Troubled Transcept ditching 43% of staff with eye on getting bought

Floundering Transcept Pharmaceuticals ($TSPT) is cutting 43% of its workforce and shuffling its board, looking to cut costs as it scouts for a buyer.

The latest reduction will leave the California biotech with just 8 employees, laying off 6 and sending a long-standing board member out the door in an effort to save about $1 million per year, CEO Glenn Oclassen said in a statement, a "difficult" decision for the company, "especially given the high quality of the people affected."

Transcept plans to be through with its restructuring by early next year, leaving the company to decide how and whether to find itself a buyer. The biotech has been working with Leerink Swann to speed along the process, but it's having trouble finding offers on its terms. In September, Transcept shook its head at a bid of $4 per share from stockholder Retrophin, a biotech outfit run by hedge fund veteran Martin Shkreli, and the company adopted a 4.9% poison pill to keep away any raiders plotting unwanted takeovers.

Now Transcept is hoping a leaner operation will convince potential suitors to pony up, but, with just one approved product and no late-stage hopefuls, the company might have some trouble landing offers much better than Retrophin's. Transcept successfully developed the insomnia drug Intermezzo, picking up FDA approval in 2011, but the treatment had a hard time breaking into an Ambien-dominated market, and, after years of lagging sales, commercialization partner Purdue is no longer pushing the pill.

However, if Transcept can reclaim the rights to Intermezzo, it might be able to fetch as much as $7 a share, lead shareholder Roumell Asset Management said in a letter to the company's board, far more favorable terms than what Retrophin put on the table.

In the meantime, Transcept has licensed an early-stage migraine treatment from Japan's Shin Nippon Biomedical Laboratories, paying $1 million upfront and up to $35 million a year if TO-2070 wins FDA approval. Last year, Transcept ditched the once-promising obsessive compulsive disorder treatment TO-2061 after it failed a mid-stage study.

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