(Reuters) - Biogen Inc (BIIB.O), whose shares have tumbled since it slashed growth forecasts for its top-selling multiple sclerosis drug in July, said it will cut 11 percent of its workforce and eliminate development of several drugs to focus on high-priority medicines in its pipeline.
Wall Street signaled its approval of the belt-tightening as well as better-than-expected third-quarter sales of Biogen's multiple sclerosis drugs, sending its shares up as much as 9.5 percent. But most of the gains evaporated by midday.
The restructuring, announced on Wednesday, will reduce operating expenses by about $250 million this year, it said.
The U.S. biotech's stock had fallen about 35 percent over the past three months over concerns about slowing sales of Tecfidera, its oral multiple sclerosis drug.
Biogen will stop developing a drug for lupus and end some immunology and fibrosis research to concentrate on high-risk programs that promise high reward if successful.
They include late-stage development of its high-profile Alzheimer's disease drug aducanumab, two other Alzheimer's programs, its anti-Lingo drug that aims to repair nerve damage caused by MS, and one for spinal muscular atrophy.
The company will also pour some of the savings into direct-to-consumer marketing of Tecfidera in an effort to reignite growth in the United States and elsewhere. It cut a Tecfidera program in secondary progressive multiple sclerosis after disappointing trial results.
Chief Executive Officer George Scangos said, even with mounting pressures to rein in prices of U.S. prescription drugs, medicines like aducanumab and others on which it will focus will justify "attractive pricing" if approved.
"In the end, things are going to be priced according to the value they bring to patients," Scangos said.
RBC Capital Markets analyst Michael Yee said investors had been concerned after the second-quarter disappointment.
"What's most important for people is that things did not get worse, things could get a little bit better, and management's tone about the pipeline remains positive," Yee said. "These are really huge opportunities."
The company said it may have found a way to reduce a type of brain swelling that had been the most concerning side effect seen with aducanumab by adjusting dosing during treatment.
Biogen, which has about 7,550 employees, will take a charge of $85 million to $95 million, primarily in the fourth quarter relating to the jobs cuts. It also plans to announce other non-labor related cost savings by year end.
With strong third-quarter sales, cost savings, and a $5 billion share repurchase campaign well underway, Biogen raised its full-year sales and earnings forecasts.
It expects revenue growth of 8 percent to 9 percent, up from 6 percent to 8 percent, and sees adjusted earnings of $16.20 to $16.50 per share versus its prior view of $15.50 to $15.95.
The company reported adjusted third-quarter earnings of $4.48 per share, sailing past analysts' tempered expectations of $3.80, according to Thomson Reuters I/B/E/S.
Tecfidera sales of $937 million in the quarter, helped by inventory stocking, topped expectations of about $895 million.
The stock rose 2.2 percent to $271.70 at midday after rising as high as $291.01.
Additional reporting by Rosmi Shaji in Bengaluru; Editing by Don Sebastian, Clive McKeef and Jeffrey Benkoe