‘It’s Happened Before:’ Biz Leaders React to Biogen Idec’s San Diego Shutdown

Xconomy San Diego — 

[Corrected 11/04/10, 9:25 am to reflect merger] When Cambridge, MA-based Biogen consummated its merger with San Diego’s Idec Pharmaceuticals in November 2003, Executive Chairman William H. Rastetter said, “Based on our existing collaboration in oncology, we knew that this combination would be an excellent fit, both operationally and culturally,” according to a statement issued at the time.

Now, just seven years after closing the $6.8 billion deal, Biogen Idec said yesterday it plans to shut down its San Diego research and corporate campus, which focused on cancer drug development, and lay off most of its San Diego employees. Rastetter, who was Idec Pharmaceutical’s founding CEO (and who joined Venrock’s Palo Alto, CA, office in 2006), declined to comment yesterday.

Other local business leaders said the shutdown is both a sign of the times, and a pattern that has become all-too-familiar among the venture-backed companies that often shut down or depart San Diego’s “grow to sell” market.

“I can fully understand why they decided to do it,” said Julie Meier Wright, CEO of the San Diego Regional Economic Development Corp. “It reminds me of some other corporate decisions we’ve seen here, like Gateway, General Dynamics, and even Hughes Aerospace, years ago.” Biogen Idec, she added, is “a first-rate company, and ideally their people will be absorbed here in San Diego.”

Biocom CEO Joe Panetta sounded a similar theme when I caught up with him yesterday during an all-day conference the local life sciences industry group had organized to focus on human resources training.

“From a historical standpoint, it’s sad to see that one of the original biotech companies in San Diego is now closing its doors here,” Panetta said. But he also noted that a recurring theme of the HR conference was the challenge to find experienced and highly talented employees in the life sciences. “It’s unfortunate, but it’s the story of the biotech industry in San Diego,” Panetta said. It’s happened before, and I can point you to any number of people who were laid off and went on to start great biotech companies.”

Panetta added, “This closure to me is not indicative of what’s going on in the life sciences in San Diego right now.” Based on venture investments over the past year, he said that “life sciences overall has really been the only sector that’s been above water” and growing.

Nevertheless, it’s clear that even with Idec, Biogen Idec failed to meet expectations that it would grow into an incredible biotechnology powerhouse, after the likes of Amgen and Genentech, which were set in 2003.

As Xconomy’s Ryan McBride reports today, George Scangos inherited a company that has not brought a new product to market since 2004. After taking over less than four months ago, Scangos told Ryan the company was stretched too thin. A major part of the restructuring plan is to divest the company’s cancer and cardiovascular drug pipelines. As part of that, the company has designated 11 programs that it plans to remove from its pipeline, including its molecule galiximab for lymphoma and the anti-tumor drug volocixiumab.

Beyond the anti-cancer drug Rituxan, which was approved by the FDA in 1997, the legacy Idec group in San Diego didn’t make as much of a contribution to the oncology drug pipeline as Biogen had expected. There also was a lot of management turnover at Biogen’s San Diego operation, which suggests that the Idec and Biogen employees didn’t mix as well as expected either.

Biogen Idec’s San Diego research and corporate center, which was intended to serve as Idec Pharmaceuticals corporate headquarters, already has changed hands, according to the San Diego Union-Tribune, which reports the 43-acre campus off Nobel Drive in University City was sold last month to Alexandria Real Estate Equities. The Biogen Idec complex was built in 2004 for $170 million.

As Connect CEO Duane Roth put it in an e-mail, Biogen Idec’s decision is “disappointing, but it seems to be a strategic business decision to narrow their discovery focus. I’m hopeful there will be some opportunities to locally license some of their cancer programs.”

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5 responses to “‘It’s Happened Before:’ Biz Leaders React to Biogen Idec’s San Diego Shutdown”

  1. Plodna says:

    Idec Pharmaceuticals bought Biogen – not the other way around. Genentech sued arguing that there had been a change in control of the company to get ownership of Rituxan but Biogen Idec successfully argued in court that it was still Idec Pharmaceuticals with only a name change to reflect the merger. The balance of power has clearly been the reverse though.

  2. John says:

    It’s a shame they didn’t offer a transfer. Most probably wouldn’t move away from S.D. but an offer would have been much better considering media relations.

  3. Else says:

    About a quarter of the affected employees have been offered relocation packages.

  4. June says:

    No surprise – our continuing business unfriendly environment, high taxes, over regulation and high real estate costs for both employers and employees are a constant discouragement for expansion.

    I suspect with the incoming Ca. state leadership we will see companies fleeing the state – lured away by more business friendly, affordable cities that welcome corporate growth and reward hiring.