Alexion Pharmaceuticals Inc. is cutting its workforce by 20%, moving its headquarters to Boston and closing offices and manufacturing sites as it works to cut its overhead and move on from a sales-practices controversy.
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The rare-disease drugmaker has seen a slew of management changes over the past year, including hiring a new chief executive, after an internal investigation showed senior management pressured staff to get customers to order its flagship drug earlier than needed to meet financial targets.
The reorganization is the first major move by new Chief Executive Ludwig Hantson.
The New Haven, Conn., company said Tuesday it will incur between $340 million and $440 million of restructuring-related charges. However, the company added the moves are expected to create $250 million in annual cost savings by 2019.
Alexion pledged to spend $100 million of the annual savings on researching new drugs and business development. On a call with analysts, Mr. Hantson said while Alexion will remain in the orphan-disease treatment space, it will focus more on "rare" diseases than "ultra rare" ones.
"These changes were necessary to enable the company to deliver sustainable long-term performance to support our ability to continue to develop and deliver life-changing therapies for patients," Mr. Hantson said in a statement.
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Shares of Alexion fell 0.6% to $142.03 in Tuesday trading.
The downsizing will eliminate about 600 jobs. At the end of last year, the company had 3,121 employees across seven locations around the world.
Alexion plans to close one of its main manufacturing facilities, located in Rhode Island, for rare blood-disease treatment Soliris, which generated nearly 90% of annual revenue last year. The company is in the process of expanding two manufacturing sites in Ireland.
Alexion joins General Electric Co. and Aetna Inc. as the latest companies to announce plans to move their headquarters out of Connecticut in recent years. Other companies have also moved their headquarters into America's largest cities in a bid to attract and keep talent. The state of Connecticut is also facing its own fiscal challenges including the potential bankruptcy of its capital, Hartford.
The drug company has signed a lease at 121 Seaport, a building that is under construction but which is expected to be ready in June, an Alexion spokeswoman said. Alexion said it would have 400 positions in Boston.
About 450 positions will remain in New Haven and those employees will work in roles including research, clinical supply and quality and nurse case management, the company said.
Catherine Smith, commissioner of Connecticut's Department of Economic and Community Development, called Alexion's decision "disappointing." "Setbacks like this, though unfortunate, do not deter the department from pursuing smart policies and ventures with growing companies in our state," she said.
Alexion, founded in 1992 in a science park in New Haven, now operates in about 50 countries. The state of Connecticut provided Alexion with a forgivable $20 million loan and $6 million grant in 2012 when the company said it would move its then headquarters from Cheshire, Conn., back to New Haven and add 200 to 300 full-time jobs to that site.
Since 2012, the company has grown to about 840 employees, exceeding the 200 to 300 figure required to meet its obligations for the $20 million forgivable loan, an Alexion spokeswoman said.
"We are in discussions with the state of Connecticut, and we will meet our obligation to the state of Connecticut," the spokeswoman said.
Financial incentives also weren't enough to keep Aetna in the state. Gov. Dannel Malloy previously said it would match any package from other states. Aetna ultimately chose New York City where the city and state promised it $24 million in performance-based tax credits and $9.6 million in other tax benefits.
An Alexion spokeswoman said it wasn't awarded incentives from the state of Massachusetts as part of its planned move, but the company may qualify for incentives at a later date.
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(END) Dow Jones Newswires
September 12, 2017 13:20 ET (17:20 GMT)