Sepracor Announces 940 Layoffs; Achieves the Impossible on Lunesta Sales
Back in August, BNET ragged on Sepracor for implementing a cost-cutting program that drove up its expenses and drove down its revenue.
In its Q4 earnings today, the company has turned that all around — sales are up and expenses are down. The turnaround has come at a price, however. The company also announced it would lay off 530 people, including 350 sales reps, plus 410 contract sales reps. That’s 20 percent of its entire staff, the company said.
The layoffs will position the company to weather a downturn in revenues that it predicted for 2009.
But look at its Q4 results: Revenues up at $350 million, sales expenses down to $169 million.
This had the effect of increasing the revenue return on each dollar spent on drug reps to $2.18, up from a low of $1.42 last year. That’s an incredible 54 percent increase in productivity over that period. No other company that I’ve looked at has achieved an increase like that.
What’s also amazing about this is the way Sepracor has managed to hold the fort on its Lunesta sleeping pill franchise.
The insomnia market is fully commodified — it’s dominated by generic Ambien, branded Ambien CR, and about a zillion other OTC and neutraceutical rememdies, plus booze and pot. Lunesta’s sales should have been decimated … but no. Q4 revenues were up to $162 million from $150 million, and its FY08 sales were flat at $60 million. Somehow, Sepracor has achieved the impossible.
The company’s biggest threat is its declining Xopenex COPD franchise, which currently forms the other 50 percent of its revenues. Xopenex declined to $137 million in Q4 and $441 million for the year.
And while we’re praising Sepracor management (CEO Adrian Adams pictured): Note to pharma PR people — Sepracor’s press release is admirably frank and detailed about the layoffs, and doesn’t attempt to hide the bad news behind a lot of corporate jargon (the jargon is relegated to the bottom of the statement.)
Jim Edwards, a former managing editor of Adweek, has covered drug marketing at Brandweek for four years, and is a former Knight-Bagehot fellow at Columbia University's business and journalism schools. Follow him on Twitter or send him an email.
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