Ax falls on 33% of Chiasma staff after trial design doubts scuttle approval hopes

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The fallout from FDA’s concerns about the design of Chiasma’s ($CHMA) Phase III program has cost one-third of the company’s employees their jobs.

Chiasma, an Israeli-originated company that shifted its center of gravity stateside ahead of a planned product launch, had 65 full-time employees as of the start of May. The cutbacks are focused on the company’s recently-established commercial operation. Almost all of the unit’s staff--including chief commercial officer Anand Varadan--now find themselves seeking alternative employment. Varadan joined Chiasma 10 months ago following 16 years at Amgen ($AMGN).

The commercial cuts will primarily hit Chiasma’s U.S. operations. But the company is refusing to say whether Israel-based staffers will also be affected by the reduction in headcount. “At this time, Chiasma will not be providing further comment on the corporate restructuring,” Cammy Duong, a spokesperson for the company, told FierceBiotech. The statement put out by Chiasma makes no mention of where the ax will fall beyond the reference to cuts at the commercial unit.

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While Chiasma expanded its presence in the U.S. ahead of the anticipated approval and commercial introduction of its treatment for adult patients with acromegaly, the company is originally from Israel and key aspects of its business are still based in its home country. Notably, its R&D and administrative teams still work out of a facility in Jerusalem. As Chiasma had 13 employees prior to the build out of its commercial team, the Israeli operation is likely to be insulated from the worst of the cuts, though.

Whether that is true in the longer term will depend largely on Chiasma’s ability to reignite its nascent business in the face of a setback. Since FDA issued a complete response letter to Chiasma’s filing in April, the regulator has reiterated its concerns with the single-arm, open-label Phase III trial that generated the data supporting the submission. With FDA viewing the filing as lacking convincing data on efficacy, Chiasma thinks it is unlikely to win approval for the drug in the near term.

A Phase III trial comparing Chiasma’s drug Mycapssa to monthly injections of somatostatin analog is ongoing. Chiasma thinks data from the study could support a filing for approval in Europe. In the U.S., Chiasma is looking into how it can meet the efficacy evidence bar set by FDA. Chiasma had $39 million in cash and equivalents as of the end of March, plus a further $95 million in marketable securities that could be converted into cash. The stock traded down 8% following news of the cuts.

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