* To cut 650 jobs, terminate 11 R&D programs
* To cease efforts in cardiovascular medicine
* Increases non-GAAP 2010 EPS forecast
* Biogen’s shares up 0.25 pct at $63.16 (Updates with CEO comment. details)
By Toni Clarke
BOSTON, Nov 3 (Reuters) - Biogen Idec Inc BIIB.O plans to cut 650 jobs -- or 13 percent of it workforce -- consolidate research sites, and halt some research programs to cut costs and focus the company's resources on its core business of making drugs for neurological disorders.
The restructuring program, announced on Wednesday, comes some four months after the biotech company named George Scangos as its new chief executive. Scangos replaced Jim Mullen, who resigned under pressure from billionaire investor Carl Icahn.
Icahn has three representatives on the company’s board.
Under the plan, Biogen, which makes the multiple sclerosis drugs Avonex and Tysabri, will cease development of cardiovascular drugs and divest its oncology assets. It will continue development of drugs to treat hemophilia, and it did not rule out acquiring cancer drugs in later stages of development in the future.
Altogether the company expects to terminate 11 research and development programs and close its San Diego location. Operations in eastern Massachusetts will be consolidated into facilities in Cambridge and Weston.
The plan is expected to save $300 million annually, according to the company.
“We have been operating in too many therapeutic areas and haven’t maximized our opportunities,” Scangos said. “We will now focus on a few areas where we can be among the best, and this starts with neurology.”
Biogen’s shares rose about 16 cents, or 0.25 percent, to $63.16 in midday trading on Nasdaq, hanging on to a recent rally sparked by news last month that it would announce a restructuring. Wednesday’s announcement gave details of the plans.
“This initiative was widely anticipated, but nevertheless, it should be a positive for Biogen over the longer term as it eliminates some higher risk and lower synergy pipeline candidates,” Geoff Meacham, an analyst at J.P. Morgan, said in a research note.
Scangos said the restructuring was designed as much to change the company’s corporate culture as to extract savings. Biogen, one of the biggest and oldest of the world’s biotech companies, has been criticized for failing to translate its scientific expertise into new products.
“We need a culture of accountability,” Scangos said in an interview. “I want to know which person, not which committee, is responsible for each element of what we do.”
The goal, he said, is to reduce layers of bureaucracy and generate a more nimble, innovative culture where people are not afraid to take risks.
“People cannot be punished for making decisions, even if the decisions were the wrong ones,” he said. “We should be rewarding good, aggressive, thoughtful decision making.”
Scangos said he expects the company to hire a new head of research and development by the end of the year, adding that the goal is to bring the company’s scientific achievements back to where they were in the early days of the company’s foundation.
“We still have a lot of good science but we have gotten away from that,” he said.
The company said it intends to expand its leadership in MS by maximizing the potential of Avonex and Tysabri, which it markets with Irish drugmaker Elan Corp Plc ELN.I and "aggressively" developing its pipeline of experimental MS drugs.
It will also apply its research and development expertise to developing drugs for neurological diseases such as amyotrophic lateral sclerosis, or Lou Gehrig’s disease, and Parkinson’s disease.
Biogen also adjusted its 2010 financial forecasts. It said it expects earnings, excluding one-time items, to top $4.85 a share. In July, it forecast earnings of more than $4.70 a share.
The company said it expects net earnings of about $3.65 a share, down from its previous outlook as it takes a charge for restructuring and accounts for a license agreement with Knopp Biosciences. Previously it said it expected net earnings to top $3.82 a share.
Biogen said it anticipated revenue growth to be in the mid-single digits, unchanged from its previous forecast. (Reporting by Toni Clarke, with additional reporting by Franklin Paul; Editing by John Wallace and Maureen Bavdek)