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Profits up, Biogen cuts 11% of global workforce

Biogen Idec Inc. CEO George Scangos InterviewBiogen Idec Inc. CEO George Scangos Interview
George Scangos, CEO of BiogenPhotograph by Scott Eells — Bloomberg via Getty Images

Earlier this year, Biogen (BIIB) was the hottest biotech in the business. Today, the company announced it will cut 11% of its global workforce—some 880 employees—and shutter a number of pipeline programs by the end of the year. The Cambridge-based biotech announced its corporate restructuring plans Wednesday morning in an otherwise rosy third quarter earnings report, in which the company beat sales estimates and raised earnings guidance for the year. Revenues were up 11% for the quarter. Profits rose 13%.

CEO George Scangos called the workforce reduction an “extremely difficult” but necessary decision to fulfill the company’s goals. Biogen plans to reinvest the projected $250 million in savings into commercial initiatives—largely the marketing of Tecfidera, the company’s blockbuster multiple sclerosis medication, whose sales disappointed last quarter. Biogen’s stock dropped 22% in July after the company reported lower-than-expected demand for the drug. Biogen is actively working to reverse that with a television advertising campaign and increased sales calls to physicians. It also recently announced the departure of its head of global commercial operations, Tony Kingsley.

Savings will also go to focus on pipeline opportunities. The company has a number of promising drugs in mid- and late-stage development, perhaps most notably aducanumab, a promising medication for early-stage Alzheimer’s patients. Data released in March from early clinical testing of the drug sent Biogen’s stock price soaring to an all-time of high of $480—it is now around $270, partly due to the downdraft in biotech stocks—and was met by unusual levels of enthusiasm from the Alzheimer’s research community. Biogen has begun to enroll patients in a late-stage trial of aducanumab, which Fortune wrote about in April and is the first-ever to both appear to significantly remove the brain plaques associated with Alzheimer’s and to slow cognitive decline in patients.

The biotech expects to take a $85-95 million charge next quarter as a result of the restructuring. Among the drug development programs Biogen will discontinue are some of those focused on MS and other immunological diseases.

Biogen may be cooling, but it is hardly struggling. The company expects revenue and profit to continue to grow with increasing patients and cost control measures. Through midday trading, Biogen’s stock was up 2%.