Peregrine Pharmaceuticals said today it will eliminate 20% of its workforce—60 jobs—in a restructuring designed to cut costs and position the company for profitability while it continues to assess strategic options for its R&D operations.
Peregrine halved its R&D staff, leaving it with 11 employees who will support potential strategic alternatives for its R&D operations while continuing to assist with the company’s collaborative trials, antibody discovery platform, and exosome program.
The company also cut by 20%, to 184 employees, the staff for its Avid Bioservices CDMO wholly owned subsidiary, saying it expects to generate reduced revenues. Peregrine also sliced its selling, general, and administrative (SG&A) workforce by 8%, leaving it with 49 employees.
As of April 30, 2017, Peregrine employed 319 full-time employees and four part-time employees, according to its Form 10-K annual report filed July 14 for its 2017 fiscal year, which ended April 30.
“While this was a difficult decision, our board and management team believe it was a necessary step as we continue to evaluate strategic options to further strengthen our two distinct businesses and seek to maximize shareholder value,” Steven King, president, CEO and director of Peregrine and president of Avid Bioservices, said in a statement.
“We remain committed to capitalizing on long-term opportunities available to our CDMO business and pursuing the best path forward for our R&D business,” King added.
Peregrine said it will take a charge against earnings in the second quarter of its 2018 fiscal year, which started May 1, for the job cuts, which are projected to cost between $1.1 million and $1.7 million. The layoffs are also expected to generate between $3.7 million and $4.3 million in cost savings in FY 2018, and more than $7 million in annualized savings beginning in the 2019 fiscal year.
Last month, Peregrine said it would increase the size of its Board of Directors from four to up to seven members by adding new independent directors with CDMO and biologics experience. The Company also announced plans to search for a president to lead Avid Bioservices, and was “actively” evaluating strategic options for advancing its R&D business.
Peregrine has been pursuing a turnaround since last year, when it halted the Phase III SUNRISE trial of its lead candidate bavituximab after it missed its primary endpoint of statistically significant improvement in overall survival in patients with previously treated locally advanced or metastatic nonsquamous non-small-cell lung cancer (NSCLC).
The company shifted its strategy in June 2016, committing itself to gaining profitability by the first quarter of its 2019 fiscal year, the quarter ending July 31, 2018. To achieve that goal, Peregrine counted on growing revenue from Avid, reducing R&D spending, and evaluating SUNRISE trial data.
In FY 2017, Peregrine said, R&D expenses were slashed 52% while revenues grew 30% to more than $57 million, resulting in a 49% reduction of its net loss to $28.159 million. The company expects to slash R&D spending by another 40% in the current fiscal year.
The efforts to grow Avid’s revenues and gain profitability for Peregrine have run into challenges in recent months, the company added, due to unanticipated decreases in manufacturing demand from its largest customer and a recent regulatory filing delay from its second largest customer.
“We believe this to be a temporary delay in revenue growth during fiscal year 2018 and have recently secured four new customers and are continuing to focus on securing additional customer business in order to better diversify our customer base,” Peregrine stated in its Form 10-K.
Also in FY 2017, the company added, it opted to continue pursuing development of bavituximab, but in combination with immune checkpoint inhibitors such as anti-programmed cell death 1/programmed death-ligand 1 therapies. The company’s spending cuts are not sufficient to advance the bavituximab clinical program through a company-sponsored trial, Peregrine acknowledged, hence its decision to collaborate with “leading immunotherapy experts and institutions.”