Irish drugmaker Elan, which recently dropped plans to sell its Elan Drug Technologies operation, has announced job cuts and the closure of offices in a bid to save cash.
Around 7 per cent of the workforce will be cut – equating to 114 jobs – and offices in New York and Tokyo will be closed. Chief executive Kelly Martin will relocate from New York to Elan’s office in San Francisco. All told, the measures stand to save the firm upwards of $20m a year.
The steps have been taken because the company’s flagship multiple sclerosis and Crohn’s disease drug Tysabri (natalizumab) has failed to live up to sales expectations. A large chunk of the workforce reduction will come from Tysabri’s sales force, with 40 staff being cut.
Tysabri has had a chequered history. The product is jointly marketed by biotechnology major Biogen Idec sales ramped up rapidly after its launch in 2004, but was withdrawn just months later after cases of a rare brain disease called progressive multifocal leukoencephalopathy (PML) were seen in patients taking the drug.
Tysabri was eventually allowed back on the market in 2006 after Elan and Biogen Idec developed a comprehensive risk-management programme to ensure that patients receiving the drug were pre-screened with magnetic resonance imaging (MRI) and monitored closely whilst on it.
Sales once again accelerated, with Biogen Idec booking $164.5m from the product in the third quarter of this year, well up on the $63.5m added to its coffers a year earlier.
But patient uptake-rates have dipped since the summer as the agent was linked to two new cases of PML, despite assertions by Elan and Biogen Idec that the cases are in line with the risk stated in the label and known to physicians: one in 1,000 cases within the first 18 months of treatment.
Elan has come under pressure from its shareholders in recent months, as it is burning cash at the rate of around $300m a year and has outstanding debt to the tune of approximately $1.7bn. It also suffered a blow when its candidate product for Alzheimer’s disease, bapineuzumab, achieved disappointing results in a clinical trial.
That pressure has resulted in calls for Martin to step down by Crabtree Partners, one of Elan’s institutional investors. Crabtree’s co-founder Jack Schuler - a former president of Abbott Laboratories, has accused Elan’s CEO of a “lack of relevant industry experience, gross incompetence related to the management of Tysabri and its partnership with Biogen, and egregious misuse of company resources.”
Martin has been backed strongly by Elan’s chairman, Kyran McLaughlin, who said he had been “highly effective in streamlining our operations and positioning us to make the most of our pipeline.”
Elan’s contract services arm EDT was taken off the market in October, despite what Elan called “considerable interest” in the business. The company said the financial environment was not conducive to a sale.
The decision followed months of media speculation and jockeying by investment groups such as Texas Pacific, Bain Capital and Warburg Pincus, which had all expressed an interest in the unit, valued by Elan at around $1bn.