With the resignations on Thursday of its chief executive officer,president and director, Jon Saxe, and vice president of clinicalresearch, Michael Catalano, Synergen Inc. will scale down into a"more entrepreneurial" company, said Ken Collins, executivevice president.
Collins and Mark Young were both promoted from vicepresident to executive vice president, and with executive vicepresidents Greg Abbot and Robert Thompson will work as apresidential team. Larry Soll, one of four University of Coloradoscientists to found Synergen, becomes chief executive officerand remains chairman of the board of directors.
The restructuring will also include layoffs of about 10 percentof the 670 people employed by Synergen (NASDAQ:SYGN) ofBoulder, Colo. The company had almost doubled the size of thestaff in the past year as it prepared for commercialization of itsflagship anti-infective, IL-1ra (Antril), in North America andEurope.
The company is keeping its 75,000-square-foot manufacturingplant in Boulder, but will suspend building and remodelingprograms for office and laboratory space near its headquarters.
Disappointing Phase III trial results for Antril, reported on Feb.22, beat share prices down nearly 70 percent, from $42.13 to$13.50, and have restricted the company's ability to accessmore cash. Synergen's stock closed Thursday at $9.75 a share,down 25 cents.
Analyst Joseph Edelman of Prudential Securities saidSynergen's approach under Saxe "had been very aggressive andturned out to be overly optimistic. They took a high-risk path.Saxe really wanted to start a big drug company. I think thatJon Saxe didn't want to lay people off and that was thedifference in philosophy," which the company cited as thereason for his resignation.
Saxe did not return phone calls from BioWorld on Thursday tohis home or office, where he was said to be picking upmessages.
"He was a very fine guy," said analyst Robert Peterson ofHanifen, Imhoff Inc. in Denver. "They kind of had managementby consensus."
Peterson suggested that the company may have responded topressure from a few major institutional shareholders, whodemanded a "sacrificial goat" in Saxe's resignation.
However, he said, Catalano was brought in by Saxe anddeserved to be held responsible for design of the Phase III trialthat showed no clinical benefit in Antril in sepsis, despite PhaseII results suggesting up to 60 percent more patients savedfrom this rapid reaction of the immune system to systemicinfection. A retrospective subset analysis of the Phase IIIresults indicated that Antril did benefit the sickest patients,and the next trial is expected to be focused on this group.
Although Catalano will continue as a technical consultant,Collins would not predict if he would be involved in the newPhase III trial design being devised now.
The company's priorities now include a second Phase III Antriltrial for the interleukin-2 inhibitor in a more narrow group ofsepsis patients deemed most likely to benefit, Collins said. Thecompany still intends to file for approval of Antril in Europe inthe second half of 1993, he said, but some products, indicationsand markets in other countries might be considered forlicensing or partnership arrangements.
A Phase II trial of Antril in rheumatoid arthritis has beencompleted, Collins added, saying that the company intends topush forward on its products in clinical trials while cuttinglosses earlier on other projects by rapidly making "go/no go"decisions based on available data.
Synergen also has a partnership with Syntex Corp. of Palo Alto,Calif., to develop CNTF for Lou Gehrig's disease that iscontingent on the outcome of a pivotal Phase II/III trial, Collinssaid. However, analysts pointed to a confused patent situationregarding that compound with competitor RegeneronPharmaceuticals Inc. (NASDAQ:REGN) of Tarrytown, N.Y., whichis also developing CNTF for the potential orphan drugindication.
An early project with SLPI, secretory leukocine proteaseinhibitor, that had been explored for use in inhibiting elastaseproduction in cystic fibrosis, will probably be shelved, saidanalyst Jeff Casdin of Oppenheimer & Co. He said any potentialrevenues from CNTF would not be expected for years.
"What Synergen's doing here makes a lot of sense," said analystDavid Webber of Alex. Brown & Sons Inc., which has been anunderwriter for Synergen. "Of course, the stock's going to moveon fundamentals."
He predicted that Antril "is very likely to be successful afterthe next trial and get approved." With the need for a secondand more narrow Phase III trial (of Antril), revenues will comelater and be lower than once hoped, Webber said, but themarket could still range from $300 to $500 million annually inthe U.S.
Webber is looking for profits in 1996 instead of the second halfof 1994. The company ended 1992 with $240 million in thebank, and anticipated ending 1993 with as little as $150million remaining. Now Synergen expects to have "well inexcess" of $150 million by the end of 1993, Webber said.
Analysts compare Synergen's situation with downsizing atother companies whose sepsis therapies had run into trouble.Xoma Corp. (NASDAQ:XOMA) of Berkeley, Calif., sharply cutspending and staff about six months after its anti-endotoxin, E-5, failed to win FDA approval in 1992, and reordered itsproduct portfolio with a gradual change in management.
Centocor Inc.'s (NASDAQ:CNTO) president and chief executiveofficer, James Wavle Jr., resigned in April 1992 after the FDArefused marketing approval for Centoxin. The Malvern, Pa.,company continues to experience "a gradual series ofdisappointments and layoffs," said Webber.
Cynthia Robbins-Roth, publisher of BioVenture View, comparedSynergen's management change to Robert Fildes' exit aspresident of Cetus Corp. (since merged with Chiron Corp.) ofEmeryville, Calif., after the FDA told the company in 1990 itneeded more data before its interleukin-2 might be approvedfor renal cell carcinoma.
"You're always taking a calculated risk with drug discovery,"she said. "If your strategy is perceived as failing, it can createautomatic conflict with the board."
She said the company may face a choice about "bettingeverything on Antril," adding that to access more money,"maybe they'll have to give away some of the company."
Before joining Synergen in 1989, Saxe had been at Hoffmann-La Roche as vice president of licensing and corporatedevelopment, responsible for the patent law department.Among other projects at the pharmaceutical company, he wasinvolved in arranging a research and developmentcollaboration with Synergen on IL1-ra.
The collaboration with Hoffmann-La Roche ended in May 1990,leaving the company in a "much more leveraged position," Saxesaid at the time.
-- Nancy Garcia Associate Editor
(c) 1997 American Health Consultants. All rights reserved.