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As we head into the last few weeks of 2016, drug makers are handing out pink slips instead of holiday bonuses.
As we head into the last few weeks of 2016, drug makers are handing out pink slips instead of holiday bonuses. Several major pharmaceutical companies have announced layoffs in recent days: Mylan (NASDAQ:MYL), Eli Lilly (NYSE:LLY), AstraZeneca (NYSE:AZN, LON:AZN), Sanofi (NYSE:SNY, EPA:SAN) and Endo (NASDAQ:ENDP, TSX:ENDP) are all restructuring their businesses and slashing jobs.
For some of these companies, the news can’t come as much of a surprise. Mylan, for example, has had a challenging year, with its CEO called before congress and shareholders filing a class action lawsuit against the drug maker. Besieged and embattled, with YTD losses of 33.66 percent, Mylan needed to do something to reassure shareholders.
They decided cutting up to 3,500 jobs might do it. On December 7, 2016, Mylan announced plans to lay off ten percent or less of its overall workforce. The drug maker is adamant that 2016’s epiPen scandal had nothing to do with the decision, instead pointing to Mylan’s acquisition activity in the past year.
Endo has seen even greater losses—75.77 percent YTD, to be exact. The company ushered in a new CEO in September …and he’s now showing 375 employees the door. Endo’s pivot away from the pain medication business has brought on the layoffs, which may be unsurprising to some investors.
When it comes to other companies, however, the news might be more unexpected. Sanofi’s stock, for example, has stayed fairly stable this year—to date, it’s lost just 3.96 percent. Yet Sanofi is making some significant slashes: its American diabetes and cardiovascular unit is seeing a 20 percent reduction in staff.
That’s because Sanofi’s diabetes business is underperforming, thanks to the rise of generic competition and delayed drug launches.
It’s not the first time Sanofi downsized this year. In early February, the drug maker dropped some 500 workers in France.
Massive layoffs can be a warning sign: a company is struggling to increase its revenues. But interestingly, they can also trigger an increase in share price. In 2013, for example, Merck cut 8,500 jobs—and saw immediate gains of two percent.
In fact, all of the companies named above saw their stock rise after announcing the coming layoffs. And while the staff reductions can hardly be termed ‘massive,’ their ramifications do bear watching, particularly as we head into 2017.
Here’s how the stock market reacted to the news, plus what each company’s share price looks like now.
Eli Lilly
On December 2, 2016, Eli Lilly confirmed it would lay off several hundred US sales representatives in the new year. It closed the day up 2.64 percent on the New York Stock Exchange.
Mylan
Mylan announced its planned layoffs on December 7, 2016. It lost 3.8 percent on the heels of that announcement.
AstraZeneca
AstraZeneca announced its own coming layoffs on December 8, 2016. By the following day, it had gained 6.86 percent on the London Stock Exchange.
Endo
That same day, Endo also announced plans to downsize. It had gained 3.62 percent by market close.
Sanofi
On December 9, Sanofi informed employees and the world of its intention to downsize. It gained 1.66 percent on the Euronext Paris.
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Securities Disclosure: I, Chelsea Pratt, hold no direct investment interest in any company mentioned in this article.
