Amidst Reimbursement Challenges, Companies Turn to Layoffs; Prenatal, Newborn Screening Segments Hit
Ongoing economic forces continued to mount pressure culminating in late-summer layoff announcements across diagnostics companies both large and small. Bryan Brokmeier, senior equity analyst for life science tools and diagnostics at Maxim Group, tells DTET that these layoffs are driven mostly by industrywide forces, as opposed to company-specific situations. Many companies are turning to restructuring to address macroeconomic concerns, including continued slower global economic growth and the ripple effects of sequestration’s impact, Brokmeier says. Additionally, lagging molecular reimbursement is hitting company revenues. As a result, companies are focused on cutting costs and “driving margin expansion.” The latest announcements follow combined head count reductions of close to 1,000 employees made earlier in the year by Affymetrix, Agilent, Bruker Biosciences, and others. Sequenom (San Diego) is reducing its workforce by 75 employees as part of a reorganization, according to an August regulatory filing. The move will cut compensation-related and future operating expenses by $10 million on an annualized basis, although it will record $1.2 million in severance-related expenses during the third quarter. For the quarter ending June 30, the company reported a 91 percent increase in revenues ($34.9 million versus $18.3 million a year ago), which fell way below analyst estimates of […]
- Sequenom (San Diego) is reducing its workforce by 75 employees as part of a reorganization, according to an August regulatory filing. The move will cut compensation-related and future operating expenses by $10 million on an annualized basis, although it will record $1.2 million in severance-related expenses during the third quarter. For the quarter ending June 30, the company reported a 91 percent increase in revenues ($34.9 million versus $18.3 million a year ago), which fell way below analyst estimates of $44.1 million. The positive rise in tests accessioned (38,000 of the patient samples tested during the quarter were MaterniT21 PLUS test, up from 35,000 during previous quarter) only exacerbated payment delays and coverage denials resulting from the new 2013 molecular pathology coding and payment system. As a result, Sequenom Chief Financial Officer Paul Maier said in a statement that, “going forward, we plan to implement expense reduction initiatives to reduce our net operating loss as we work to improve reimbursement.” In a late July research note, Brokmeier expressed concerns that although “the company plans to curtail service in order to focus on covered patients and accelerate its profitability . . . if competitors don’t follow Sequenom’s lead, we expect the service curtailment to negatively impact the strength of its leadership position, but not eliminate it.” Additionally Brokmeier says that expense-reduction initiatives won’t “be sufficient to offset our reduced revenue outlook” and now believes the company won’t turn a profit until 2016.
- GeneNews (Toronto, Canada) in mid-August announced a restructuring to sharpen its focus on the commercialization of ColonSentry while reducing the company’s cost structure, including reducing staffing levels by 60 percent. The company said the staffing cuts will concentrate on reducing internal research, while maintaining its business development, commercialization, and regulatory functions, particularly around its expected third- or fourth-quarter launch of the ColonSentry test through a joint venture with Innovative Diagnostic Laboratory. The company saw second-quarter revenues fall year over year while losses for the six months ending June 30 grew to $3.4 million, compared to a net loss of approximately $2.5 million for the same six-month period in 2012.
- At the beginning of August, Luminex (Austin, Texas) began a restructuring effort focused on its newborn screening group within its Assay and Related Products segment. Luminex will spin off its NeoPlex business, including assays nearing regulatory submission for congenital hypothyroidism, congenital hyperplasia, and cystic fibrosis. The company expects to reduce its 700 person workforce by approximately 5 percent and close its Brisbane, Australia, office, which will result in annualized cost savings of $5 million to $6 million. The reallocation of resources will allow the company to focus on its molecular diagnostics business, while improving profitability and providing additional financial flexibility, the company said in a statement.
- PerkinElmer (Waltham, Mass.) laid off 265 employees during the second quarter, according to regulatory filings, as part of a restructuring plan to consolidate and realign operations and research and development resources as a result of previous acquisitions. The nearly $19 million in charges will be split by its Human Health segment and its Environmental Health segment. Noting PerkinElmer’s joint venture with noninvasive prenatal screening firm Verinata, Brokmeier wrote in an August research note that, “PerkinElmer stated that they feel good about the reimbursement for the Verifi and that it didn’t experience the same reimbursement problems that Sequenom reported. However, we wouldn’t expect it to be much of an issue for PerkinElmer given their focus on profitable testing volume and not market penetration.”
- Thermo Fisher Scientific also in early August announced it had reduced head counts by approximately 655 employees during the first half of the year, according to regulatory filings. The charges were split by the Analytical Technologies segment, which saw 250 layoffs in the first half of the year, and Specialty Diagnostics, with a reduction in staff by 185 employees. Laboratory Products and Services additionally cut 220 employees through the first six months of the year. The company still has nearly 39,000 employees globally.
Subscribe to Clinical Diagnostics Insider to view
Start a Free Trial for immediate access to this article