FDA Delay on New Drug Triggers Layoffs at San Diego’s Zogenix

Xconomy San Diego — 

Pressed by unexpected delays in a ruling from the FDA, San Diego-based Zogenix (NASDAQ: ZGNX) says it has laid off 55 employees—or 37 percent of its workforce—in an effort to conserve cash through the summer.

The pharmaceutical company, which specializes in developing drugs for pain and central nervous system disorders, had expected the FDA to rule by March 1 on its New Drug Application (NDA) for hydrocodone bitartrate extended release (Zohydro ER) capsules.

The drug is an acetaminophen-free formulation of the opioid painkiller, which Zogenix had promoted as posing a lower risk for liver toxicity when used in high doses over time. In 2011, the FDA itself had raised concerns about liver toxicity in prescription painkillers that combine acetaminophen and opioids. Zogenix had sought to alleviate such concerns in making its long-acting version of hydrocodone. The company used proprietary extended-release technology developed by the Irish drugmaker Alkermes (NASDAQ: ALKS), its pharmaceutical partner.

But clear signs of trouble for the company erupted in December, when the FDA’s Anesthetic and Analgesic Drug Advisory Committee of independent experts voted 11 to 2 (with one abstention) against approval of Zohydro. Several panel experts said afterward that they were chiefly concerned about the potential for drug abuse with the formulation, even as an extended-release drug.

In a statement that followed the panel’s recommendation, Zogenix COO Stephen Farr said that while the company recognized drug abuse as a critical issue, “there is a documented patient need for an extended-release hydrocodone medicine without acetaminophen. We remain confident in the measures we have proposed to support safe use of Zohydro ER and are committed to continuing to work with the FDA through the review process to bring this treatment option to this specific patient population.”

It’s unclear from recent comments whether such cooperation actually transpired. Zogenix CEO Roger Hawley told investors and analysts during a May 9 conference call, “We are still faced with further delay from the FDA on our Zohydro ER NDA. To our knowledge this sort of delay is unprecedented.”

Farr also said during the May 9 call that FDA had recently informed Zogenix they planned to take action on the company’s new drug application “some time during the summer.” Farr added that drug regulators have not identified any deficiencies in the Zogenix application. But he added ominously, “The information we have received has not been helpful in understanding the precise timing or potential outcome of the situation.”

In today’s statement, Zogenix says it’s cash-conserving priority is to preserve the company’s “core commercial capabilities and ability to support the potential launch of Zohydro ER three to four months following potential FDA approval by retaining 93 full-time equivalent employees.” The company also plans further cost-control initiatives and says it will increase efforts to get its migraine drug and needle-free injector to “brand-level profitability.” Zogenix says it also is searching for a pharmaceutical partner to help develop its drug-and-device combination for a once-monthly, needle-free delivery of risperidone for schizophrenia, and to out-license its proprietary needle-free injector technology.

Zogenix says it expects to record most of the layoff-related expenses with a one-time charge of approximately $1 million in the current quarter.