Xoma cuts manufacturing costs to ramp-up R&D
The move – which will see a total of 84 staff lose their jobs – means the majority of Xoma's Phase III and commercial manufacturing needs will be serviced by third-party providers with in-house capacity being whittled down to the bare minimum.
CEO John Varian said the cuts will free up $13m (EUR10m) for Xoma’s core focus; the development of its monoclonal antibody pipeline gevokizumab, or XOMA-052m, for the treatment of inflammatory diseases.
“We are streamlining Xoma's operations in order to focus on our key near-term value driver, gevokizumab, and to drive our discovery science toward development of value-creating products and technologies,” said Varian.
Fifty employees will leave immediately, the rest before the end of the first quarter, leaving a total of 160 workers and a $6m (€4.6m) bill for the company in severance pay.
The firm will also terminate the lease on its 31,000-square-foot manufacturing facility in California, US, when it expires in 2013.
As for the contract manufacturers set to fill Xoma’s production needs, the company has remained silent. In a statement the company did however reveal it would keep its pilot manufacturing facility which makes drugs for Phase I and Phase II clinical trials.
Restructuring
The company plans to spend its $13m savings on a number of R&D (research and development) ventures, mainly related to gevokizumab's clinical progress during 2012.
Investments include Phase III studies in non-infectious eye disease uveitis – expected to start in the second quarter – and the multiple Phase II proof-of-concept clinical trials for severe acne.
Varian said the Phase II trials are part of plans to highlight gevokizumab's applications “that can expand the commercial opportunities”.
History repeating
This is not the first time Xoma has made the decision to reduce its manufacturing footprint in favour of R&D.
In 2009, the firm laid-off 42 per cent of its staff, scaling back production of its drug XOMA 052 for planned Phase II studies.
Again the company retained just its pilot production capacity.
Then chairman and CEO, Steven Engle’s comments have been echoed by Varian.
At the time he said: “The reductions are focused on manufacturing and related areas and associated general and administrative support. Today's actions will bring operating expenses more in line with expected revenue.”
