PerkinElmer plans to lay off several dozen California-based employees in the coming months, according to the state’s record of Worker Adjustment and Retraining Notification (WARN) Act submissions.
The Massachusetts-based lab services giant filed a WARN notice this week, attributing 75 layoffs to the permanent closure of its operations at the California Department of Public Health’s laboratory in Valencia, a neighborhood of Los Angeles County. The job cuts will take effect June 4, according to the filing.
The cuts are linked to a contract PerkinElmer signed with California’s Department of Public Health (CDPH) in August 2020 to provide COVID-19 lab testing and reporting services for the state, the company confirmed to Fierce Medtech.
Under the terms of the original $1.7 billion contract (PDF), PerkinElmer and the state together in October 2020 opened a $25 million lab in Valencia. At the time, they said the facility would allow the state to run an additional 150,000 tests per day and employ a total of 700 people once it reached full capacity—though reports later showed that it never actually reached that point.
At the end of last month, PerkinElmer quietly disclosed in a filing (PDF) with the U.S. Securities and Exchange Commission that CDPH had opted to terminate the contract as the COVID-19 case count plummets. The company said it would discontinue its operation of the Valencia Branch Laboratory on May 15.
“We are proud that we have enabled California to increase testing availability in communities at high risk for contracting COVID-19. Early in the pandemic, when testing was scarce and supply chains were challenged, the Valencia Branch Laboratory helped provide consistent access to COVID-19 testing and increased capacity for surges. As of March 29, 2022, the lab had processed more than 9 million samples from a network of more than 4,700 specimen collection sites developed with churches, schools, clinics, workplaces and community-based organizations,” PerkinElmer said in a statement to Fierce Medtech.
“Moving forward, we will be working with CDPH to ensure a smooth transition period,” the statement continued, with a note that the company still expects to rake in COVID-related revenues of “at least $400 million” for all of 2022. That's a sizable drop from 2021's total, which clocked in above $1 billion, CEO Prahlad Singh said in a February call with investors.
The original contract between PerkinElmer and CDPH was scheduled to run out at the end of October 2021 but was renewed around that time, even amid then-unresolved reports of the lab’s shortcomings.
In February 2021, the state shared that an early December 2020 inspection of the lab had resulted in the discovery of “significant deficiencies.” The company was given until March 1 to correct the issues—though PerkinElmer said it had already corrected them in the weeks following the inspection—and CDPH said it would finalize the full report on the lab for public release by mid-March.
In fact, it wasn’t until late November 2021, after the contract had already been re-upped, that the state concluded its inspection and released the report. It listed the lab’s repeated failures to “remove all condition-level deficiencies,” through notifications issued in February, April, May, June and October, the last of which announced CDPH’s decision to impose sanctions against the lab.
The deficiencies, as described in letters addressed to the lab’s director, Adam Rosendorff, M.D.—incidentally, also the former lab director of Theranos—included inadequate documentation of changes to its testing interpretation methods and a lack of validation data for certain lab-developed tests it was using, among other issues.
Ultimately, however, following an onsite visit to the lab in early November 2021, CDPH’s Laboratory Field Services Branch opted not to impose any sanctions and determined that all issues had been corrected.
Describing the decision to renew the contract even before the deficiencies had been fixed, a CDPH spokesperson told the Los Angeles Times in November, “The state was confident in the contractual language and its ability to terminate the contract, and therefore felt confident proceeding without the final report.”