Delcath axing 20% of workforce after FDA blow

Delcath Systems ($DCTH), hamstrung by an unforgiving FDA review of its cancer-treating device, plans to slash its payroll by about 20% to reduce the company's expenses.

Last month, an FDA panel voted unanimously that Delcath's Melblez system, a drug-device combo treating eye cancer that has spread to the liver, wasn't safe enough to merit approval, sending the company's stock into a 40% tailspin as analysts doubted the tech would ever reach the U.S. market.

Now, Delcath is paring down its staff and reshuffling its leadership to focus on marketing the treatment in Europe, where it has a CE mark, CEO Eamonn Hobbs said.

"The actions we announced today are designed to further increase our organizational efficiencies with a goal of reducing our expected cash burn in the fourth quarter to approximately 50% of what it was in the second quarter of 2012," Hobbs said in a statement. "Our team continues to be focused on our key strategic priorities in clinical development and European commercialization."

The company's device uses a system of filters and pumps to cordon off the liver and douse it with the chemotherapy melphalan, but, in an April meeting, the FDA took serious issue with those filters, pointing to a high rate of treatment-related mortality and delaying a final approval decision until Sept. 13. Delcath wants to sub out new filters it said are more effective, but the agency would demand another randomized clinical trial before allowing a swap, and that process would very likely push an approval date far beyond September.

Meanwhile, some of Delcath's investors have filed suit this month, claiming the company withheld safety information about the cancer-treating device to inflate its share price, burning shareholders when the facts came to light. The company has declined to comment on the pending litigation.

- read Delcath's release