Aliso Viejo-based drug developer Avanir Pharmaceuticals is trying to stop the bleeding.
The company, whose stock is down some 90% in the past year, last week said it plans to restructure itself to keep developing Zenvia, a drug designed to treat a neurological disorder that causes involuntary emotional outbursts.
Avanir plans to close its San Diego research facility and move what it calls “essential resources” to its headquarters at the Summit Office Campus near the San Joaquin Hills (73) Toll Road.
Last year, Avanir moved its headquarters from San Diego to Aliso Viejo.
The company hopes to lower its annual operating costs from $75 million to $20 million.
The backstory: Avanir has seen costly regulatory setbacks with Zenvia in the past year. And now two big drug makers, AstraZeneca PLC and Novartis AG, are ending a pair of research deals with the company, resulting in lost revenue.
Eric Brandt, the company’s chief executive lured from Allergan Inc. in 2005, left last month to become chief financial officer for Irvine chipmaker Broadcom Corp.
Brandt, who declined to comment for this story, appears to have traded the fading hope of a homerun as head of Avanir for a critical supporting role at Orange County’s top technology company.
Avanir’s former vice president of human resources, Theresa Hope-Reese, also recently left. She’s now senior vice president of human resources for Anaheim’s Targus Group International Inc., a maker of computer carrying cases and other products.
The restructuring suggests a company that’s trying to regroup.
“Our goal is to minimize shareholder dilution and obtain sufficient cash to fund all, or substantially all, of the operating expenses for the next two years,” said Keith Katkin, the drug maker’s new chief executive, in a statement.
Katkin, 35, joined Avanir in 2005 as senior vice president of sales and marketing. Before that, he served as vice president of commercial development for Alameda’s Peninsula Pharmaceuticals Inc., which was bought by Johnson & Johnson in 2005.
Avanir, which has a market value of about $50 million, isn’t ruling out any options for the company, Katkin said.
The company’s predicament is illustrated in a Securities and Exchange Commission filing.
For the December quarter, the company reported operating expenses of $19 million with sales of $6.2 million.
Avanir’s main commercial product is Abreva, an over-the-counter cold sore cream that’s sold in North America by Britain’s GlaxoSmithKline PLC.
Another revenue source is FazaClo, a drug to treat severe schizophrenia it got last year in a $29 million deal for Alamo Pharmaceuticals LLC, a privately held drug maker with offices in Beverly Hills and Parsippany, N.J.
Avanir had cash and investments of $17.6 million as of Dec. 31. The company raised $14.4 million in November through a secondary stock offering.
It “may have to raise money within the next four or five months,” said Megan Murphy, an analyst with Lazard Capital Markets LLC in New York.
Avanir said it was talking with other companies about possibly selling some of its investigational drug compounds and FazaClo.
“Once we have more definitive results from our discussions with the interested partners, we will report back to our shareholders,” Katkin said.
Avanir’s hopes were high a year ago when it moved to Aliso Viejo under Brandt.
Back then, the company was awaiting Food and Drug Administration word on Zenvia, which then was known as Neurodex.
In an earlier Business Journal interview, Brandt said Avanir expected to boost its staff to as many as 350 workers when regulators signed off on Zenvia.
Then a string of bad news hit.
In November, the FDA sent a letter saying Zenvia could be approved but expressed concerns. One worry was about the heart risk of quinidine, an enzyme inhibitor that helps to increase the availability of dextromethorphan, Zenvia’s active ingredient.
Regulators asked for more testing.
The setback proved costly. At the time, Avanir cut 16% of its workers in an effort to reduce its cash burn rate to a goal of $10 million a quarter.
“The decisions we had to make were difficult but necessary,” Brandt said at the time.
In February, Avanir said the FDA asked it to hold a fresh clinical trial to test a revised formulation of Zenvia. The testing could take about two years.
Avanir’s shares fell 15% on the day it announced the FDA’s request, likely on concerns about whether the company could see Zenvia through more lengthy testing.
Brandt left a few weeks later.
Avanir said in a filing “there was no disagreement between (the company) and Mr. Brandt giving rise to his resignation.”
The filing also said Brandt wasn’t going to receive severance or 124,999 shares of unvested Avanir stock.
