Struggling Chelsea jettisons staffers, plots survival strategy

Struggling to find a way forward for droxidopa (Northera) after the FDA rejected its application for the lead program, Chelsea Therapeutics ($CHTP) today broadly outlined some big changes at the little biotech. Its CEO, Simon Pedder, is out, effective immediately. "Significant" job cuts are being planned to reduce the burn rate. Strategic options are being put on the table for discussion. And patient enrollment in an ongoing study is being stopped, bringing up its scheduled delivery on fresh data to the end of this year.

As Chelsea announced a few days ago, though, its ongoing 306B study of the hypotension drug won't satisfy the FDA's demand for a new study to evaluate the efficacy of droxidopa. Chelsea had also been forced to dump its RA program earlier this year on the failure of a mid-stage study. And now everyone who isn't directly involved in the effort to win an approval for the hypotension treatment is being laid off.

Chelsea didn't spell out exactly how many staffers won't make the cut, but the biotech outlined about $3.5 million in annual payroll savings. That won't satisfy disappointed investors, though. The drumbeat of bad news at the company has wiped out much of its value. Chelsea's shares were trading at $1.18 this morning, down a few cents.

"We believe that this reorganization should allow the company's resources and capital to be laser-focused on efficient conclusion of the 306B study and the evaluation of next steps in the regulatory process," says Michael Weiser, who is replacing Kevan Clemens as chairman. "In tandem, the board plans to explore and evaluate all available strategic options to determine the best path forward in the long-term strategic interests of the company and its stockholders."

Chelsea is one of several biotechs to announce layoffs this week. Yesterday QLT ($QLTI) and Cardiome ($CRME) announced job cuts. And Savient Pharmaceuticals ($SVNT) joined the reorganization movement, planning to trim 35% of its work force as it promoted Louis Ferrari to the helm. Ferrari will try to turn around slow sales for Kystexxa. Savient's former CEO, John Johnson, was recruited by Dendreon to reposition Provenge after reporting disappointing sales.

- here's the release on Chelsea
- here's the Reuters story
- and here's the release on Savient

Related Articles:
More bad news on Northera app blights Chelsea shares
Chelsea Therapeutics trims payroll to fund key Northera program
Chelsea scuttles rheumatoid arthritis drug after PhII failure, shares plunge