Alkermes to trim 150 jobs, close plant

End of partner Eli Lilly's inhalable insulin project prompts biotech's move

Some thought Alkermes's inhalable insulin had the potential to generate billions of dollars in sales. (Lisa Poole for the Boston Globe/ File 2007)

Alkermes Inc. said yesterday it plans to cut about 150 jobs, or 18 percent of the Cambridge biotech's workforce, this week and shut down its Chelsea manufacturing plant after a partner decided to halt development of an inhalable form of insulin for diabetics.

The move comes two weeks after Alkermes's partner, Eli Lilly & Co., pulled the plug on the Air Insulin project, making it the latest in a string of companies to give up plans to market an inhalable form of insulin as an alternative to injections. In recent months, two other drug makers - Pfizer Inc. and Novo Nordisk A/S of Denmark - have also scrapped work on their versions of inhalable insulin.

"It seems like the market environment is not optimal to be going forward with candidates for pulmonary insulin," said Alkermes spokeswoman Rebecca Peterson. Instead, she said, the company will try to use the technology to develop inhalable treatments for other diseases such as chronic obstructive pulmonary disease.

Eli Lilly's decision was a disappointment for Al kermes because some thought the product had the potential to generate billions of dollars in annual sales. In the United States alone, there are an estimated 21 million diabetics, many of whom need to take insulin regularly to regulate their blood sugar levels. Eli Lilly and Alkermes were hoping to ask the Food and Drug Administration for approval to start marketing the product in 2009.

But after Pfizer spent $3 billion developing its own version of the product, the New York pharmaceutical giant found many doctors and patients were reluctant to switch from injectable insulin. Also, some doctors worried about the potential long-term health effects of insulin on the lungs.

Alkermes said it expects to take a restructuring charge of $5 million to $10 million, plus an impairment charge of up to $15 million, associated with the job cuts and plant closure. The company said laid-off workers will be eligible for severance pay and other benefits.

Peterson said Alkermes received economic incentives from the state and the city of Chelsea to build the plant, which opened in 2003, but is not obligated to return any money.

Kofi Jones, a spokeswoman for the Massachusetts Executive Office of Housing and Economic Development, said Alkermes received a reduction in its corporate excise taxes in exchange for its investment - a standard tax break available to companies that expand in Massachusetts - and a discount on its property taxes from the city. Jones was not sure how much money the company saved in taxes because of the incentives.

Regardless of the inhalable insulin failure, Alkermes executives said, the company remains in sound financial shape with more than $500 million in cash.

Alkermes also has revenue from two products on the market, Risperdal Consta (an injectable form of Johnson & Johnson's oral schizophrenia drug) and Vivitrol (a monthly injection to treat alcoholism that is marketed by Cephalon Inc.). It also has a pipeline of medications in development.

The company recorded $178 million in revenue for the nine months ended Dec. 31, up 2 percent from the same period a year ago, with a $15 million operating profit.

After the cuts, Alkermes will have 665 employees, including 260 in Massachusetts. Alkermes shares fell 3 cents to close at $10.82. It has a stock market value of more than $1 billion, making it one of the larger biotechs based in Massachusetts.

Todd Wallack can be reached at twallack@globe.com.