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Incyte Sacks 37 Percent of Staff as Focus Sharpens on Drug Discovery

NEW YORK, Nov. 12 - Incyte Genomics will lay off 259 people, or around 37 percent of its staff, as it embarks on a restructuring program it hopes will shed $88 million in annual costs, the company said today.


Incyte, which earlier today announced plans to buy a small drug-discovery company for slightly more than $28.3 million, will also consolidate its four research facilities in Palo Alto, Calif., into two centers.


The staff cuts, which go into effect "immediately," will take place at Incyte's bases in Palo Alto, Beverley, Mass., and Cambridge, UK, the company said. Incyte stressed, however, that none of these actions will affect its newly launched drug-discovery program--in fact, the company said it intends to hire between 80 and 100 researchers during the next year to bolster its drug-discovery efforts.


In addition, Incyte, which will incur a $40 million charge in the fourth quarter as a result of the reorganization, plans to continue buying back $30 million of its own shares, which it considers to be undervalued. It's already snagged half a million of them for an undisclosed amount.


Incyte also said it has put together its first "fully staffed" drug-discovery program. One compound the company is banking on is a small molecule that may be useful against certain inflammatory diseases. So far, 80 scientists work on this and other compounds in a newly opened facility in Delaware. The firm's acquisition of San Diego-based Maxia Pharmaceuticals--which has "a nice preclinical pipeline," according to one Incyte official--will eventually buttress Incyte's nascent drug-discovery program.


The restructuring--Incyte's second major shake-up in two years--can be traced to thinner quarterly revenues, strong R&D spending, and hulking net losses. For the period ended Sept. 30, for example, Incyte posted $22.4 million in revenue, down from $57.3 million in the year-ago quarter. The company attributed the drop to the dual blows of its discontinued custom-genomics business, announced last year, and a "slowdown in spending" among database subscribers.


R&D spending in the third-quarter dipped slightly to $47.3 million from $47.7 million last year, though overall expenses in the quarter fell by $14.4 million as the company trimmed SG&A to $12.1 million from $17.9 million year over year, the company said.


As a result, net loss in the third quarter swelled to $38.4 million, or $.57 per share, from $17.8 million, or $.27 per share, during the same time one year ago.


Incyte said it had roughly $15.7 million in cash and cash equivalents as of Sept. 30.


"I believe we are on the right path and that we will succeed in creating superior information products for our customers, effective new medicines for patients and significant and lasting value for our shareholders in the years ahead," Incyte CEO Paul Friedman said in a statement this afternoon.


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