Restructuring

Floundering in the wake of an FDA approval, Achaogen makes a second round of deep cuts to stay alive

Success can be costly in this business. Partial success can be a disaster.

Blake Wise, CEO

Just 3 months after Achaogen execs took out the budget ax and whacked around a quarter of its work force, with its R&D chief, CSO and CFO leaving in the exodus, the CEO has to cut much more. The goal now is to slash overall costs 35% to 40% at the antibiotics developer while posting a ‘for sale’ sign in the window as the company considers all options in a scramble to stay afloat.

Just days ago the company tapped Silicon Valley Bank for $25 million available under its loan agreement, with provisions for maintaining cash reserves. And all signs indicate that the biotech is in crisis mode.

The first cuts came a month after the FDA approved Zemdri (plazomicin) for complicated urinary tract infections but rejected their pitch for bloodstream infections — following a revamp of the Phase III after only a fraction of the planned patient group was recruited. 

Difei Yang at Mizuho Securities called the restructuring a surprise for investors, who were clearly not happy with the latest move to cut the budget. Achaogen’s suffering stock $AKAO dropped 12% on Monday. Shares are down 71% from the beginning of this year — badly damaging its ability to raise more cash through a stock sale. 

Yang added that the move “signals deteriorating business conditions as the company now has to limit the crucial investment which could impact Zemdri launch. As a result, we extended the the launch uptake period from 5 to 8 years due to reduced investment.” 

Achaogen flagged its sinking fortunes in their Q2 report, noting doubts about their ability to continue as a “going concern” after racking up a $470 million deficit, with about $100 million in cash and short-term investments to operate with.

Over the past year we’ve seen plenty of evidence about the harsh business environment for new antibiotics as Novartis joined the migration of Big Pharma out of the low margin arena. Cheap generics still dominate the field, even as drug resistant infections continue to rise around the world. That leaves small biotechs on their own to handle commercialization work with just one or two products. It’s not a pretty picture.


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Scientist, Quality Control
Molecular Templates Austin, TX
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Molecular Templates Austin, TX
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Flagship Pioneering Cambridge, MA

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