Drugmaker Affymax Inc. (AFFY) shares are tanking Tuesday after the company said Monday evening that it intends to cut its workforce by about 230 employees, or 75 percent of its staff, as the company explores its alternatives after having to recall its anemia drug Omontys in February due to a few fatalities with first-time users of the drug. Part of the firings include Chief Commercial Officer, Jeffrey Knapp, as disclosed in a filing with the Security and Exchange Commission.
Omontys is Affymax’s only source of revenue. The Palo Alto, California-based company said that it is exploring all options, including selling itself, winding-down operations, restructuring and bankruptcy.
"I would like to sincerely thank all of our departing employees and recognize their important and valued contributions to the company," said John Orwin, chief executive officer of Affymax. "While this decision was extremely difficult, aligning and managing our limited resources around our product investigation is our most important priority."
Affymax and Japanese partner Takeda Pharmaceutical Co. Ltd. voluntarily recalled all Omontys in February after consultation with the Food and Drug Administrations about deaths and serious hypersensitivity reactions, including anaphylaxis, sending share down by about 85 percent.
In the SEC filing, Affymax said that it “is unable to estimate the scope or timelines associated with the investigation and whether its available resources would allow it to complete the investigation, which may be costly and time-consuming, and with limited funds and resources, the company may not be able to complete the investigation or ever identify the causes of the safety concerns.”
As of February 28, 2013, Affymax had $67 million in cash on hand. Current liabilities were about $33 million, not including debt of approximately $11 million under its credit facility, $8 million to $10 million related to staff reductions, expenses related to the recall and expenses as a public entity.
Affymax also said that additional workforce reductions were probable as it tries to contain costs. Further, the company said if the cause of the safety concerns of Omontys aren’t “rapidly” identified, which is “highly uncertain,” then Omontys may be permanently removed from the market.
The latest news is evaporating most of what was left of Affymax’s market valuation. In February, shares jettisoned from around $16 per share to as low as $2.34 before recovering some back to around $3. With the latest bad news, however, shares of AFFY have carved-off another 57 percent to be trading around $1.25 in Tuesday morning action.
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