The biotech’s “Fit for Growth” program, which includes the headcount reduction, is expected to generate a net savings of $700 million on operating expenses by 2025.
Pictured: Biogen/The Boston Globe via Getty, John Tlumacki
With full FDA approval and CMS coverage for Leqembi in hand, Biogen is ramping up its launch efforts for the Alzheimer’s drug and executing a massive cost reduction program. The biotech company announced second-quarter earnings and its new cost-savings plan on Tuesday.
The “Fit for Growth” program is expected to generate around $1 billion in operating expense savings by 2025, which includes a headcount reduction of approximately 1,000 jobs, or about 11% of Biogen’s workforce. Around $300 million will be reinvested into product launches and R&D programs for a net savings of $700 million.
The staff reduction will be completed by 2025. The company had more than 8,700 employees in 2022, according to Statista.
Biogen CFO Michael McDonnell told investors on Tuesday’s earnings call that a “substantial portion” of the $700 million in net operating expense savings are expected to come from cutting 1,000 jobs “which we expect to right-size the company with our business plan and enable us to return to sustainable growth.”
The biotech reported more than $2.4 billion in total revenue for the second quarter, a 5% drop from 2022’s earnings during the same period, beating expectations by $100 million.
Despite its 25% market share in multiple sclerosis, Biogen’s MS products were down 15% in revenue compared to the second quarter of last year, coming in at $1.2 billion. The company laid off an unspecified number of employees in April, suspected to be from the MS business as the head of the franchise left Biogen and 2022’s financial presentation alluded to its declining revenue business.
Biogen’s MS drug Tecfidera is facing the entrance of generics to the market. The EU granted extended market protection for the drug until February 2025. There is also more competition in the MS space, which will only increase with Roche, Merck KGaA, Sanofi and Novartis all in Phase III trials to bring new BTK inhibitors to approval for MS.
“While we will be making significant investments in our newly prioritized pipeline and new product launches, we will also need to invest less in other areas which are no longer growing. With these changes, I believe that Biogen will be better positioned to maximize its growth opportunities going forward,” CEO Christopher Viehbacher said in a statement.
Alzheimer’s disease revenue from Aduhelm and Leqembi equated to a headwind of $20 million, according to Viehbacher. He expects the line to continue to be in the negative for the year as commercialization expenses exceed initial revenue.
After the botched Aduhelm launch, Biogen and partner Eisai are determined to do better for Alzheimer’s drug Leqembi. While the companies have recently secured full FDA approval with Medicare coverage, Leqembi’s challenges are far from over.
Viehbacher acknowledged on Tuesday’s earnings call that “there’s an awful lot we still don’t know” about Alzheimer’s and due to the subtleties of the disease “it’s going to be quite interesting from a commercial point of view.”
In particular, the physician process for using Leqembi is quite complex with the PET scans, cognitive testing, infusions and follow-up MRIs needed for treatment. Viehbacher said the mechanics of seeing patients will change as a routine for assessing and treating with Leqembi develops in the doctors’ offices.
The CEO pointed to the need for “smarter” product launches on the earnings call, highlighting a focus on high-value projects in R&D to give the opportunity to diversify into rare disease, immunology and psychiatry. The company will also be looking at ways of conducting clinical trials more efficiently.
Biogen’s stock price fell more than 3% in Tuesday morning trading following the news.
Kate Goodwin is a freelance life science writer based in Des Moines, Iowa. She can be reached at kate.goodwin@biospace.com and on LinkedIn.
