Sepracor to shift focus, cut 530 jobs

Firm cites need to remain competitive

Marlborough drug manufacturer Sepracor Corp., shifting its focus and streamlining its operations in a slumping economy, yesterday said it would cut 530 jobs, roughly 20 percent of its workforce.

The move, coming as Sepracor posted higher fourth-quarter profits, is intended to save about $210 million, including $20 million already shaved from its budget in the last three months of 2008.

Sepracor said it would reduce its corporate staff by 180 positions and its field staff by 350, though it didn't specify how many jobs would be eliminated overall in its home state of Massachusetts. The company said it would also cut 410 contract sales employees.

In a statement, Adrian Adams, the Sepracor president and chief executive, said the company had to adapt to "a challenging time for the country and the pharmaceutical industry" to remain competitive. Company representatives didn't return phone calls and e-mail.

Sepracor shares surged nearly 15 percent in after-hours trading. Before the disclosure, shares closed at $13.63, up 13 cents in Nasdaq trading.

The company's move represents a shift toward more reliance on its respiratory drug products, which are cheaper to promote, and less on its sleep drug, said Ian Sanderson, chief pharmaceutical analyst for the Cowen and Co. research firm in Boston. Sanderson said the timing "makes great strategic sense" because Sepracor's insomnia drug, Lunesta, will be facing increased competition this year as generic versions of Ambien CR, its chief rival, come onto the market.

"They have been spending a lot of money to promote Lunesta," said Sanderson. "And they came to the conclusion that a company the size of Sepracor can't afford to support a large primary care sales force and a large consumer advertising budget. They made the strategic decision to pull back on Lunesta and turn it into a cash cow by increasing their [profit] margins even though sales will be down."

Sepracor's respiratory drugs, by contrast, require less spending on advertising and promotion to primary care physicians because they are usually prescribed by specialists, he said. Those products include Xopenex, Brovana, Omnaris, and Alvesco.

Sepracor yesterday reported earnings of $88.4 million, or 77 cents a share, for the October-to-December period. That compared to a loss of $5 million, or 5 cents a share, in the fourth quarter last year. The company's quarterly revenue climbed 8.7 percent to $369.7 million.

Sepracor projected 2009 earnings between $2.10 and $2.70 a share, a 50 percent increase over last year. But revenue is projected to fall between $1.1 billion and $1.2 billion this year, about 7.1 percent lower than 2008.

Robert Weisman can be reached at weisman@globe.com.