Biogen Idec Chief Aims to Make Firm More Like Biotech and Less Like Pharma with Restructuring Plan

11/4/10

Biogen Idec is returning to its biotech roots, in a way. The Weston, MA-based company (NASDAQ:BIIB) made headlines yesterday for its plans to cut 650 full-time jobs and narrow its research and development focus to emphasize its core expertise in neurology. And a big part of the restructuring plan, the firm’s CEO, George Scangos, says, is to make the biotech company, well, more biotech-like.

Xconomy was early on Biogen’s big news yesterday and also provided details about where the job cuts are being made in Massachusetts and San Diego, where the company plans to completely close its R&D center.

Scangos, who took over as Biogen’s chief executive on July 15, inherited a company that has not brought a new product to market sine 2004 and has been criticized by billionaire investor Carl Icahn and others on Wall Street for an overall lack of research and development productivity. (Those critiques sound an awful lot like the knocks on lumbering big pharmaceutical companies.) So Scangos is taking action, not just to address concerns among investors, but also to remove some of the productivity-hampering bureaucracy from the firm, he says.

“What’s best about small companies is they are fast, they are efficient, and there’s not a lot of bureaucracy,” Scangos said in an interview. “As the company gets larger, it gets harder and harder to do that. We want to make Biogen more like a biotech and less like a pharmaceutical firm.” The CEO has reduced the number of R&D committees, for instance, and he has designated project leaders who report directly to him.

Biogen, founded in 1978 during the biotech industry’s earliest days, has grown into a profitable industry leader, best known as the world’s largest maker of multiple sclerosis drugs. However, the company’s $1.2 billion in revenue for the third quarter of 2010 rose a modest 5 percent from a year ago, in part because of decreased revenue from one of is three major products, the anti-cancer and rheumatoid arthritis drug rituximab (Rituxan). Also, the company’s MS franchise faces competition from, among other products, the Swiss drug giant Novartis’s recently approved oral MS treatment, fingolimod (Gilenya).

Scangos inspected the company’s R&D pipeline and other operations over the summer, and concluded that the company was stretched too thin in terms of the number of therapeutic areas it was researching. A major part of the restructuring plan is to divest the company’s cancer and cardiovascular drug pipelines. The company has designated 11 programs that it plans to remove from its pipeline, including its molecule galiximab for lymphoma, the anti-tumor drug volocixiumab, and the cardiovascular therapy lixivaptan.

Scangos wants Biogen to build on its leadership in neurology. This means increasing revenue from its blockbuster MS drugs interferon beta (Avonex) and natalizumab (Tysabri), developing its existing pipeline of drugs for neurological disorders, and researching biomarkers and other avenues to help personalize treatments for people with illnesses such as multiple sclerosis, he said during a conference call with investors yesterday. The company highlighted its late-stage pipeline, which features five new neurological disease treatments that could reach the market by 2015. The firm also has two hemophilia drugs in late-stage development.

Still, there are lingering worries about the increasing number of cases of a potentially deadly brain infection called multifocal leukoencephalopathy (PML) in patients on natalizumab and its impact on sales of the drug. “With troubling Tysabri trends out of [third quarter 2010] earnings combined with real risk to [Biogen's] MS franchise from an oral MS therapy, even with today’s meaningful refocus on its core strengths, we think the road ahead is more difficult for [the company],” Christopher Raymond, a biotech analyst for Robert W. Baird in Chicago, wrote in a note to investors yesterday. Biogen has confirmed 70 cases of PML, according to Raymond.

In interviews with some of Massachusetts’ biotech leaders, the consensus opinion about Biogen’s restructuring plan seemed to be that it was not necessarily bad news for the Bay State’s biotech community. (As Xconomy reported yesterday, the company is cutting about 80 jobs in the commonwealth, while it is axing the majority of its 300 to 350 workers in San Diego.) Yet Biogen’s cuts follow the announcements in September of major layoffs at a couple of other important local biotech companies—Genzyme (NASDAQ:GENZ) and Alnylam Pharmaceuticals (NASDAQ:ALNM).

“The really important story in this is that as large pharma and biotech companies make adjustments in their work forces, they are choosing to retain a significant presence in Massachusetts,” said Susan Windham-Bannister, president and CEO of the Massachusetts Life Sciences Center, a quasi-public agency in Waltham, MA.

Windham-Bannister noted that both large drug companies and smaller biotechs are investing in the state because of its strong R&D capabilities. Switzerland-based Novartis, for example, announced last month that it planned to invest $600 million in its expansion in Cambridge and add 200 to 300 jobs there over the next five years. And the French drug giant Sanofi-Aventis is planning to invest $65 million in an expansion in Cambridge and boost its local work force with 300 new hires in the coming years.

Bob Coughlin, the chief executive of the Massachusetts Biotechnology Council, said yesterday that large drug researchers such as Biogen would continue to invest in the Bay State to stay close to innovative science that will feed their R&D pipelines for years to come. Biopharmaceutical jobs in the state increased 60 percent from 29,046 in 2000 to 46,553 in 2009, according to Coughlin’s Cambridge-based industry group.

Biogen will employ roughly 1,900 workers in Massachusetts after the 4-percent reduction in its employee base here. (The firm expects to have 4,275 workers globally after its cuts are completed). Scangos said that the company will remain headquartered in the state and it’s an important part of its business. “There’s a potential to grow here in the future,” the CEO said.

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  • Clark G.

    If you want to be different from big pharma, maybe you should stop laying off everyone and develop a drug on your own.