It’s no surprise when an acquired biotech firm faces layoffs.
But what the cut-loose talent does next can greatly impact a growing life sciences community in a place like Los Angeles.
That’s the situation facing 117 employees of Kythera Biopharmaceuticals Inc. that will be laid off Nov. 30. The Westlake Village firm had 212 full-time workers as of June, according to regulatory filings, meaning more than half of its workers have been handed their walking papers.
Pharmaceutical giant Allergan of Dublin, Ireland, which completed its acquisition of Kythera a couple of weeks ago, confirmed to the Business Journal those cuts will affect everyone from administrative staff to Chief Executive Keith Leonard, who left the firm Oct. 1.
“Typically, when these businesses combine, there tends to be a lot of overlap of job duties,” said Michael Waterhouse, an analyst at Morningstar Inc. in Chicago. “It’s not terribly uncommon to see a lot of people at the acquired company let go as a result.”
He added that Allergan, which is already a dominant player in the aesthetics market, has a broad sales force in that space and can easily layer Kythera’s chin fat-busting drug, Kybella, into its existing infrastructure.
But some of the firm’s laid-off workers could bolster the ranks of other local companies.
“If you’re going to get laid off in Southern California and the L.A. area, this is a pretty good time to do it,” said Alan Cullen, president of Westwood &Wilshire, a life sciences executive search firm on the Miracle Mile. “There are more companies, more viable places of employment today than ever, from the Kites to the ImaginAbs and companies like that around the area,” as well as those not on the radar yet.
However, it’s not realistic to expect everyone will stay local.
“You’re talking about 117 jobs,” said Cullen. “There’s no way that’s going to get absorbed just in the L.A. area. Clearly that’s going to be a boon for Bay Area and San Diego companies.”
Cullen added that the only way to grow a really significant biotech community in Los Angeles is by having companies that launch products, sell them and remain independent commercial entities in the area, thereby fueling new startups.
Ahmed Enany, president of downtown L.A. trade group Southern California Biomedical Council, described the layoffs as disappointing.
“You’re trying to create a critical mass then these mergers and acquisitions come in and wipe out your success stories,” he said.
But there’s a silver lining. Executives exiting the firm, possibly with big bucks from cashing out equity, could license new technology and launch companies here, Enany said.
“All of them have the potential of getting back in the game, from the president and CEO to the people in charge of R&D,” he said.
The same thing happened with Cougar Biotechnology Inc., said Enany of the Westwood pharmaceutical firm bought by Johnson & Johnson in 2009.
“(Chief Executive) Alan Auerbach created a new company, Puma, which will hopefully be even more successful than Cougar,” said Enany.
Kythera’s management, said Enany, also has the resources and track record to find new projects and start over.
“I hope they … don’t go out and buy wineries,” he said.