July 5, 2017
By Alex Keown, BioSpace.com Breaking News Staff
WALTHAM, Mass. – Five employees at tiny Interleukin Genetics (ILGN) received an unwanted kind of freedom this Independence Day holiday with pink slips.
On July 3, the struggling Massachusetts-based company terminated five employees, about 63 percent of its workforce, as a part of a cost-cutting effort. The job cuts will leave the company with three employees, according to the Boston Business Journal. Stock prices tumbled more than 50 percent after the company made the announcement, closing at 29 cents per share.
Mark Carbeau, chief executive officer of Interleukin, said the decision to terminate the bulk of its employee base was made after the company failed to reach an agreement to extend deferral of its debt payment obligations with its senior lender, Horizon Technology Finance. Carbeau said the decision to terminate the employees was difficult, but said it was necessary “to preserve capital as we assess our options.”
In May, Interleukin reported total revenue of $196,000 for the first three months of 2017, which was a tremendous drop from the same period the previous year when the company saw revenue of $961,000 for those three months.
In addition to the job cuts, Interleukin announced the lack of funding forced the company to shut down its Ilustra Inflammation Management Program. Ilustra, a genetics-testing program for periodontitis, was one of its revenue drivers. The program was offered to benefits providers as a DNA test for inflammatory-related diseases.
With limited financial resources, which includes about $925,000 cash on hand, the company said it was looking for strategic alternatives, which could include a sale of its assets or the company. In its statement Interleukin said it was also seeking possible collaborative agreements that could provide a revenue source to keep the company afloat. As company leaders search for options, it said the primary assets are its “CLIA certified laboratory operations and its intellectual property relating to the ILUSTRA program, cardiovascular disease test, osteoarthrosis test and the Inherent Health tests.”
The company has a total indebtedness of $5.6 million, which includes secured debt obligations of approximately $4.9 million, accounts payable and contractual severance obligations, Interleukin said in its statement. As a result of the restructuring, Interleukin expects to incur aggregate expenses of approximately $245,000 consisting of cash severance payments, accrued vacation payments and costs associated with suspending its testing programs. Because of the job cuts and the company’s debt troubles, Interleukin said it is unlikely the company will be able to file its quarterly 10-Q report on time. It intends to notify the U.S. Securities and Exchange Commission about its predicament, according to the statement.
In December, Interleukin was rebuked by the U.S. Food and Drug Administration (FDA) for the marketing of the company’s Inherent Health test. The FDA said the test appeared to be a medical device that had not received any regulatory authorization.
