UPDATE 1-Transcept cutting jobs after FDA rejects drug

Fri Jul 15, 2011 9:13pm EDT

* To cut about 45 pct; had workforce of 31 on March 15

* Cut comes after FDA rejects sleep-disorder drug

* Says to record a charge of about $1.1 mln in Q3

July 15 (Reuters) - Transcept Pharmaceuticals Inc (TSPT.O) said it would cut about 45 percent of its workforce after the U.S. Food and Drug Administration denied approval of its sleep-disorder drug Intermezzo.

The company, which as of March 15, 2011, had 31 employees, expects a restructuring charge of about $1.1 million in the third quarter. It also expects to record a stock compensation charge related to modifying certain stock options as a result of the restructuring, in the same period.

As a result of the restructuring, it expects to reduce annualized payroll and benefit expenses by about $2.1 million.

"Our staffing needs have changed after the recent news from the FDA on the regulatory status of Intermezzo. We are therefore phasing out certain positions that are non-essential to our plan," Glenn Oclassen, chief executive officer, said in a statement.

The company's insomnia drug, whose proposed label was Intermezzo, was denied approval by regulators, who cited concerns it could impair driving ability the day after it was taken. [ID:nL3E7IF0QW].

Transcept's shares have lost 45 percent since the drugmaker revealed earlier on Tuesday it expected a rejection but has since recouped some of its losses as investors felt the drug's efficacy in treating sleep disorder remained unquestioned.

Shares of the Richmond, California-based company closed 3 percent higher at $4.87 on Friday on Nasdaq. (Reporting by Siddharth Cavale in Bangalore; Editing by Gary Hill)

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