KaloBios lays off another 61% of its staff after a slew of setbacks

KaloBios ($KBIO), battered by a string of clinical failures, is planning to soldier on with its thinning pipeline, cutting 61% of its workforce to conserve cash.

The South San Francisco biotech is laying off 17 workers and regrouping around a once-failed antibody that it now believes has a future in leukemia. The treatment, lenzilumab, failed a Phase II trial in severe asthma last year, leading ex-partner Sanofi ($SNY) to pull the plug on a deal worth up to $290 million. But KaloBios sees hope that the antibody's target could play a role in the rare chronic myelomonocytic leukemia and is now plotting to start a Phase I trial in the fourth quarter.

The company's most recent failure saw an antibody called KB001-A miss the mark in a Phase II study on a bacterial infection related to cystic fibrosis, results that were disclosed in January and quickly followed by a 20% headcount reduction and the departure of CEO David Pritchard.

Turning its full attention to lenzilumab's leukemia program, KaloBios said it's pausing enrollment in a Phase II study for the blood cancer therapy KB004. At the same time, KaloBios is looking into "strategic alternatives," which would include the unlikely outcome of finding a company to buy it outright.

"While this decision was extremely difficult, aligning and managing our limited resources to maximize the opportunity for continued development of lenzilumab is our most important priority," KaloBios Chief Financial Officer and interim CEO Herb Cross said in a statement. "I would like to sincerely thank all of our departing employees and recognize their important and valued contributions to KaloBios."

The news sent KaloBios' already decimated shares down about 30% on Thursday night, as investors reacted to the company's decision to stay in business and not simply return what cash it has to shareholders.

- read the statement

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