MDRNA Cuts Executive Pay, Freezes Salaries as Cash Runs Out

MDRNA is running out of cash, and is drastically cutting down payroll expenses, according to a source close to the situation. The Bothell, WA-based biotech company (NASDAQ: MRNA) has asked executives to work for no pay, and has frozen employee salaries at $1,250 for the final two weeks of January, according to the source.

Matt Haines, a spokesman for MDRNA, said the company hasn’t done any layoffs, although he declined to comment on specifics about any payroll cuts. “As a public company, we cannot get into details of any cost-cutting we are taking at MDRNA,” Haines said in a voice message.

The company, formerly known as Nastech Pharmaceutical, has been trying to reinvent itself over the past year from a company that specialized in nasal delivery of existing drugs into one that develops new medicines that work via RNA interference, or silencing problematic genes. The company changed its name in June to MDRNA, removed CEO Steven Quay from the top job, and replaced him with Michael French.

The new boss has a track record in RNAi, as a former senior vice president of corporate development at Sirna Therapeutics, a San Francisco RNAi drug developer that was sold to Merck for more than $1.1 billion in October 2006. Still, he joined MDRNA when its work was at the very early stages of development and would require significant capital investment to create something of more value. MDRNA said it has 4 issued patents on RNAi technology, and has 304 pending applications. None of its RNAi work has yet advanced into clinical trials, leaving it behind leaders in the sector like Cambridge, MA-based Alnylam Pharmaceuticals.

MDRNA’s effort has also been plagued by its rapidly dwindling cash reserves. The company slashed 23 jobs in August, mostly among people from the nasal delivery business, leaving it with 58 employees at the end of September. But the cuts may have been too little, too late. The company had just $10.9 million in cash and investments left at the end of September, down from more than $41 million when it started the year. At the end of September, MDRNA’s last formal financial update to investors, the company said it had just enough cash to last “into the first quarter of 2009.” Since then, the company has been notified that it is in jeopardy of having its ticker symbol de-listed from the NASDAQ. The company’s stock traded today as low as 25 cents, with a market valuation of just $8 million. It hasn’t announced any new round of investment.

MDRNA in its various forms has been in business since 1983, and never developed a successful marketed product to push it consistently into the black. The company has run up an accumulated deficit of more than $241 million from its beginning through the end of September 2008, according to its most recent quarterly report. When French was hired, his starting base compensation was set at $340,000, and he was given 1.26 million company stock options, according to a regulatory filing.

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  • JIMMY TURANO

    Thursday, Dec 24, 2009

    · MDRNA, Inc. Announces Closing of $1 Million Bridge Loan

    Marketwire – 1 hour, 6 minutes ago

    THE MOST COSTLY TYPE OF LOAN TO GET “A BRIDGE LOAN”.

    SHOWS SHAREHOLDERS HOW STRONG OF A FINANCIAL POSITION

    MDRNA INC(MRNA) IS. SHOULD HAVE A VERY NEGATIVE ADVERSE EFFECT ON THE STOCK PRICE NEXT WEEK!

    GOOD THING THEY GOT THIS LOAN, NOW MANAGEMENT CAN REALLY PAY THEIR ACCOUNTANTS FOR THE YEAR END EARNINGS REPORT, AND PUT SOME CHRISTMAS MONEY IN MANAGEMENTS POCKETS.

    WHAT A FOUNDATION OF A COMPANY, BUILT ON ISSUANCES OF STOCK, BORROWING MONEY, FAILED PARTNERSHIPS, BUT WITH THOUSANDS OF NEWS RELEASES AND THEY STILL EXIST.

    HOW MUCH LONGER?

  • Jimmy—thanks for the comment. I have a brief up on the site today which says the stock fell 8 percent on this news.

    http://www.xconomy.com/seattle/2009/12/24/mdrna-grabs-1m-bridge-loan/