Earlier this year Merck, AstraZeneca, Eli Lilly, and others announced restructuring initiatives to cut costs in the face of disappointing clinical trial results and revenues challenged by generics. On Thursday, Novartis , Bristol-Myers Squibb , and Ariad jumped on the bandwagon by announcing staff layoffs.

Novartis
Yesterday, The Boston Globe reported that Novartis would be cutting 500 jobs across its international research centers as it axes a respiratory disease research site, an oncology program, and a dermatology program. The layoffs are part of a broader restructuring program aimed at curbing some of the company's $2.4 billion in R&D expenses registered in the third quarter. These cuts come after a disappointing quarter for Novartis, which saw year-over-year sales growth of 6% at constant currency aided by multiple sclerosis drug Gilenya, but operating income falling by 2% on a 10% year-over-year increase in R&D expenses.

Instead, Novartis will be focusing operations by adding 175 jobs to its headquarters in the Boston area. The workforce consolidation should help reduce costs as Novartis pushes its late stage pipeline with drugs like serelaxin for the treatment of acute heart failure and ruxolitinib in collaboration with Incyte. Fellow Fool Sean Williams thinks Novartis might be worth a look as a health care dividend play, and if the cost-cutting is effective he might be right.


Bristol-Myers Squibb
Bristol-Myers Squibb has had some disappointment lately, despite a strong third quarter. After patent expiration of Plavix, failed investments in Alzheimer's drug avagacestat and hepatitis C drug BMS-986094, and the disappointing launch of blood thinner Eliquis, Bristol-Myers Squibb is refocusing its R&D efforts for maximal efficiency.

In an emailed statement to Reuters, Bristol-Myers Squibb announced a restructuring initiative that would cut only 1% of R&D costs and 70 jobs, but would reallocate resources to specific areas of expertise. The ax will come down on early stage discovery in diabetes, hepatitis C, and neuroscience. Spared from the cuts will be Bristol-Myers' most exciting segment -- the immunotherapy division -- and a new Alzheimers' drug that takes a very different approach from avagacestat.

Most of the excitement at Bristol-Myers is over immunotherapy drug Yervoy and experimental PD-1 inhibitor nivolumab. They will continue to be a focus of Bristol-Myers' development and marketing strategy.

Ariad
The last layoff news of the day came from a notably smaller company in Ariad Pharmaceuticals. Ariad received a crushing blow last week when the Food and Drug Administration requested that it temporarily halt sales of leukemia drug Iclusig. A post-commercialization follow up study revealed a disproportionate occurrence of blood clots in treated patients. That sent shares tumbling yet again, contributing to a 88% plunge in October.

Ariad will now be forced to salvage a crippled pipeline, all while coping with the sudden loss of a critical revenue source. Iclusig is being tested in seven of Ariad's eight ongoing phase 2 clinical trials. The fate of those trials is in question, and the company's earnings report on Tuesday should paint a better picture.

What we do know is that Ariad has to start cutting costs if it wants to survive. The first step in doing that is to slash 40% of its workforce across all major departments. That should save Ariad $26 million in 2014. The company did have $332 million in cash and only $7 million in long-term debt at the end of last quarter, but with its real growth driver sitting on the bench, it's make-or-break time for Ariad.

The bottom line
While it's been an amazing 2013 for biotech growth stocks, big pharma has really struggled with the patent cliff and inflated R&D expenses. We're seeing that now, with company after company announcing plans to improve efficiency by restructuring and downsizing. The small companies haven't been immune, either, and failures for little guys like Ariad can be brutal.

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The article A Busy Day of Layoffs in Pharma originally appeared on Fool.com.

Seth Robey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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