Otonomy axes staff, hits brakes on R&D after phase 3 flop

The progress of OTO-311 into a phase 2 trial and Otiprio into a pivotal study is on hold.

Otonomy is hunkering down after a phase 3 wipeout devastated its near-term prospects. The ear disease firm is laying off one-third of its noncommercial staff and hitting pause on its remaining pipeline programs.

San Diego, California-based Otonomy unveiled the cuts and pipeline review two weeks after the failure of Otividex to move the needle in phase 3 forced it to can that candidate. The aftershocks of the blow are being felt well beyond the Otividex program. Otonomy is holding off on starting clinical trials of other candidates until next year at the earliest.

That means the progress of OTO-311 into a phase 2 tinnitus trial and Otiprio into a pivotal study in children with acute otitis media with tympanostomy tubes is on hold. Otonomy will decide on the timing of the study starts as part of a reassessment of its pipeline.

Whatever Otonomy decides, it will move forward with a reduced workforce. The ax is set to fall on one-third of the Otonomy staff who work on tasks other than the commercialization of Otiprio. Otonomy’s total headcount was 139 as of the end of 2016. The biotech’s sales force stood at 40 before a recent reorganization, suggesting the latest cuts could affect about 30 employees.

Otonomy thinks the cuts are necessary if it is to bounce back from the phase 3 setback.

“We moved quickly following the disappointing AVERTS-1 trial results to focus our efforts in order to reduce costs,” Otonomy CEO David Weber, Ph.D., said in a statement. “The changes we are making give us the cash runway we need to build shareholder value by focusing on key assets in our product pipeline which we believe is still the broadest in the otology field.”

Expectations for that pipeline have been beaten down by Otonomy’s failures in the clinic and its struggles to grow sales of Otiprio, which won FDA approval late in 2015. Sales in the most recent quarter came in at $300,000, up from $100,000 a year earlier. The FDA is due to decide whether to also approve Otiprio in acute otitis externa, a bacterial infection also known as swimmer's ear, by March.