quarter of this year.