Pharmaceutical Industry Faces Continued Layoffs and Restructuring Amid Clinical Trial Setbacks

The pharmaceutical and biotechnology sectors continue to grapple with workforce reductions and organizational changes as companies respond to clinical trial failures and financial pressures.

Allakos Slashes Workforce After AK006 Disappointment

Allakos announced it will cut 75% of its workforce, reducing headcount to about 15 employees, following disappointing Phase 1 results for its chronic spontaneous urticaria (CSU) candidate AK006. The San Carlos, California-based biotech will discontinue further development of AK006 after the drug failed to show significant symptom improvement compared to placebo in CSU patients.

This marks the second major setback for Allakos' CSU pipeline in recent years. In January 2024, the company halted development of lirentelimab after it failed two Phase II studies in atopic dermatitis and CSU. That decision led to a 50% workforce reduction at the time.

Allakos expects the latest cuts and AK006 program closure to cost $34-38 million. As of September 30, the company had an accumulated deficit of $1.2 billion and anticipates having $35-40 million in cash and investments by mid-2025.

Widespread Layoffs Continue Across Industry

Allakos is far from alone in implementing significant workforce reductions. Several major pharmaceutical and biotech companies have announced layoffs in recent weeks:

• Gilead Sciences is cutting 104 employees at its Foster City, California headquarters and closing its Seattle research site, affecting 72 workers there.

• Bristol Myers Squibb will lay off 79 employees in Lawrenceville, New Jersey between December 2024 and May 2025, bringing its total cuts at that location to over 1,100 this year.

• Johnson & Johnson is eliminating 231 positions at its New Brunswick, New Jersey headquarters.

• Bayer is laying off 57 employees at its Whippany, New Jersey site.

• Pfizer plans to cut up to 210 manufacturing jobs across facilities in Ireland.

The layoffs come as many companies aim to reduce costs and streamline operations in response to pipeline setbacks, pricing pressures, and shifting strategic priorities. Bristol Myers Squibb, for instance, announced plans earlier this year to cut $1.5 billion in costs through 2025, including the elimination of about 2,200 jobs by the end of 2024.

Clinical Trial Failures Drive Restructuring

Failed clinical trials continue to drive much of the industry's restructuring activity. FibroGen announced it will eliminate 75% of its U.S.-based workforce after two late-stage trials of pamrevlumab failed to meet primary endpoints in pancreatic cancer. The cuts will affect approximately 355 of FibroGen's 475 global employees.

Similarly, Aerovate Therapeutics plans to lay off nearly all of its workforce following the Phase IIb failure of its pulmonary arterial hypertension candidate. The Waltham, Massachusetts-based company has already notified 39 employees - 78% of its staff - of their termination.

These cases highlight the high-stakes nature of clinical development in the pharmaceutical industry, where years of research and hundreds of millions in investment can be upended by a single trial failure.