UPDATE 2-Vical cuts 20 pct jobs, closes facility to save cash
(Adds analyst's comments, updates stock movement)
By Anand Basu
BANGALORE, Nov 21 (Reuters) - Biotechnology company Vical Inc (VICL.O) said it would cut about 20 percent of its workforce and close a research facility to preserve capital and focus on the development of its advanced drug candidates, sending its shares down 16 percent to a lifetime low. Vical is the latest addition to a string of several small biotechs who have been forced to take desperate measures like stalling clinical trials and cutting jobs as the tightening credit market makes new funding unavailable.
The company, which cut about 29 jobs, expects to incur severance charges of about $800,000 in the fourth quarter, and $500,000 in the first quarter related to the facility closure. The company did not disclose which facility it was shutting down.
The closure of the facility will not result in the company discontinuing any of its programs, analyst Alan Carr of Needham & Co told Reuters.
Carr said the fourth-quarter charges would not have a "huge effect on their bottomline" and expects the company to report a loss of 23 cents a share in the fourth quarter, excluding the charges.
Vical, which will now have about 120 employees, said the restructuring efforts are expected to reduce future net losses and cash burn by about $4 million annually.
The company said it would focus on developing its experimental treatment for metastatic melanoma, Allovectin-7, and its potential vaccine for cytomegalovirus, which belongs to the herpes virus family.
The melanoma drug is currently in a late-stage trial, while the vaccine is being evaluated in a mid-stage study.
The analyst said the company may find a partner for its cytomegalovirus program in 2009 based on the "encouraging results" from an interim analysis reported earlier this month.
"Allovectin-7 is a longer-term trial as the data is not expected till 2010," said Carr, who has a "buy" rating and a price target of $8 on the stock.
The company's shares, which have lost about three-fourths of their value over the last 12 months, were down 11 cents $1.13 in low volume trade Friday early morning on Nasdaq. They touched a life-low of $1.04 early in the morning. (Additional reporting by Esha Dey; Editing by Amitha Rajan)
