Stressgen forced to slash staff
Millions lost in last five years
Darron Kloster
Times Colonist
Thursday, April 28, 2005
Stressgen Biotechnologies, often cited as a symbol of Greater Victoria's diversifying economy, slashed half its workforce on Wednesday to save cash and focus remaining resources on development of its lead product, a treatment for warts in the upper respiratory system.
The Victoria-based therapeutic vaccine developer said the decision to trim the payroll to 39 from 77 will save $5 million annually and inject confidence into an ailing shareholder base.
The company has lost money the last five years, including $32.9 million in 2004 and $16.2 million the year before.
Stressgen made the layoff announcement after markets closed. Shares were unchanged at 27.5 cents on the Toronto Stock Exchange.
"The termination of talented colleagues, all of whom made large contributions to the company over the years, is always difficult but is an action that is required to help ensure that we have sufficient resources in place to accomplish our overall goal of bringing a new treatment for HPV-related diseases to the marketplace," a Stressgen statement said.
HPV, or human papillomavirus, is one of the common causes of sexually transmitted diseases, and a precursor to cervical, anal, head and neck cancer.
The pink slips at Stressgen's Glanford Avenue labs and offices came just two weeks after the company replaced its chief executive officer, cancelled a proposed share issue and sold off its profitable bioreagents division, which produces proteins and other products for medical research.
The bioreagents sale to U.S.-based Amperstand Ventures Inc. netted Stressgen $8 million and the transaction included 26 staff.
Combined, Stressgen shed 64 workers from its payroll of 103 at the start of April. "We believe that this restructuring program is necessary to enhance our ability to invest resources in the HspE7 program, which is the critical value driver for the company and our shareholders," said chief executive Gregory McKee, who replaced Dan Korpolinski on April 13.
HspE7 is a fusion vaccine designed to treat diseases caused by the human papillomavirus.
Stressgen also announced Wednesday the closing of its U.S. office in Collegeville, Penn., by year's end. The company will keep its San Diego office and maintain its headquarters and labs here.
Saanich-based Stressgen was founded in 1990 and went public in 1993. Since then, it has attracted many millions of dollars in international investment in its research, and has entered into joint ventures with major U.S. and European pharmaceutical companies.
The pharmaceuticals business is high risk, said industry consultant Peter Dawson. He stressed that he couldn't comment about Stressgen. Generalizing about the industry, he said for a one-product firm, "starting out from scratch, odds of success are very remote. It's a 7- to 10-year route, with no guarantee you will ever bring it to market."
David Hall, president of Angiotech Pharmaceuticals and chairman of the board of B.C. Biotech, an umbrella group of biotech companies, said there are only three profitable Canadian-based pharmaceutical companies -- and two of them are in B.C. -- Angiotech and QLT. The other is Ontario-based Biovail. Angiotech had a $25-million profit last quarter. About 90 biotech and healthcare companies are based in B.C.
"It takes a lot of time to bring products to market," said Hall. "There is a high failure rate and it goes through many cycles. Like technology, (pharmaceuticals) fail and they fail often. That's why they are funded by venture capital. It is a very risky business, and no quick payoffs."
© Times Colonist (Victoria) 2005 |
