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March 14, 2017

Alexion to Eliminate 7% of Workforce

  • Alexion Pharmaceuticals is eliminating about 7% of its workforce in a company-wide restructuring that follows a retreat from a key pipeline candidate and an overhaul of its top leadership in recent months.

    A 7% job reduction would amount to 218 of the 3121 employees Alexion reported as constituting its workforce as of December 31, according to its Form 10-K annual report for 2016, filed last month.

    "We are investing our resources in key growth drivers, including our portfolio of marketed products," the company said in a statement to Reuters. The company at deadline had not posted to its website a statement or regulatory filing on the restructuring.

    Not among those products is SBC-103 (rhNAGLU enzyme), an investigational enzyme replacement therapy for which Alexion recognized an $85 million impairment charge during the fourth quarter. Alexion inherited the drug candidate when it acquired Synageva for $8.4 billion in 2015.

    “This charge was taken as a result of a strategic evaluation of the asset, increases in the development and commercial timelines, and updated cash flows. In February 2017, Alexion decided to reduce its investment in SBC-103, which the company acknowledged in the statement that accompanied its release of fourth-quarter and full-year 2016 results on February 16.

    SBC-103 is being assessed in a Phase I/II trial in patients with mucopolysaccharidosis IIIB (MPS IIIB). Patients currently enrolled in that trial will continue to receive SBC-103, with no additional Alexion studies planned, the company said, adding: “Alexion will reassess the value of this asset on a go-forward basis.”

    The restructuring comes about 3 months after the resignation of the company’s CEO David Hallal and CFO Vikas Sinha, who have been succeeded on an interim basis by former AstraZeneca CEO David Brennan and ex-Honeywell CFO David Anderson. While Alexion said Hallal left for personal reasons and Sinha to pursue other opportunities, CNBC reported at the time that the executives resigned after losing the confidence of the company’s board.

    However, in its delayed Form 10-Q quarterly filing for the third quarter of 2016, Alexion acknowledged that unnamed members of “senior management” pressured some customers to place “pull-in” or advance orders for shipments of the company’s main marketed drug Soliris® (eculizumab) in order to meet financial targets.

    While Alexion said its quarterly results did not require restatement, the company said in the third-quarter filing, “the Company concluded and the Audit Committee concurred that there was a material weakness in the Company's internal controls over financial reporting because senior management did not set an appropriate ‘Tone at the Top’ for an effective control environment and such failure resulted in inappropriate business conduct, including conduct that was inconsistent with, and in violation of, the Company's policies and procedures.”

    Pull-in sales accounted for between $1 million to $7 million in company revenues from all of 2014 through the third quarter—excluding the fourth quarter of 2015, during which Alexion said it generated an estimated approximately $10 million to $17 million.

    Those ranges are fractions of the company’s total 2016 revenue of $3.084 billion, up 18% from a year earlier. The company’s net income last year more than doubled to $399 million from $144 million in 2015.

    Nearly all of Alexion’s revenue, 92%, was generated through sales of the company’s main marketed drug Soliris, the first treatment approved for paroxysmal nocturnal hemoglobinuria (PNH), to reduce hemolysis, and atypical hemolytic uremic syndrome (aHUS), to inhibit complement-mediated thrombotic microangiopathy.

    Alexion generated $2.843 billion in net product sales from Soliris, up nearly 10% from $2.591 billion in 2015.

    The executive shuffle has continued into this month, with Alexion saying on March 2 that Leonard Bell, M.D., will retire as chairman and director at the end of his term on May 10. He is expected to be succeeded as chairman by Brennan. Dr. Bell served as Alexion’s CEO from the Company’s inception until 2015, when he was succeeded by Hallal.

    Over the past year, Alexion shares peaked at a closing price of $161.38 on April 21, then fell 32% to $110.01 on December 13—the day after the Hallal and Sinha resignations—before inching back up, closing yesterday at $124.74.

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