By Debbie Strickland
Six weeks after an FDA advisory panel rejected its lead product, DepoTech Corp.'s CEO has resigned for "personal reasons" and the company, its stock in the sub-$5 range, is restructuring.
To conserve cash, DepoTech is suspending development of two pain relief products and laying off 29 employees, leaving 124. The San Diego-based drug delivery firm will take a first-quarter charge of $405,000 for severance and out-placement expenses.
DepoTech's shares closed Tuesday at $3.50, down $0.25.
The stock has remained well below $5 since plunging from $13 to $4.125 on Dec. 19 — the day after the anticancer drug DepoCyt failed to win the endorsement of the FDA's Oncologic Drugs Advisory Committee.
The panel said the single DepoCyt Phase III trial was not adequate or well controlled. (See BioWorld Today, Dec. 19, 1997, p. 1.)
DepoTech and U.S. marketing partner Chiron Corp., of Emeryville, Calif., had sought approval of DepoCyt for patients who develop neoplastic meningitis as a result of metastasizing solid tumors. DepoCyt is a sustained-release formulation of the chemotherapeutic agent cytarabine.
Although the job cuts are "across the board, we did maintain our core competencies, such as our GMP manufacturing capabilities," said Dana McGowan, chief financial officer. GMP stands for Good Manufacturing Practices, which are FDA-regulated standards.
DepoTech plans to meet later this month with the FDA to discuss the status of DepoCyt. Pharmacia & Upjohn, of London, meanwhile has submitted a marketing authorization application for DepoCyt in Europe. Pharmacia & Upjohn acquired non-U.S. rights in July 1997.
"The things we want to do have not changed," said McGowan. A Phase IV DepoCyt study — unique because it began prior to marketing approval — is proceeding, along with Phase III trials in neoplastic meningitis associated with lymphoma and leukemia. Moreover, she said, development and regulatory filings remain on track in Europe and Japan.
DepoTech's next two products in the pipeline are DepoMorphine, morphine sulfate administered by a single epidural injection for postoperative pain management; and DepoAmikacin, a broad-spectrum aminoglycoside antibiotic. Like DepoCyt, they are based on the company's lipid-based encapsulation system, DepoFoam.
DepoMorphine has now advanced to Phase II trials, but the DepoAmikacin program has been put on hold, along with the lower-profile DepoBupivacaine project. Development of those two products may resume if DepoCyt is commercialized or if outside sources of funding are secured, McGowan said.
In preparation for an expected DepoCyt launch, DepoTech last fall raised nearly $15 million in a private placement of 1 million shares priced at $14.625 per share.
As of Sept. 30, the company had $34.8 million in cash, following a nine-month net loss of $14.3 million. At 1997's burn rate of about $5 million per quarter, the company has enough cash to last nearly two years. The restructuring should reduce the burn rate, McGowan said, but she declined to say by how much.
A committee of three executives with long-term ties to the firm is managing the company in the wake of the departure of Edward Erickson, president and CEO, who resigned for personal reasons not related to the company's recent fortunes, McGowan said.
Fred Middleton, chairman of the board, has assumed the CEO post; and John Longenecker, chief operating officer, has been appointed president and a member of the board of directors. The two, along with board member and medical director Stephen Howell, comprise the executive committee now running the company. *