King Pharmaceuticals has unveiled plans to reduce its workforce by 22 per cent in a bid to further reduce costs after the US District Court decision to invalidate patents protecting its lead product, the muscle relaxant Skelaxin (Metaxalone).
Last month’s ruling, which caused King’s stock price to fall nearly 9 per cent, was connected to a successful challenge by generics manufacturer Eon Labs. While King plans to appeal, CEO Brian Markison said that the cuts were being enacted due to the uncertainty created by the decision.
The news was a further blow for King whose efforts to expand in the pain market suffered a regulatory setback last year. In December, the US Food and Drug Administration (FDA) missed the deadline for its review of the opioid candidates Remoxy and Embeda.
At the time the FDA said that it was extending its assessment of the two drugs and voiced concerns that they may give physicians a “false sense of security” about their tamper resistant benefits.
Some 240 corporate job losses of the 760 announced this week had been expected following King’s somewhat acrimonious $1.6bn swoop for Alpharma and its pain products Kadian and Flector in November last year.
Of the remaining 520 positions, 380 are from the Tennessee-headquartered group’s US sales force. Corey Davis, an analyst at Natixis Bleichroeder said in a research note that while the restructuring is "right" it is not reassuring.
Davis explained that: "We appreciate the rapid cost-cutting, which could boost earnings per share during the transition away from Skelaxin, but in our view it is too early to have this reflected in the stock price."