In Face of Dropping Stocks and Failed Phase III, Biogen Restructures, Slashes Programs and Lays off 880 People
Published: Oct 23, 2015
October 21, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Cambridge, Mass.-based Biogen, Inc. announced today that it was restructuring, cutting 11 percent of its workforce, and slashing programs. In addition, the company announced that its Phase III ASCEND clinical trial of natalizumab for the treatment of secondary progressive multiple sclerosis (SPMS) failed to hit its primary and secondary endpoints.
As part of the company’s third quarter financial results, Biogen reported revenues of $2.5 billion, an increase of 11 percent from the same quarter in 2014. Non-GAAP diluted earnings per share (EPS) for the quarter increased 18 percent over third quarter in 2014, reaching $4.48. It’s leading drug, Tecfidera, for MS, increased by 19 percent in the quarter to reach $937 million, beating analysts’ average estimates of $897 million, reported Bloomberg.
Although the company is the most valuable publicly traded company in Massachusetts with a market value of $62.5 billion, it is attempting to cut its operating costs. Company shares have dropped about 35 percent over the last three months and the company is reporting fewer new patients are receiving the Tecfidera, partly because of physician concerns over rare side effects that were linked to a patient death in 2015.
As part of the restructuring, Biogen will lay off 11 percent of its 8,000 employees, about 880 people. The layoffs are expected to be completed by the end of this year. They are projected to save the company about $250 million, although there will be an accounting charge of $85 to $95 million to occur mostly in this year’s fourth quarter.
“The decision to reduce the Company’s workforce was extremely difficult, but we believe these actions are necessary to fulfill our mission of bringing important new medicines to patients,” said George Scangos, chief executive officer of Biogen, in a statement. “We have several high-quality programs that are now or soon will be in Phase III, and the cost savings from the restructuring will be reinvested to carry out those programs aggressively and hopefully to bring them to patients as quickly as possible.”
Biogen will also eliminate several research and development pipeline projects for lupus and a type of multiple sclerosis.
As today’s separate announcement indicated regarding natalizumab, although the drug was well tolerated and side effects were consistent with the drug’s known safety profile, it did not meet its primary and secondary endpoints.
“While we’re disappointed with these results, we believe this research will provide the MS community important insights into this more advanced patient population, and the benefits that natalizumab may provide in areas such as upper limb function,” said Alfred Sandrock, group senior vice president and chief medical officer at Biogen, in a statement. “Given the challenges of treating the advanced stage of MS, these results underscore the importance of treatment early in the course of disease with effective disease-modifying therapies before a patient advances to SPMS.”
Natalizumab, marketed as Tysabri, is approved in more than 65 patients as a monotherapy for the treatment of patients with relapsing forms of MS. It increases the risk of the rare viral brain infection, progressive multifocal leukoencephalopathy (PML), which typically causes death or severe disability. Part of the company’s restructuring will be to increase marketing activities related to the drug.
As part of the financial report, the company updated its full year 2015 financial guidance. Revenue growth is projected to be 8 percent to 9 percent compared to 2014, slightly higher than previous guidance. R&D expenses won't change and are expected to be about 19 to 20 percent of total revenue. Non-GAAP diluted EPS is expected to increase to between $16.20 and $16.50, and GAAP diluted EPS is also expected to increase to between $14.65 and $14.95.
Biogen is currently trading for $283.84. Its highest point this year was Mar. 20, 2015, when shares traded for $475.98. Its lowest point was Oct. 13, when shares traded for $256.04.
“On the surface, Biogen reported great earnings, beating on the top and bottom lines and raising guidance,” wrote Maxim Jacobs, an analyst at Edison Investment Research in a research note today. “However, the devil is in the details, as much of the revenue beat was due to inventory stocking. The company also announced a key drug failure and the layoff of 11 percent of their workforce, signaling that perhaps Biogen’s high growth days are behind them.”