Alexion Pharmaceuticals announced an operational plan to re-align the global organization with its refocused corporate strategy. The plan includes relocating its headquarters from New Haven, Connecticut to Boston and a reduction of the company’s workforce by 20 percent.
The plan is expected to deliver approximately $270 million in GAAP and approximately $250 million in non-GAAP pre-tax savings annually by 2019.
Alexion expects that the increased financial flexibility will allow the company to reinvest approximately $100 million a year into research and development through disciplined business development and additional complement proof-of-concept studies starting in 2018. Alexion anticipates the total pre-tax restructuring and related expenses associated with today’s announcement to be in the range of $340 million to $440 million.
“By streamlining our operations we will create a leaner organization with greater financial flexibility that is highly focused on delivering for patients, growing our rare disease business, and both leveraging our leadership in complement and pursuing disciplined business development to expand the pipeline,” said Ludwig Hantson, Chief Executive Officer of Alexion. "These types of changes are difficult and we recognize that they have a personal impact on people who have been dedicated to the mission of Alexion. We thank our employees for their contributions to the achievements of Alexion. While difficult, these changes were necessary to enable the Company to deliver sustainable long-term performance to support our ability to continue to develop and deliver life-changing therapies for patients.”
The restructuring will achieve savings by focusing the development portfolio, simplifying business structures and processes across the company's global operations, and consolidating manufacturing capabilities. This includes:
The company will eliminate spend and headcount associated with previously announced de-prioritized pipeline programs as well as optimizing additional R&D spend. As previously disclosed, these de-prioritized programs include ALXN1101 (cPMP replacement therapy) and ALXN6000 (samalizumab) as well as partnerships with Moderna Therapeutics, Blueprint Medicines and Arbutus Biopharma.
The new facilities strategy will result in the closing of multiple Alexion sites, including the Alexion Rhode Island manufacturing facility and certain regional and country-based offices. The company is aligning its manufacturing facilities with its ongoing multi-product network manufacturing strategy, which utilizes Alexion’s manufacturing operations in the U.S. and Ireland, and manufacturing capacity through its manufacturing partners.
The company is reducing certain General & Administrative (G&A) functions, such as Human Resources, Finance and Information Technology (IT), including out-sourcing certain non-core Finance and IT roles to support the realigned business. Alexion will continue to invest in other G&A functions, such as Legal and Compliance, to support its global business.
Implementing these changes is expected to deliver approximately $270 million in GAAP pre-tax savings annually, inclusive of $20 million of share-based compensation savings, and approximately $250 million in non-GAAP pre-tax savings annually by 2019. These changes will position Alexion to deliver on its financial ambitions, including growing GAAP operating margin to 37% and non-GAAP operating margin to 50% in 2019.
Additionally, Alexion plans to relocate its headquarters to Boston, MA by mid-2018. The company plans to have approximately 400 positions in Boston. Boston will provide access to a larger biopharmaceutical talent pool and a variety of life-sciences partners to further support future growth initiatives.
New Haven, CT will be the Company’s Center of Excellence for its world-class complement research and process development teams, which are dedicated to advancing Alexion’s innovation engine. Approximately 450 positions will be based in New Haven, including employees working in the research and process development laboratories, the clinical supply and quality teams, nurse case management and a number of important enterprise business services.
The company expects to record cumulative pre-tax restructuring and related expenses ranging between approximately $340 million and $440 million. Approximately 50% of the restructuring and related expenses will result in cash outlays. Pre-tax restructuring and related expenses of approximately $240 million to $300 million are expected to be recorded in 2017.