More layoffs announced at EntreMed

Struggling company has cut more than half of its staff since July

Cash burn being watched

Analyst sees retrenching for 2 celebrated drugs

September 20, 2002|By Julie Bell | Julie Bell,SUN STAFF

EntreMed Inc., the young company that gained fame four years ago when a Nobel laureate implied that its drugs might "cure" cancer, announced yesterday its second round of layoffs in less than two months - its latest bid for survival.

The Rockville-based developer of the anti-cancer drugs Endostatin, Angiostatin and Panzem said it cut 30 jobs yesterday on top of the 30 last month, leaving the company with about 50 employees, fewer than half the number of July.

One analyst said the company also appears to be de-emphasizing internal development of its two most celebrated drugs, Endostatin and Angiostatin.

A New York Times article about the two drugs in May 1998 thrust EntreMed into the limelight, ostensibly because it quoted Nobel laureate James Watson as implying that they would "cure cancer."

Watson's comments sent EntreMed's shares soaring nearly 330 percent in a day, to $51.81. They closed at $1.48 yesterday, down 2 cents.

EntreMed said it was cutting more jobs to conserve its remaining cash. Gerard Klauer Mattison analyst Peter J. McDonald said he thinks the company will exhaust its funds in the fourth quarter unless it finds a way to raise more.

Company spokeswoman Amy Finan declined to provide an update yesterday of how much cash the company has left, repeating only that it had $11.4 million June 30.

"It's still going to be tough to make it to '03," McDonald said.

His firm recommended Monday that investors sell EntreMed shares, after which the depressed stock lost more than 25 percent of its value. The New York investment bank, which previously had a "neutral" recommendation on the shares, said it lowered the recommendation because it will be difficult for EntreMed to raise money now on terms favorable to shareholders.

EntreMed Chief Executive Officer John W. Holaday, who has led the 11-year-old company through last-minute financings a number of times, has remained positive despite the weak stock market and what analysts describe as the growing reluctance of large pharmaceutical companies to enter into licensing deals.

The company, Holaday said Monday, is in "late-stage negotiations" for a deal to sell the rights to one or more of its cancer drugs to another company.

Such a deal, if structured typically, would bring EntreMed upfront cash and the promise of royalty payments from sales of the drug.

EntreMed emphasized yesterday that it will continue enrolling cancer patients in the clinical trials it has begun, which are testing its three drug candidates as cancer treatments. The company said it has enough drugs manufactured to supply current clinical trials into 2004. Spokeswoman Amy Finan said additional trials for all three drugs are planned.

Finan acknowledged that the focus in EntreMed's Rockville laboratories has narrowed.

"The focus in the labs here in Rockville will be small-molecule," she said, referring to drugs such as Panzem, which generally are taken in pill form and are considered cheaper to manufacture than proteins.

Protein drugs such as Angiostatin and Endostatin are injected or infused into patients.

"It seems like it's moving to the back burner," analyst McDonald said of EntreMed's protein drugs. "It seems like the focus is Panzem, and then Angiostatin and Endostatin as they can do it, depending on" how much money they have.

The two rounds of layoffs - and other cost-cutting steps such as deferred compensation for top executives - will reduce EntreMed's annual net expenses to $12 million by early next year, the company said. EntreMed spent $11.6 million in the second quarter alone.

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