Daily Record, The (Baltimore) - Md.-based Advancis Pharmaceutical Corp. freezes development, looks
As Advancis Pharmaceutical Corp. faces growing losses and regulatory challenges, the Germantown-based drug firm is cutting costs by controlling staff size, freezing most of its development programs and actively seeking a partner for acquisition.
The company, which has only one commercialized product, the antibiotic Keflex, had a net loss of $41.99 million in 2006, compared with a $32.99 million loss for 2005.
Its revenue for the year from Keflex sales was $4.8 million, about the same as 2005.
Its gross margin - the percentage of sales the company keeps after considering the cost of producing goods - is shrinking, at 80 percent for last year compared to 88 percent in 2005, according to the company.
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Advancis expects increased losses and shrinking sales to continue this year, according to its annual filing with the SEC, which was made Monday.
To control costs in 2007 Advancis officials said that they will eliminate two planned clinical trials - a Phase II trial of a pediatric version of its time-release antibiotic Amoxicillin Pulsys, which would cost about $3 million to $4 million, and a Phase III trial of Keflex Pulsys for adults that would cost a total of about $10 million, said spokesman Robert Bannon.
The company also has implemented a hiring freeze and will allow staff to shrink through attrition this year. Advancis will trim discretionary personnel such as consultants, Bannon added.
The staffing reduction will not mirror Advancis’ more drastic cuts of recent years. In 2004, the company cut its work force 18 percent to 88 employees, and then in 2005 it cut 38 percent of the work force to 52 employees.
Advancis employed 76 as of Feb. 28, according to SEC filings.
The firm also this month retained an investment bank to guide it to strategic alternatives for its future, including actively seeking acquisition partners. The name of the bank was not disclosed; Advancis still is ironing out details of the deal, Bannon said.
The company has faced challenges of late including disappointing Keflex sales, despite the introduction last year of new formulations intended to compete with cheaper generic forms of the drug made by other companies.
An additional hardship for Advancis occurred last month when the Food and Drug Administration postponed the submission of the company’s long-awaited new drug application.
The application is the last step before commercialization of Advancis’ new formulation of the antibiotic amoxicillin using the company’s proprietary time-release technology, known as Pulsys. Amoxicillin Pulsys would be the first commercialized product that employs the time-release technology.
The move means the FDA’s final decision date on the application is due in January 2008, rather than October 2007.
The cost-cutting measures mean Advancis needs to raise about $20 million to make it to the FDA’s final decision on Amoxicillin Pulsys next January, Bannon said.
Raising that money is crucial to drawing a fair price for the firm should the company locate an appropriate acquisition partner, he added.
“It would really be imperative that anybody interested in acquiring the company would see we could get to the other side of the FDA decision and move forward on our own if we so chose,” he said. “Any bid that came in - would have to be placing a value on our company and products that we think is appropriate.”
Advancis has not said how it plans to raise the money. In the past, it has raised money through stock offerings and partnerships with other companies.
Bannon said the company is wary of additional offerings because of the consequential dilution to existing shares.
Stockholders’ equity has declined from $70.149 million on Dec. 31, 2003 - the first year Advancis was publicly traded - to $11.872 million as of Dec. 31, 2006.
The company’s shares, AVNC on the Nasdaq, lost 16 cents, or 6.3 percent, Wednesday to close at $2.37.
Copyright 2007 Dolan Media Newswires
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