When German pharma Boehringer Ingelheim completed a $12.5 billion asset swap with France’s Sanofi in 2016, BI traded its consumer health business for Sanofi’s veterinary unit and agreed to make the French cities of Lyon and Toulouse the center of its animal health business. Now that plan is coming to fruition—and about 300 jobs are getting axed in the process.
BI will cut 327 of its 2,800 workers in France and create 32 new jobs, for a net loss of 295 positions, Jean Scheftsik de Szolnok, BI’s president in France, said in an interview with FiercePharma. He added that 130 of the job losses will come in animal health, with the rest coming from the human health side. Of the new jobs, a half-dozen will be created in animal health.
But the layoffs are more about the reorganization than they are about a need to conserve resources, de Szolnok said. In fact, BI has a long-term plan to invest €335 million ($380 million) in its France-based animal health R&D and production facilities. “BI is making a big strategic commitment to animal health,” and France is becoming an important hub of the industry, he said.
BI’s expansion in animal health turned heads when the Sanofi deal was first announced—and it’s even more of a standout now that so many Big Pharma companies are getting out of that business. As part of the deal, BI’s Vetmedica unit gained huge brands, such as the parasiticides for dogs Heartgard and NexGard, not to mention 13 research facilities and 18 manufacturing plants. At the time, the deal launched Vetmedica into the No. 2 spot on the list of the largest animal health companies, just behind Pfizer spinoff Zoetis.
As a result of the asset swap, animal health accounted for 22% of BI’s $18 billion in sales in 2017, up from 9% the previous year. NexGard was the unit’s top-selling product, bringing in €546 million ($620.7 million) for the year.
BI will soon be virtually alone among Big Pharma companies that have chosen to keep animal health and human health under one roof. Just two weeks ago, Bayer said it would separate its animal health unit as part of a major shakeup that will include the loss of 12,000 jobs. The selloff comes in the wake of Bayer’s $63 billion acquisition of Monsanto and will give the company much-needed cash to prop up its pharma pipeline.
Bayer’s animal health castoff came just months after Eli Lilly revealed a plan to shed its own veterinary business, Elanco. Lilly spun off Elanco in an initial public offering in September, raising $1.5 billion. The company’s share price has since soared from $24 to $33.38—not bad for a business that brought in flat sales for 2017 of $3 billion and that missed its earnings goal by almost half, with $552 million in pretax profits.
Now Merck is the only Big Pharma that stands with BI in maintaining a commitment to animal health, though it, too, has faced pressure to get out of the business. Merck CEO Kenneth Frazier has consistently responded to questions from analysts about whether holding on to veterinary products is a good strategy by pointing to animal health as a source of consistently solid margins.
BI’s de Szolnok said his company is undeterred by the broader industry trend to separate animal health from human health. BI’s management team believes research breakthroughs in animal health can complement R&D on the human-health side and vice versa, he said.
BI has faced some challenges of late on the human side of the business. It has been embroiled in a patent fight over its biosimilar version of AbbVie’s blockbuster drug Humira, for one. BI recently gave up its plans to launch a biosimilar of the product overseas, choosing instead to gamble that it will be able to roll the product out in the U.S. before 2023, when a raft of biosimilar contenders are all expected to hit the market.
De Szolnok said BI is working diligently toward becoming the top player in the product categories it competes in, both in human and animal health—a lofty goal it set in 2016 when it embarked upon the Sanofi asset swap. “We redefined the strategic priorities of the company,” he said.
Meanwhile, BI is not the only company shedding jobs in France, even as protests rock the country. Sanofi came out with reorganization news of its own last week, announcing plans to let go of 670 employees in the country between now and 2020. But it also plans to hire 250 new people with "relevant skills," the company said.