The need to revamp its drug pipeline by eliminating several research programs was a key factor behind Biogen’s recent decision to reduce its 8,000-person workforce by 11%.

The Cambridge, Mass.-based biotech giant announced the 880 worldwide layoffs, which include 400 positions out of about 3,300 in Massachusetts, on Oct. 21 as part of a corporate restructuring.
In an interview with CWWeekly, Chris Barr, the company’s associate director of community relations, said the changes were necessary.

“Obviously, it’s tough to lose people,” he said. “But this will make us more efficient and more effective in getting new therapies to patients who actually need them. It puts us in a better position to fulfill that mission.”

Barr emphasized that the restructuring won’t affect the Biogen services currently offered to patients, noting, “Our relationship with the community (Cambridge) and the area—that doesn’t change.”

“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,” Biogen CEO George Scangos, Ph.D., said in a prepared 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. We are grateful for the contributions of our talented and admired colleagues and we will do our best to treat everyone with fairness and dignity.”

According to the company’s statement, Biogen is expected to save $250 million a year as a result of the changes.

The company announced the job cuts as it buoyed its profit outlook and reported a 12.7% jump in third-quarter earnings to nearly $966 million, or $4.15 a share. Shares closed up almost 4% on Oct. 21 to $276.34.

The stock, which traded as high as $480.18 in March, has dropped more than 15% this year. Still, Biogen’s market value of more than $60 billion remains the highest for any Massachusetts company, and the company is the world’s largest maker of multiple sclerosis (MS) drugs.

“More than anything, the news is about resizing the company for a smaller commercial opportunity,” Eric Schmidt, a biotech analyst at the New York-based investment bank Cowen & Co., told The Boston Globe. “Their stock had been reflecting that smaller opportunity in recent months.”

Part of Biogen’s plan includes revitalizing sales of Tecfidera, which is a key revenue driver and enjoyed a 19% sales increase in the last quarter. The company plans to use the savings from the job cuts to support sales and marketing of Tecfidera, which has been approved to treat relapsing forms of MS.

“We are encouraged by the results this quarter,” Joseph Schwartz, an analyst with Leerink Partners, told The Boston Herald. “Management is taking decisive steps to control spending, reinvigorate Tecfidera sales, and focus the pipeline on the best programs.”

Biogen also has indicated that a late-stage trial of Tysabri, which treats secondary progressive MS, did not meet key goals. That drug already is approved to treat MS and Crohn’s disease.

Biogen has been awarded roughly $16.5 million in state tax breaks in five different grants since 2009, in exchange for adding and maintaining a total of 755 new jobs. Travis McCready, president and chief executive officer of the Massachusetts Life Sciences Center (MLSC), said his organization will be talking to Biogen about any effect the layoffs will have on those tax breaks.

“A conversation will take place over the next several weeks between the MLSC and Biogen regarding recovery of tax incentive awards that are impacted by their announced layoffs,” McCready told CWWeekly. “We will use the same recovery procedures that we have used in the past with other companies to ensure accountability to the job creation commitments that were made in exchange for these incentives.”

McCready also offered his thoughts about the Biogen restructuring.

“Biogen has a history of commitment to innovation in drug discovery, and I believe that this restructuring will allow them to stay true to that ethos,” he said. “The ‘street’ recognized this long-term commitment in Biogen’s recent share price. The precise negative effects will remain to be seen, depending on how the job cuts will be implemented in the short term. We regret that the layoffs that were announced by Biogen will impact hundreds of Massachusetts families.

“Last year was a record year for both employment growth and private investment in the biopharma sectors in Massachusetts, and that growth is continuing. We remain confident in the fundamentals of our thriving life sciences economy, and know that there are many growing companies in Massachusetts looking for talent.”

Biogen, which enjoyed profits of $3.3 billion in 2015, is not the only Massachusetts-based biotech company to experience recent setbacks. Three others endured hardships in October alone: Lexington-based Shire PLC, which learned federal regulators were delaying a decision on approving an experimental drug to treat dry-eye disease; Needham-based Verastem, which saw a cancer drug candidate fail in a clinical study; and Boston-based Zafgen, which reported a patient death resulted from a clinical trial for an obesity drug.

This article was reprinted from Volume 19, Issue 43, of CWWeekly, a leading clinical research industry newsletter providing expanded analysis on breaking news, study leads, trial results and more. Subscribe »