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Achaogen Restructures, Slashes Staff 28% as Antibiotic Launches

Xconomy San Francisco — 

[Story updated 7/27/18, 7:07 p.m. EDT. See below.] The runup to a new drug launch is usually a time for hiring, but as Achaogen commercializes its new drug, the antibiotics developer is doing just the opposite.

Faced with a tough market for antibacterial products, Achaogen (NASDAQ: AKAO) announced Thursday that it will eliminate 80 positions, which is roughly 28 percent of its staff. Those cuts include much of the executive team. In a statement released after the market close, the South San Francisco, CA-based biotech said the restructuring will enable the company to focus its attention on the launch of its antibiotic plazomicin (Zemdri), as well as two research programs that already have funding.

Shares of Achaogen perked up 1.5 percent in after-hours trading Thursday.

In a phone interview with Xconomy on Friday, Achaogen CEO Blake Wise said the decision to cut staff was made in order to give the company the strongest possible financial position to support the commercialization of plazomicin. Achoegen is also planning to file for approval in Europe. The drug, a once daily infusion, costs $944 a day, and a course of treatment will range from five to 14 days. Plazomizin is competing against generic antibiotics, and Wise says Achaogen needs time to demonstrate the drug’s value treating patients who otherwise would succumb to infection. [Paragraph added with comments from Wise. The remainder of the story was updated to include additional Wise comments.—Eds]

“We have a drug that is treating a higher unmet need and does have a higher commercial opportunity,” Wise said.

Wise acknowledged that large pharmaceutical companies are abandoning antibiotics research. He says it’s because those companies are looking for blockbuster sales, and antibiotic drugs can’t deliver those figures. But he says that smaller biotechs like Achaogen don’t need to have a blockbuster seller, and they can step up and fill the research void that big pharma companies have left.

Achaogen develops antibiotics to treat drug-resistant infections. Last month, the FDA approved plazomicin as a treatment for complicated urinary tract infections in patients who have limited or no treatment alternatives. But it was a split decision for the drug. The regulator rejected plazomicin as a treatment for bloodstream infections, telling the company in a letter that its clinical trial did not provide enough evidence of the drug’s efficacy for that indication.

The injectable drug’s label carries a boxed warning that alerts physicians and patients that the drug may cause kidney problems or affect muscle use. Hearing problems and vertigo have also been reported in some patients who have used the drug. Wise says that the the label is consistent with others in the same class of drugs.

Wise said in a prepared statement that the market for novel antibiotics requires the company to cut costs and narrow its focus. The divisions working on the commercialization of plazomicin aren’t affected by the restructuring. The company is also continuing work on two earlier-stage programs. Its C-scape program, which combines cephalosporin and clavulanate in pill formulation, is in Phase 1 studies testing the drug as a treatment for complicated urinary tract infections, Wise said. The Biomedical Advanced Research Development Authority is funding that research. The non-profit public-private partnership CARB-X is funding another Achoegen program that is in preclinical development.  But the company is cutting other spending on early-stage R&D, technical operations, and administration.

Those losing their jobs include Kenneth Hillan, president of R&D; Chief Financial Officer Tobin Schilke; and Chief Scientific Officer Lee Swem. Chief of Staff Zeryn Sarpangal will take over as CFO after Schilke leaves at the end of September. Liz Bhatt, currently chief business officer, was appointed chief operating officer, effective Thursday. Achaogen plans to discuss the restructuring during the company’s second quarter earnings conference call, scheduled for Aug. 6.

Here’s more about the early days of Achaogen and its vision for developing new broad-spectrum antibiotics.

Image by Flickr user Joe The Goat Farmer via a Creative Commons license