The 3rd quarter of 2012 was not so great for chemical, pharma firms

From this week's C&EN, I see storm clouds brewing. From Melody Bomgardner, 3rd quarter earnings for chemical companies were not looking so great:

Against the backdrop of a slowly strengthening U.S. economy, chemical firms saw earnings slide again in the third quarter, in large part because of rapidly declining prices. Out of 21 firms tracked by C&EN, Dow Chemical, DuPont, and eight other companies reported lower sales and earnings in the quarter compared with last year. 

The results prompted promises by chief executive officers to heighten the cost-cutting moves they have been implementing throughout the postrecession recovery. As they announced financial results, Dow CEO Andrew N. Liveris and DuPont CEO Ellen J. Kullman unveiled additional restructuring plans, including layoffs, to be implemented in the fourth quarter and beyond (C&EN, Oct. 29, page 7). Then, one week after Dow’s Oct. 23 announcement, the company amended its tally of layoffs, saying it will cut 3,000 positions in the next two years, an increase of 600 from the original statement and equal to 6.3% of the firm’s workforce.

From Ann Thayer, same thing goes for the pharma companies:

For the third consecutive quarter, no relief came as combined sales and earnings declined at the major pharma companies tracked by C&EN. Overall, quarterly sales fell 5.0%, and earnings for the companies that reported them dropped 9.1%. For the first nine months of the year, sales were down 3.0%, while earnings declined 5.4%. By comparison, in the first half of 2012, sales slipped just 2.1% and earnings were down 3.5%. 

Four companies reported double-digit drops in sales, and five had similar-sized slides in earnings. Hardest hit was Bristol-Myers Squibb. Its third-quarter sales plummeted 30.1% to $3.7 billion, and earnings dropped by an even larger 34.3% to $685 million. U.S. patents expired in March on its high blood pressure drug Avapro and in May on the blood thinner Plavix. Excluding these two products, the company’s sales were up 7% compared with the third quarter of 2011.

Does anyone foresee another round of layoffs from Big Pharma? By now, I can't see how they could cut more (he said naively.)

Human stories abound in C&EN's employment outlook issue

Credit: C&EN

From Linda Wang's excellent, yet excruciating story on unemployment among pharma chemists, some terribly sad stories:

“I’m listed as employed,” says “Eric,” 46, who was laid off in 2007 from his position as a senior chemist at Johnson & Johnson and is now an adjunct professor at three different colleges and universities. “I got reemployed, but is this what employment should be like for someone at my level?” [snip] 

...He teaches as an adjunct professor on Mondays, Wednesdays, and Fridays, splitting his time among three colleges and universities that are 50 to 70 miles apart. He leaves around 10 AM and doesn’t get home until after 11 PM, leaving little time to spend with his twin daughters, who are nine years old. 

Because of the length of his commute and the high cost of gas, Eric sold his car and bought a used Suzuki with better gas mileage. “The previous car was costing me about $1,000 a month in gas, and that was not sustainable,” he says. He has roughly $400 left in his 401(k). “Four hundred bucks is no 401(k); it won’t buy you a plane ticket anywhere,” he says. But he’s not one to dwell on his difficulties. “It’s tight financially, but the fact is we’re still surviving. It’s just a little harder, that’s all.”

I found this comment on ACS' Salary Survey data kind of amusing:

“The data that ACS has is for the most part self-reported, and that’s always going to underreport the truth,” says Lee H. Latimer, a consultant and longtime ACS volunteer, who was laid off from Elan in 2011. “Many may have a job, which keeps them from collecting unemployment, but they’re not working either in their field or in a position that comes anywhere close to matching their previous income”—meaning, he says, that they’re effectively underemployed.

And how about the PMP, that certificate of awesomeness from a couple of years ago?:

“Michael,” a Ph.D. organic chemist in his 50s, living in California, knows just how unsettling this roller-coaster ride can be. Since he was laid off from a biotech company in 2008, he has applied for more than 10,000 jobs, some 7,000 related to the chemical sciences and 3,000 outside of science. 

Meanwhile, Michael has earned certifications in clinical trial design and management, regulatory affairs, quality assurance and control, and project management. But “by the time that I finished, not only did the number of these jobs decrease, employers weren’t going to take anybody who doesn’t have experience. The training is not enough for them,” he says. “I went and retrained myself, but I still cannot get a job. 

I don't think it's a coincidence that most of the people in these articles are in what is supposed to be the prime of their careers (late 30s to 50s). That it has become brutal for mid-career chemists (the people who are probably going to be most productive and have the most ability to innovate) is fundamentally clear. It is beginning to be clear that not a single organization (not ACS, not the pharma companies, no one in government) has any idea what to do about it. What a shame.

C&EN's 2012 employment issue: the numbers

I don't want to have the new numbers released from the ACS Department of Member Research and Insights from the March 2012 ACS Salary Survey to be lost in the shuffle, so here they are, pulled out of Sophie L. Rovner's article, which is worth reading in full:

• Overall member unemployment: 4.2% 
• Ph.D. member unemployment: 3.4%
• B.S. member unemployment: 5.9%
• Industrial member unemployment: 5.4%
• Academic member unemployment: 2.2%
• % of members unemployed at anytime during 2011: 8.2%
• % of members unemployed at anytime during 2010: 8.4%
• % of newly graduates unemployed in October 2011: 13.3% 
• % of newly graduates unemployed in 2010: 10.6% 
• % of Ph.D. graduates unemployed in October 2011: 8.8%
• % of B.S. graduates unemployed in October 2011: 13.6%

Also, check out this chart from the article (right), which indicates the brutal reality facing new graduates in chemistry.

Credit: C&EN*

Anyone who buys into facile claims that America needs more scientists and more chemists needs to be able to explain this graph. 

Also, the larger picture for the chemical manufacturing sector:

Zeroing in on the U.S. chemical manufacturing sector, employment totaled 799,600 on a seasonally adjusted basis in September 2012, up 0.2% from the prior month and up 0.7% from September 2011, according to preliminary figures from BLS. That’s good news, but it’s little comfort to the hundreds of thousands of people who lost their jobs in prior months. At the start of the Great Recession in December 2007, employment in the sector was 857,600. Five years earlier, it was 921,500. And 10 years before that—in December 1992—chemical manufacturing employees numbered 1.03 million.

Yikes.

*[NOTE: Corrected number for 2004 for ACS members. Numbers include unemployed and seeking employment. Data for 2012 on new graduates are not yet available. SOURCES: ACS Starting Salary Survey, ACS Comprehensive Salary and Employment Status Survey.]