Heron, Avadel Slash Headcount, Brace for Economic Downturn
Heron Therapeutics and Avadel Pharmaceuticals have now joined the ranks of life sciences companies cutting costs. In addition to slimming R&D and administrative costs, both companies are extending their cash runway by laying off a significant number of employees.
Heron Therapeutics Reduces Headcount by 34%
San Diego-based Heron Therapeutics is bracing itself for an economic downturn. The company’s press release announced a "corporate restructuring and cost reduction plan to address the current market dynamics and prepare the company for long-term sustainability.”
The cost reduction plan involves reductions and reallocations in overall sales, general and administrative expenses and savings related to reduced external spending. Additionally, Heron will cut its headcount by 34%. The majority of the cost savings will result from a significant workforce reduction across the research and development department, which will account for about 70% of the layoffs.
With these changes, Heron hopes to extend its cash runway by an annualized $43 million.
"To address the current market realities and the macro headwinds facing many commercial-stage biotechnology companies, we are enacting critical plans to protect Heron's long-term sustainability and growth plans. This restructuring and cost reduction plan is expected to support our operations, with ongoing business development activities intended to provide the resources to further extend the runway," said Barry Quart, Pharm.D., chairman and CEO of Heron.
Avadel Chops Workforce to Support Narcolepsy Drug Approval
Dublin-based Avadel Pharmaceuticals also announced a corporate restructuring. Although it is also bracing for an economic downturn, the company has another urgent financial goal.
“[Avadel] is taking to explore every available pathway to accelerate the decision by the U.S. Food and Drug Administration to grant final approval of its lead drug candidate, FT218, prior to June 2023,” the company’s press release stated.
The company is taking drastic measures to support FT218, an investigational formulation of sodium oxybate for the treatment of EDS or cataplexy in adults with narcolepsy. The measures include a restructuring charge of between $3 -$4 million, comprised primarily of severance-related costs associated with a nearly 50% reduction in the workforce for the second quarter, as well as optimizing the cost structure to reduce total quarterly cash operating expenses to $12 to $14.0 million, excluding inventory purchases.
“We believe FT218 has a clear and meaningful place in the multi-billion-dollar narcolepsy market and will continue to pursue every potential option to make it available as soon as possible to all eligible patients whose lives it has the potential to improve,” said Greg Divis, CEO of Avadel Pharmaceuticals. “As part of these efforts, we are optimizing our cost structure by focusing our existing resources on our most important priorities, thus extending our cash runway and subsequent financial bridge to a potential final approval in June 2023 or sooner.”
Other Companies Face Similar Challenges
The second quarter brought layoffs for many other pharma and biotech companies. Athersys laid off 70% of its staff in June – including its COO, CSO and CFO – after its stroke therapy failed in Phase II/III trials. On Tuesday, Swiss biopharma giant Novartis announced that it plans to cut up to 8,000 jobs - about 7% of its workforce - in hopes of saving at least $1 billion by 2024. Similarly, RedHill Biopharma created an 18-month streamlining plan to save money that involves axing a third of its U.S. workforce, and Oyster Point Pharma chopped 50 employees to support a new drug launch.