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Facing Cash Crunch, Novan Slashes Staff and Shuffles Executive Team

Xconomy Raleigh-Durham — 

Novan is laying off 20 percent of its workforce, the company announced today, as it retrenches following the late-stage clinical trial failure of its experimental acne drug earlier this year.

The skin drugs developer says it is still committed to its acne drug SB204. But Durham, NC-based Novan (NASDAQ: NOVN) adds that layoffs throughout the organization are part of a plan to turn its focus to earlier-stage compounds that could have applications as topical treatments for inflammatory skin conditions, such as psoriasis and eczema.

Novan employed 62 workers at the end of last year, according to the company’s annual report. That means a 20 percent layoff would affect about 12 workers. Novan’s first quarter financial report showed that the company had $30 million in cash on hand. On Monday, the company said that it believes it has enough cash to last “at least through the end of 2017.”

The corporate shuffling includes Novan’s executive team. Co-founder Nathan Stasko, who had served as CEO, will become president and chief scientific officer. Kelly Martin, a member of Novan’s board of directors, is now the company’s interim CEO. The company says Martin will work with Stasko to extend Novan’s ability to continue as a business and broaden the potential applications of its nitric oxide technology.

Novan develops drugs that can store nitric oxide, a gas, in solid form and control its release for therapeutic applications. The technology is based on research from the University of North Carolina at Chapel Hill. SB204, a topical gel, was the company’s lead drug. In January, Novan released results from two Phase 3 clinical trials testing the drug in acne patients. While the drug hit all of its goals in one of those trials, it failed to beat a placebo in a second, separate Phase 3 study. Those results sank the company’s shares by more than 75 percent.

Novan says it plans to schedule a follow-up meeting with the FDA later this year, which the company hopes will clarify a path forward for the acne drug. The company is also completing safety studies for SB204 that could support marketing approvals in the U.S., as well as Japan, where Sato Pharmaceutical has licensed rights to the compound.

Besides its acne drug, Novan has advanced a potential toenail fungus drug into Phase 2 clinical trials. The company has also finished a dose-ranging study for a compound developed to treat human papillomavirus. But Novan says its near-term focus is on anti-inflammatory applications of the nitric oxide technology. The company plans to seek the FDA’s go-ahead to begin a clinical study of SB414, a potential treatment for psoriasis. Novan says it hopes to start that trial in the third quarter. The company also says it is working on separate plans to begin testing that same compound as a potential treatment for eczema.

Here’s more on Novan and its nitric oxide technology.

Photo by Flickr user reynermedia via a Creative Commons license.