Advancis cuts 33 jobs, including 6 officers

Move comes in aftermath of disappointing trials of drug release technology

July 30, 2005|By Tricia Bishop | Tricia Bishop,SUN STAFF

On the heels of disappointing clinical trial results for its main drug candidate, Advancis Pharmaceutical Corp. of Germantown yesterday eliminated 38 percent of its staff, including its second-ranking executive and five other officers.

The reduction of 33 positions will likely cost Advancis $3.3 million, in part from severance agreements, but the company says the move will ultimately save about $4.1 million per year.

"While we very much regret the decision we have had to make to reduce many talented Advancis staff members, we believe these actions are needed to strengthen Advancis' financial position and enhance our potential for long-term success," Edward M. Rudnic, the company's founder and CEO, said in a prepared statement.

It was a near-identical sentiment to that given in November, when the company cut 19 jobs after GlaxoSmithKline Corp. ended a licensing deal that could have been worth more than $100 million.

Wall Street appeared unconvinced that the latest move would help. Shares closed unchanged at $1.45 on the Nasdaq stock market yesterday, with trading volume about 75 percent lower than average.

Advancis had been developing technology meant to deliver antibiotics in time-released bursts, abolishing the need for multiple doses throughout the day. But two costly clinical trials of its "PULSYS" technology - paired with the antibiotic amoxicillin as a treatment for strep throat and laryngitis - showed it to be less effective than the old standard: penicillin administered several times a day.

The company expects to regroup and perhaps redo the trials or even change its business model. It will discuss its plans during an earnings conference call planned for Thursday.

In a conference call last week, Rudnic said it was "imperative" that the company rely on its current assets - primarily about $40 million in cash - to pay for future clinical trials and operations, a position that led to the layoffs.

Researchers expensive

Payroll is a significant expense for most businesses, said John Weiss, financial professor at the University of Baltimore, but it's even more so for biotechnology companies.

"Because of the professional level of the payroll in early-stage companies - it's mostly researchers - they're expensive," Weiss said. "They're expensive for good reason, but they're still expensive. [Layoffs] kind of comes with the territory when [cost cutting]."

Bob Bannon, an Advancis spokesman, said the company reviewed everyone's jobs - including Rudnic's - in determining where to make cuts. It ultimately settled on those who may be less crucial in moving forward or whose work was tied to the poor trial results, he said.

Among those who lost their jobs was the company's second-in-command and chief scientific officer, Barry Hafkin. He joined Advancis in March 2004, and was due to receive $291,200 in base salary this year with a bonus potential of 30 percent of that figure, according to papers filed with the Securities and Exchange Commission. He will receive severance pay of two years' salary.

`Breath of fresh air'

Edward M. Sybert, director of the Biotechnology Industry Program within the University of Maryland's Technology Enterprise Institute, was unfamiliar with Advancis, but he praised the idea of cutting top positions along with those at other levels.

"I think it's a breath of fresh air to hear that management is being included in a reduction in force," Sybert said. "It would indicate to me that a company [willing to do that] might have a better perspective on the ethics of responsibility."

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