Alexion says it will repay $26 million to state after announcing departure

Alexion says it will repay $26 million to state after announcing departure


FILE PHOTO -- Gov. Dannel P. Malloy with Dr. Leonard Bell, the former CEO of Alexion.

CHESHIRE — Alexion Pharmaceuticals Inc., which left its Knotter Drive headquarters for New Haven last year, is packing its bags once again and laying off about 20 percent of its global workforce. A letter from the company’s chief executive officer indicates it plans to pay back $26 million in incentives and loans handed out by the state.

The pharmaceutical company, which treats rare blood disorders with its drug Soliris, announced Tuesday it is moving its headquarters to Boston while leaving an estimate 450 jobs in research and development in New Haven. The move is expected in 2018.

The move follows Alexion’s accepting $51 million in state aid to move from Cheshire to New Haven. The company was awarded a 10-year loan of $20 million at a rate of 1 percent with principal and interest deferred for five years, as well as loan forgiveness of $16 million to $20 million based on the creation of between 200 and 300 full-time jobs.

Tuesday’s announcement did not sit well with state officials.

“Alexion’s decision to move its headquarters out of the state is very disappointing, especially in light of how supportive the state has been to the company over the years as it has grown into what it is today,” said Catherine Smith, commissioner of the Department of Economic and Community Development. “While Alexion will maintain a significant number of employees in state, we are requiring that all of the $20 million loan and $6 million grant be repaid — with interest and penalties — to the department in accordance to the terms of our agreement. Setbacks like this, though unfortunate, do not deter the department from pursuing smart policies and ventures with growing companies in our state.”

In a letter to Smith dated Monday, Alexion’s chief executive officer, Ludwig Hantson, acknowledged the repayment obligation in the company’s agreement. Hantson wrote the company “will be pleased to work with you regarding payment process and timing.”

The company has had a series of setbacks after disappointing Soliris clinical trials last summer and its chief financial and executive officers left the company in December. A stock drop followed. In March, Alexion announced it was laying off 210 employees.

Alexion is also under investigation by the U.S. Department of Health and Human Services in connection with an earlier federal investigation involving support for charities that aid Medicare patients, according to Bloomberg.

An accounting scandal caused Alexion’s former CEO, David Hallal, to step down. An internal investigation concluded that the company’s senior management “failed to set an appropriate tone at the top,” including a high-pressure sales environment, according to the Boston Globe.

The state’s overtures to keep Alexion in New Haven were met with opposition by some lawmakers who said it should do more to oversee DECD’s First Five program, which includes steep tax incentives and low-interest loans.

But the state has also faced criticism that it was unfriendly to businesses after Bristol-Myers Squibb’s announcement last year that it was moving to Cambridge, Massachusetts, and General Electric’s decision to move to Boston.

“Alexion’s announcement that it’s moving its headquarters to Boston from New Haven is one more body blow to the state’s image of being unfriendly to business,” said David Cadden, professor of entrepreneurship and strategy emeritus at Quinnipiac University. “In this case, that reputation is totally undeserved. The state made a considerable attempt (up to $51 million in incentives) to keep the company in the state and grow its workforce.” Alexion was a key part of the state’s First Five program, Cadden said. The move of the corporate headquarters from Cheshire to New Haven was part of a larger plan to make New Haven more attractive to other biotech firms.

“The decision to move its headquarters should not be placed singularly on the back of Connecticut,” Cadden added. “This firm has undergone significant changes in the last year. It has lost almost all of its top leadership. Its interim president has just been replaced. Some of its financial and sales records were seized at its Brazil unit. Something is happening at Alexion.”

It remained unclear Tuesday whether any incentives were offered to the company by Boston or Massachusetts.

“However, we know what was offered by the state of Connecticut. It may be important for the state to ask for its ‘engagement ring’ back,” Cadden said.

State Senate President Martin Looney, D-New Haven, said the news was unfortunate but he was pleased Alexion would keep about 400 jobs in New Haven.

“Certainly Connecticut has been a very strong business partner with Alexion, investing millions of dollars and a great deal of time and resources in growing the company right here in Connecticut,” he said in a statement. “But there are some business decisions which are out of the control of state government.”

Sen. Joseph Markley, R-Southington, said the state’s practice of tax and spending, budget and economic uncertainty has companies continuing to leave.

“It’s terrible news, bad news for the state,” Markley said. “It’s further proof the governor’s strategy for economic growth is misguided. The notion you can pay companies to keep them here is wrong-headed. Nothing that has happened has reassured businesses to stay here because we’re continuing to go the wrong way.” 203-317-2255 Twitter: @Cconnbiz

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