September 19, 2005

With the future of its withdrawn multiple sclerosis drug Tysabri still unclear, Biogen Idec plans to lay off 650 employees, sell its San Diego manufacturing plant and channel the savings from those moves into drug development.

Tysabri (natalizumab) was pulled off the market in February after it was linked to a rare, and frequently fatal, demyelinating disease of the central nervous system.

The company expects to cut its annual expenses by $200 million to $300 million, and will use the savings to boost spending on external research collaborations and other business opportunities from $50 million to $200 million, it said in a recent statement.

The company said it plans more drug research collaboration with academic institutions and teaching hospitals, and may acquire products and companies, which it said should "significantly expand the number of potential products in its pipeline in subsequent years."

Analysts said the restructuring would give Biogen a financial boost, but Merrill Lynch analyst Eric Ende said the firm's new focus on external research signifies "low confidence" in its internal research capabilities.

"An increase in business development and external research activities implies ... there is low confidence in internal R&D, ... and there will be greater reliance on external R&D, which is less controllable by the company," Ende writes in a recent research note. As a result, Biogen's "future growth will be more reliant on external and less controllable factors."

Early this year, Tysabri was named one of the 10 most promising drugs for 2005 by Standard & Poor's. In February, however, Biogen and its Irish drug development partner Elan withdrew Tysabri after a patient died from progressive multifocal leukoencephalopathy (PML). The drug has since been linked to at least three PML-related deaths.

Despite the problems, Biogen is still aiming to relaunch Tysabri, a fact it noted in its new business plan. Safety evaluations of other multiple sclerosis patients who took Tysabri in clinical trials revealed no new cases of the disease, and evaluations of patients who took the drug for Crohn's disease and rheumatoid arthritis are scheduled to be finished by summer's end, Biogen said in August.