01/05/2012 06:19 EST | Updated 03/06/2012 05:12 EST

Cangene Layoffs: Biotech Company Cuts 120 Jobs, Shakes Up Management In Efficiency Drive

WINNIPEG - Winnipeg-based Cangene Corp. is cutting 120 jobs, or about 17 per cent of its total workforce, as the company adapts to shrinking demand for drugs stockpiled to combat possible biological warfare or terrorism.

A spokesman for the company, one of Canada's oldest and biggest biotech firms, said Thursday that most of the job cuts will be in Winnipeg where Cangene has its head office and other operations.

There'll be minimal impact on a bottle-filling plant in Baltimore, Md., which mainly does contract work for other companies. A few jobs will be lost at a small office in Toronto that employs about 10 people.

Cangene (TSX:CNJ) sells immune therapeutics around the world to customers that include the U.S. military. It also has been growing its roster of commercial products that use similar technology to treat medical conditions.

The company says its overall workforce will drop to about 580 positions from 700, a few of them already vacant due to a hiring freeze that has been in place some time.

Cangene estimates the cuts will result in reducing future spending by $6 million to $7 million on an annualized basis.

Chief financial officer Michael Graham said the cuts will be made in most types of functions, but mostly in Winnipeg, and affected individuals will be notified over the next month.

Provincial law requires 30-days notice when a company cuts more than 50 jobs, he said.

Cangene makes drugs that can be used to treat victims of anthrax, botulism and smallpox — three potentially deadly biological threats that could be used in weapons in war or in a terrorist attack.

However, the demand for those biodefence products is less than it was a few years ago when the United States was building up its strategic stockpiles in the wake of the 9-11 terrorist attacks in 2001.

Cangene has also got commercial products for treating pregnant women and their fetuses for a blood disorder, for treating hepatitis B infections in liver transplant patients and other health conditions.

Graham said Cangene is working to develop or acquire additional products with commercial potential but that's an expensive process because it can take years of research a new drug before it generates sales.

"We've tried to manage to fund our internal R&D through the cash generation that's coming from these commercial products that we're selling and from this biodefence profitability," Graham said Thursday in an interview.

"We've tried to live within our means, to some degree, and this is why we're trying to fine-tune our R&D programs so that we're only spending money on those programs that we really think have a high likelihood of succeeding."

Among the departures will be a senior vice-president for operations and a vice-president for research and development.

Cangene is also reorganizing its remaining management team, with Gary Floyd appointed to the new position of chief operating officer. Floyd has been an independent consultant who has worked in the pharmaceutical industry.

Cangene's chief executive said the cuts are necessary for the long-term health of the company, as it focuses on higher-growth businesses.

"Aligning our workforce with our strategic focus on commercial products is a top priority and is expected to help Cangene drive value for its stakeholders," John Sedor, president and CEO, said in a release after stock markets closed Thursday.

"Unfortunately, these changes affect talented people who have made important contributions to our organization. It's never easy to make this type of decision, but it was necessary to better position the company for continued success."

— with files from David Paddon in Toronto