Aveo, reeling from setbacks, says cuts will save it $190 million and allow biotech to recover
Deep staffing cuts will save Aveo Pharmaceuticals Inc. about $190 million, allowing the Cambridge biotechnology company to refocus on new cancer drug candidates, its chief executive said Wednesday, a day after scrapping development of a once-promising kidney cancer treatment.
Tuan Ha-Ngoc apologized to patients, employees, and shareholders for Aveo’s failure to bring its experimental kidney cancer drug, called tivozanib, to market. But in a conference call with industry analysts, he said it was necessary to lay off 140 employees so the company could move forward after a series of recent setbacks.
“This is an incredibly sad day for Aveo,” Ha-Ngoc said of the job cuts, which will reduce Aveo’s 225-person workforce by 62 percent to about 85. “Today we are saying goodbye to many friends and colleagues who dedicated their professional lives to fighting cancer.”
In a separate interview, Tuan said restructuring would create a leaner organization as Aveo and its Japanese partner, Astellas Pharma Inc., manage clinical trials of tivozanib to treat two other diseases, breast cancer and colorectal cancer. In addition, Aveo is testing two other experimental therapies. One treats solid tumors; the other is a lung cancer drug.
“We continue to believe that tivozanib is an effective and tolerable drug,” Ha-Ngoc said. “Now we have to see if its properties can be translated to clinical benefits for patients with other tumors. We have existing programs that will continue to go forward. It’s certainly a much smaller company. It’s a flatter organization. We’ve eliminated several layers of management.”
Ha-Ngoc said that by the end of next year Aveo expects to present results of its tivozanib trials for colorectal and breast cancers. Its use against those diseases could be “equally exciting and potentially more exciting” than its use as a treatment for kidney cancer, he said.
The shake-up follows an advisory panel recommendation last month that the Food and Drug Administration reject Aveo’s new drug application for tivozanib as a treatment for renal cell carcinoma. The disease is a form of kidney cancer that kills tens of thousands of people around the world annually. Company executives acknowledged the FDA is now unlikely to approve the drug, though it continues to review the application and plans to rule on it by July 28.
After the advisory committee vote, Astellas pulled out of an agreement to market tivozanib in Europe and said the company would no longer fund its development to treat renal cell carcinoma, a disease for which there already are several approved drugs.
Aveo shares, which initially rose on the restructuring news, closed down 10 cents at $2.39 on the Nasdaq exchange. The stock has lost more than 70 percent of its value since late April.
Despite the slew of bad news for Aveo, it is not uncommon for drug companies to repurpose experimental treatments and recover their financial footing, said Jonathan P. Gertler, senior partner at the Boston consulting firm Back Bay Life Science Advisors.
“There’s always setbacks in biotechnology,” Gertler said. “The capacity of a company to take a step back and find an alternative indication for a drug is part and parcel of the business. I would expect that a company that has a strong technology platform and has taken a novel approach to drug discovery, as Aveo has, will certainly be able to weather the storm.”
The company’s cuts will affect employees in every area, Aveo executives told analysts. Overall, about 140 jobs will be shed in clinical, regulatory affairs, and administrative functions, while a precommercial department that includes medical affairs will be eliminated.
Aveo’s executive vice president and chief operating officer, Elan Ezickson, has resigned effective July 31, the company said. His responsibilities will be transferred to chief commercial officer Michael Bailey, who will become chief business officer reporting to Ha-Ngoc. But Ha-Ngoc said he doesn’t anticipate a wholesale management overhaul.
“In finalizing our strategic plan, we reviewed the management team,” he said. “We believe that the existing management team will be in place to execute our strategy going forward.”Robert Weisman can be reached at email@example.com. Follow him on Twitter @GlobeRobW.