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Novacea Slashing Jobs Following Ill-Fated Trial
(BioWorld Today Via Acquire Media NewsEdge) Novacea Inc. said it plans to reduce its work force over the next two months to about 15 employees, as it faces a net loss of $1.2 million for the first quarter.
The job cuts come about a month after Schering-Plough Corp. ended its collaboration agreement with Novacea to develop Asentar for prostate cancer. Novacea terminated the Phase III ASCENT-2 trial of Asentar after a higher number of deaths occurred in the Asentar-treated group.
As part of the collaboration, Novacea received a $60 million in up-front payments from Schering in 2007. As of March 31, the remaining deferred revenue balance was $52.4 million, Novacea said.
Due to the deaths in the Phase III trial, Novacea also suspended enrollment in other ongoing trials involving the product, which was in a Phase II trial for advanced pancreatic cancer.
Novacea is finalizing an analysis of the ASCENT-2 Phase III trial and is preparing a complete response to the FDA regarding releasing the clinical hold on the Asentar investigational new drug.
In addition, the company said it plans to present preliminary findings from ASCENT-2 at an investigator meeting during the upcoming American Society of Oncology meeting in Chicago.
"We view management's decision to continue to preserve cash by cutting costs as a positive," said Simos Simeonidis, an analyst with Broadpoint Capital, in a research note. "However, our view is that Novacea is in a race against time, as the longer it takes to resolve the current situation, the weaker its position."
The company expects its cash burn rate for 2008 to be about $15 million. Based on the anticipated level of monthly operating expenditures by the end year, the estimated operating burn rate for 2009 should be in the $6 million to $8 million range, Novacea said.
The South San Francisco-based company is providing severance assistance to the employees affected directly by the work force reduction, and anticipates related cash payments totaling about $800,000 in 2008.
First-quarter figures released Monday showed Novacea had $102.2 million in cash, cash equivalents, marketable securities and accounts receivable. That compares to $106.1 million as of Dec. 31.
The accounts receivable balance of $4.8 million as of March 31 includes $4.3 million of cost reimbursement revenue for the first quarter of 2008 related to Novacea's development efforts on Asentar under the company's agreement with Schering-Plough, which ended in April.
Total research and development expenses for the first quarter of 2008 were $5.5 million as compared to $7.6 million for the same period in 2007.
Novacea attributed the $2.1 million decrease in R&D expenses primarily to the reduced development activities and product manufacturing expenses for AQ4N, and to the lower level of clinical development activities in its Phase III clinical trial in androgen-independent prostate cancer, which was terminated in November 2007.
The net loss for the first quarter of 2008 was $1.2 million, or 5 cents per share, as compared to a net loss for the same period in 2007 of $10.6 million, or 46 cents per share.
Shares in Novacea (NASDAQ:NOVC) were down 2 cents Tuesday, closing at $3.13. n
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