Hikma has already cut 200 jobs since picking up generics business Roxane Labs from Boehringer Ingelheim, but more layoffs are coming.
As CFO Khalid Nabilsi told Reuters, another 200 positions are slated for elimination as the company consolidates its manufacturing facilities and stateside distribution centers.
The Jordanian company expects to wrap up the manufacturing slim-down before year’s end. On the distribution side, it’ll be shuttering a Memphis, Tennessee-based center later this year, too, Executive Chairman Said Darwazah told investors on the company’s fourth-quarter earnings conference call.
Last fall, the company said it would close its plant in Eatontown, New Jersey, jettisoning about 250 jobs, and consolidate the production in plants in Jordan and in Columbus, Ohio, a former Roxane Laboratories facility.
It hasn’t been an easy go for Hikma since it nabbed Roxane back in 2016. The company cut revenue guidance for the division three times last year, thanks to mounting pricing pressure in the knockoffs sector that Hikma doesn’t expect to go away any time soon.
“Improving profitability is essential for the access of this business especially in the coming couple of years, when we expect a high level of price erosion to continue,” Darwazah said.
And a major regulatory setback at the hands of the FDA hasn't helped, either. Earlier this week, the agency sent Hikma back to the clinic with its copy of GlaxoSmithKline respiratory blockbuster Advair, delaying a potential launch until 2020.
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While it is cutting cutting the Eatontown facility, it is investing elsewhere in the U.S. and globally. Nabilsi told analysts that more than half of its $107 million in 2017 capex expenditures was invested in the U.S. to maintain and expand the manufacturing capacity and capabilities of its injectable and generic businesses. Some was also spent on a plant in Portugal which received an FDA warning letter in 2014.
Of course, Hikma has hardly been the only copycat maker forced into cost cuts by pricing pressure. Generics king Teva—the previous employer of brand-new Hikma CEO Siggi Olafsson—revealed late last year that it would slash a whopping 14,000 jobs, and analysts were quick to grill Hikma’s new skipper on how the two companies compare in terms of cost-saving potential.
While Olafsson likened that comparison to “apples and oranges,” he did point out an opportunity to move more products into Columbus, Ohio- and Jordan-based plants in order to improve efficiency.
“I think there's opportunity in the cost of goods sold that will take time of course, but I feel we have the ideal scenario,” he said, adding that “we have both really efficient plants.”