(Adds analyst comments, details, byline)
By Toni Clarke
BOSTON, Feb 3 (Reuters) - King Pharmaceuticals Inc KG.N is cutting 760 jobs, or 22 percent of its workforce, as part of a restructuring designed to reduce costs, the company said on Tuesday.
About 240 of the job losses are corporate positions associated with King’s $1.6 billion acquisition of drugmaker Alpharma Inc. Of the rest, about 380 are in sales and about 140 are corporate.
The restructuring leaves King, which makes the blood pressure drug Altace, with a branded product sales force of about 720.
The Bristol, Tennessee-based company said it expects the restructuring to result in costs of $50 million to $55 million, all of which are expected to fall in the first half of this year.
Brian Markison, King’s chief executive officer, said the restructuring was sparked in part by a recent federal court decision invalidating two patents related to the company’s muscle relaxant Skelaxin.
Markison said the uncertainty the ruling creates regarding the product’s continued exclusivity caused King to thoroughly assess its cost structure.
“We concluded the restructuring measures announced today will better position us to support the near-term priorities of our strategic plan,” he said.
King is seeking to expand its presence in the market for pain drugs. Its acquisition of Alpharma gives it the pain drug Kadian and pain patch Flector. It is hoping to obtain dominance in the market for abuse-resistant pain products with its experimental drugs Embeda and Remoxy.
Corey Davis, an analyst at Natixis Bleichroeder said in a research note that while the restructuring is “right” it is not reassuring.
“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,” he said in a research report.
In addition, he said, the sales force restructuring does not suggest, at least on the surface, that King expects to launch Embeda or Remoxy any time soon.
“Certainly, King’s remaining 720-strong sales force is not bad, and should be sufficient for a launch, but we’d guess that downsizing — with the accompanying realignment and morale issues — is not the usual pre-launch strategy approach.”
In December King said the U.S. Food and Drug Administration had missed its deadline for completing a review of Embeda and that the review would extend into early 2009.
King said it plans to provide more details during its quarterly conference call on Feb. 26.
The company’s shares were up 2 cents to $8.65 in mid-morning trading on the New York Stock Exchange. (Reporting by Toni Clarke, editing by Dave Zimmerman and John Wallace)