Troubles at Echo Therapeutics ($ECTE) are mounting, with sizeable layoffs and potential FDA delays relating to the government shutdown becoming the latest setbacks faced by the Philadelphia device company.
Echo, which is developing the Symphony needle-free, wireless continuous glucose monitoring system, disclosed in a general update that it reduced staff levels by about a third at the end of September, a measure approved by the company's board of directors as well as Robert Doman, Echo's chairman and interim CEO. Executives also slashed spending on marketing and manufacturing, as well as administrative expenses. The goal: to keep from running out of money. Echo expects that cost cutting will help reduce its 2013 fourth-quarter cash burn rate by up to 40% compared to the first three quarters of the year.
Echo, which has ties to famed MIT inventor and entrepreneur Robert Langer, is trying to keep the development engine running for Symphony, which will be submitted for a CE mark in the 2013 fourth quarter. It is also scheduled to begin a multi-center pivotal FDA clinical trial in the second half of 2014, pending some enhancements to the product. Echo cautioned that the government shutdown could throw a wrench into the U.S. process, after regulators informed the company that a meeting scheduled during the 2013 fourth quarter could be postponed as a result. The meeting will be crucial, whenever it is held; it's designed to help Echo plot out its U.S. clinical trial and regulatory submission strategy.
A lot of these actions became more likely over the last month, after executives from shareholder Platinum-Montaur met with Echo's executive team, following their angry open letter to the company demanding changes. Echo used to be an investment darling, but Platinum-Montaur, which owns about 20% of Echo's outstanding common stock, complained that the stock price plunged 95% over two years, and that the leadership and ineffective directors were to blame.
Then-CEO Patrick Mooney took an immediate leave of absence, And Echo confirmed he was fired as of Sept. 27. They're now searching for a full-time replacement, and Echo said it is talking regularly with Platinum-Montaur about the company's ongoing efforts to rebalance things.
Echo envisions Symphony initially for use in hospitals, but said it also wants to pursue whether diabetes patients can use the product in an outpatient setting. It also sees potential for the needle-free skin element of Symphony as a technology that could help deliver topical pharmaceuticals. Platinum-Montaur has previously said it wants Echo to link up with a partner in China to advance development and manufacturing of Symphony.
We'll see if investors like the changes. So far, the signs are troubling. Echo's stock closed at $2.67 on Oct. 3, representing a steady drop from a high of $3.26 on Sept. 16, and a return to levels last seen before Platinum-Montaur publicly called for major changes at the company. That downward trend is never a good sign.
- read Echo's corporate update