Here's one drug - Bexxar - that pretty much all the biofreaks on SI misjudged from the beginning - both in terms of how hard it would be to get it approved and how well it would sell once it was finally approved (although I don't think anyone here had great expectations for big sales later, after the full details emerged at the FDA):
Corixa chops jobs to cut losses
By Luke Timmerman
Seattle Times business reporter
Corixa, one of Seattle's top biotech companies, has unloaded its slow-selling cancer drug and cut 160 jobs to limit a tide of losses.
The company said yesterday it is handing over its worldwide rights to Bexxar, a treatment for non-Hodgkin's lymphoma, to its partner, pharmaceutical giant GlaxoSmithKline.
Corixa, which paid about $570 million in stock to acquire Bexxar's developer four years ago, said it "will transfer" the drug to GlaxoSmithKline.
In return, it is shedding the expense of further developing Bexxar, and it stands to receive some milestone payments and royalties on future sales. The transfer will take place at year-end.
Corixa Chief Executive Steve Gillis said the company is shutting down operations in South San Francisco and letting go about 100 employees there whose jobs depended on Bexxar.
In Seattle, about 60 people will lose jobs, and layoffs will affect every department, Gillis said. The cuts will reduce Corixa's work force by 43 percent, leaving it with 220 workers in Seattle and Hamilton, Mont.
The company's focus will shift to developing other treatments.
The decision was necessary, Gillis said, because Bexxar did not live up to its sales goal of $20 million this year. The drug recorded $7.2 million in sales in its first four full quarters on the market, not enough to cover the expenses of production, marketing and further clinical tests of its effectiveness.
Gillis said the drug, which combines an antibody to zero in on tumor cells and a small dose of radiation to kill them, was not able to compete well enough with the big drug for non-Hodgkin's lymphoma, Rituxan.
He said he gave a lengthy explanation to employees before the news was spread to Wall Street yesterday after markets closed.
Workers will receive severance payments, outplacement services and extended health insurance, Gillis said.
"Everyone here understood what we've done and why we did it," Gillis said. "It's difficult to do and it's unfortunate, but it had to be done."
"We couldn't afford to underwrite our share of the losses," he added.
The company said it expects to record $10 million in cash and noncash charges because of the moves. More charges could come when the company attempts to sublease space in South San Francisco and some space within its new Seattle headquarters, at the 9th & Stewart Life Sciences Building.
Corixa said it still expects to spend about $65 million of its cash this year. Following the cuts, it expects to reduce its cash spending rate to less than $30 million for 2005.
The decision closes the book on Bexxar, which has run into obstacles virtually ever since Corixa acquired it four years ago.
Corixa bought Bexxar's developer, Coulter Pharmaceutical, in December 2000. The drug was expected to be approved by the Food and Drug Administration shortly thereafter, but regulators criticized the application as incomplete in March 2001.
Corixa eventually won over experts who were impressed with Bexxar's ability to spur long-term remissions, and obtained FDA approval in June 2003.
But the drug was considered complicated to administer and carried a $27,000 per-patient price tag. Ultimately, it did not catch on in the marketplace as quickly as hoped.
Corixa said it plans to unload its other cancer programs besides Bexxar. It plans to sell or transfer rights to develop its cancer vaccines and biological targets for antibody drugs.
Corixa will shift its emphasis to developing and manufacturing its MPL adjuvants, compounds that can boost the effectiveness of vaccines.
The adjuvants are one of its bright spots this year. The company secured an eight-year, $150 million contract to make millions of doses at its Montana plant for GlaxoSmithKline vaccines in development.
Gillis said the company plans to hire another dozen people there next year to support the effort.
Corixa will also pour its resources into developing a class of compounds, called TLR4s, that in animal studies have shown an ability to turn components of the body's innate immune system on or off. The most advanced, CRX-675, entered human testing earlier this year as a treatment for seasonal allergies.
Paul Latta, an analyst with McAdams Wright Ragen who dropped coverage of the company in October, estimated the ongoing study commitments for Bexxar could have cost the company $200 million for a product that wasn't selling.
Another option would have been to sell the entire company, he said.
"This is an opportunity to cut off the ball and chain and move forward on early-stage programs that are more exciting," said Latta, who owns the stock.
However, the cuts don't necessarily cure all the company's potential financial headaches. In a convertible debt offering last year, the company borrowed $100 million at 4.2 percent annual interest. That money is due back in 2008 unless Corixa stock rises to $9.17 a share and the debt is converted to stock.
Corixa stock has not reached that level in the past year. It closed yesterday at $4.60.
Corixa's future revenue stream now depends heavily on GlaxoSmithKline's ability to win regulatory approval for its vaccines, to sell them effectively and to produce royalties. Corixa will also have to drum up enthusiasm for its TLR4 programs, with results from clinical trials.
Stewart Lyman, a Seattle-based biomedical research consultant and a former colleague of Gillis at Immunex, called the news "very sad."
"They made a big bet on Bexxar and obviously it didn't pan out," Lyman said. "This kind of thing does happen in biotech. Gillis is still there and he's well-respected. But in the end, you have to come up with a product."
Luke Timmerman: 206-515-5644 or ltimmerman@seattletimes.com
Certainly this saga would make a very interesting (and cautionary) book for any author wannabes out there. <g>
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