Vertex to shutter Canada site, focus in on 3 hubs in R&D shuffle

Research
Vertex Pharmaceuticals announced in its annual filing that it's closing an R&D site in Canada as part of an overall research consolidation.

After posting a disappointing forecast for 2017, Vertex is consolidating its R&D operations, according to a securities filing. The company plans to close a site in Canada, cutting 70 jobs, and trimmed its headcount in Boston, according to a source close to the company.

Vertex “decided to consolidate our research activities into our Boston, Milton Park and San Diego locations,” according to its 10-K. The decision was made last month, the company said, as analysts were chewing over reduced expectations for Vertex's star cystic fibrosis med, Orkambi.

A spokesperson told FiercePharma the drugmaker chose to close the R&D outfit in Canada "after careful consideration" and offered some employees the chance to relocate. Vertex will expand research efforts at its three remaining hubs, he said.

Meanwhile, at the Boston location, an internal reorganization left 5 to 15 longtime employees without jobs, a source close to the company told FiercePharma. A few employees moved from the Canada office to Boston, the source said, "but most were cut loose." The cuts in Boston followed a trickle of departures by other veteran staffers.

Vertex's spokesperson didn't answer a specific question about cuts in Boston.

About 70 Vertex employees in Canada face losing their jobs. The move will result in restructuring expenses of about $10 million. Radio Canada reported the Laval site is set to close in May.

"Having the right expertise in the right places with the right resources is critical to our mission of bringing more transformative medicines to people with serious diseases," a Vertex spokesperson wrote. "We are constantly looking for ways to improve the odds of success for our business and for patients."

RELATED: Vertex's 'cautious but reasonable' 2017 guidance hits below Wall Street forecasts

Massachusetts' Labor and Workforce Development office doesn't have a WARN notice filed from Vertex, according to a spokesperson with that agency. Vertex has about 2,150 employees worldwide, according to its 10-K. 

Drugmakers have been focusing their R&D efforts in geographic hubs to save money and, they hope, create collaborative environments where scientists in daily contact build on one another's ideas. Vertex's three remaining R&D locations sit in three regions where pharma companies, academic centers and teaching hospitals have created active research networks. Vertex's Milton Park site is near Oxford, U.K.

The move comes shortly after Vertex trotted out 2017 sales guidance that hit below Wall Street expectations. Facing a hit to Orkambi’s growth, the drugmaker expects between $1.79 billion and $2.01 billion for the year. At the midpoint, it’d be about 17% lower than sell-side expectations, Evercore ISI analyst John Scotti wrote at the time.

RELATED: Vertex casually drops Orkambi revenue slowdown, creating 'unnecessary drama' for investors

Leerink Partners analyst Geoffrey Porges said the company had laid out a “cautious but reasonable” guidance, while Jefferies' Brian Abrahams figured that the drugmaker could be keeping its Orkambi guidance “in check” as it negotiates for coverage in Europe.

Last fall, Vertex took criticism after execs hinted about a “looming revenue miss” for Orkambi at a fireside chat. That, according to Porges, was “a backhanded slap” to investors—he said the information “warranted a simple 8-K” filing with the SEC, rather than an offhand public reference.

Vertex is predicting between $1.1 billion and $1.3 billion for Orkambi this year.