West Coast Editor
With the Phase I study for its anemia drug on hold, Neose Technologies Inc. said it is restructuring to reduce its work force by 25 percent in order to take the drug far enough that the company might attract a partner.
"We've said we are prepared and plan to hold off on partnering until we have some Phase II data," said Brian Davis, vice president and chief financial officer of Horsham, Pa.-based Neose.
The company's stock (NASDAQ:NTEC) closed Friday at $2.58, down 33 cents.
At the end of March, Neose had about 170 employees. By the time the restructuring is finished, the firm will be down to about 125, Davis said.
"There is a component of that that includes some hiring, because involved with the closing of our facility in San Diego is hiring back [employees] in Worsham to fill some of the functions there," he told BioWorld Today.
Last month, the FDA put the proposed Phase I study for NE-180, a long-acting, GlycoPEGylated erythropoietin to treat chemotherapy-induced anemia, on hold pending more manufacturing and preclinical information in order to complete the review of the investigational new drug application.
Neose previously had expected to start the Phase I trial in the third quarter, and the firm's shares dipped more than 19 percent on news of the delay of at least one quarter, closing that day at $3.35.
While waiting for further word from regulators, Neose officials are looking down the road and already have started to identify would-be suppliers of NE-180 in Europe to begin the scale-up required for Phase III trials and launch. Those activities are expected to occur during next year and 2007, once the FDA has cleared the firm to start trials.
"We've known for a long time that, for intellectual property reasons, it would make more sense to make the Phase III and commercial material in Europe," Davis said.
Meanwhile, as a result of the restructuring, Neose expects to record non-cash property and equipment impairment charges in an amount that's uncertain for now. After getting the full benefits of the restructuring during the fourth quarter of this year, though, the firm plans to reap annualized savings of between $6 million and $8 million.
Net cash burn for the second half of 2005 is expected to average about $9 million per quarter, which includes the cash effect of the restructuring costs (and does not take into account any new partnering activities). That compares to an average net cash burn during the first half of 2005 of about $10.5 million per quarter, excluding the effect of proceeds from equity issuances and purchases of marketable securities.
In all, Neose estimates cash restructuring costs of about $1.8 million, mostly to be reflected in its operating results during the third quarter of 2005.
The company will centralize its research activities in the Horsham facility, ending operations in the leased building in San Diego, and will divest efforts not related to its GlycoAdvance and GlycoPEGylation technologies - including maybe a spin-off of the glycolipids program, which has generated what the company calls "promising leads" for the treatment of Parkinson's disease and others.
Once the firm gets enough drug made for Phase II trials with NE-180, which probably will happen in the third quarter of this year, the need for internally manufactured products will be substantially lower than the capacity of its 24,000-sq.-ft. pilot facility, so Neose might sell that plant and consolidate further in Horsham, but no decision has been made in that regard.
Separately, Neose reported second-quarter financial results, including a net loss of about $10.3 million, 31 cents per basic and diluted share, compared to a net loss of about $10.3 million, or 47 cents per share, for the period last year. Revenues went up, totaling $1.4 million, thanks largely to the collaboration with BioGeneriX AG, of Mannheim, Germany, which began in the second quarter of last year. Davis said he expects a regulatory filing in Europe related to that deal in the first quarter of next year. (See BioWorld Today, Feb. 1, 2005.)
In late 2003, Neose and Bagsvaerd, Denmark-based Novo Nordisk A/S turned their 2002 research and development pact into two formal licensing agreements that gave Neose $4.3 million up front and promised up to $51.3 million in milestone payments. The deals call for Neose to apply its GlycoPEGylation technology to develop three next-generation proteins within Novo's therapeutic areas. (See BioWorld Today, Nov. 19, 2003.)
Neose ended the second quarter with about $54.1 million in cash, cash equivalents, and marketable securities, enough to last until "at least the middle of 2006," Davis said.