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Rosetta Genomics to Cut More than Half its Staff to Trim Costs amid Cash Crunch


By Doug Macron

Just weeks after reporting that a cash crunch may threaten its ability to continue operations through the rest of the year, Rosetta Genomics said this week that it has begun implementing a corporate restructuring designed to cut its monthly cash burn in half.

As part of the effort, the company said it will eliminate 35 jobs, all of which are in Israel and are related to research-and-development and general-and-administrative functions. Rosetta, which currently has around 54 employees, said it has already cut 24 positions and will eliminate 11 more “as soon as [the company] can provide termination notices under Israeli employment regulations.”

In a statement, Rosetta President and CEO Kenneth Berlin called the headcount reduction “difficult,” but “appropriate and necessary.” He also indicated that the company's development-stage products may remain on hold until new financing can be obtained.

He said the layoffs announced this week will allow Rosetta to “concentrate our resources on growing sales” of its already-launched microRNA diagnostics, including its second-generation miRview Mets 2 test, used to determine the source of cancers of unknown primary origin, and its miRview Lung test, which differentiates neuroendocrine tumors from non-small cell lung tumors, and then subtype neuroendocrine tumors into small cell lung cancer and carcinoid, and non-small cell lung tumors into squamous and non-squamous.

"We have begun to see a significant increase in demand for our tests since the launch of our dedicated oncology sales team,” he noted. “As expected, there is the usual lag between generating demand and getting paid for these tests by the applicable payors.”

He said that Rosetta has “recently” submitted its first claims to payors, and that the “additional commercial progress” is expected in coming quarters as the sales force, which was established in May (GSN 5/5/2011), gains traction.

Progress with its development-stage programs, however, remains “subject to obtaining adequate additional financing,” at which point the company hopes to introduce new products and hire additional sales representatives, Berlin said in the statement.

“As we get better footing financially, we expect to invest strategically in longer-term projects,” he told Gene Silencing News this week. “We'll be able to, even with the smaller size of our group in Israel, continue to do some work on our lead … blood-based diagnostic in heart failure.”

Indications of Rosetta's interest in heart failure were seen as early as this summer when the company disclosed preliminary data showing that undisclosed blood-borne miRNAs could be used to identify and stratify patients with the condition (GSN 7/26/2011).

In a proof-of-concept study, expression levels of a “wide panel” of miRNAs were measured in blood serum from an undisclosed number of patients with stable chronic systolic heart failure and normal individuals, the company said.

The differences in miRNA expression were characterized, and a score was defined based on the four miRNAs with the most significant up-regulation in the heart failure patients, Rosetta said. This score was used to discriminate heart failure patients from controls with 90 percent sensitivity and specificity.

At the same time, the company has been moving away from the more-invasive tissue-based diagnostics, this year putting on hold the development of a number of such tests including miRview Kidney, designed to differentiate clear cell, papillary, and chromophobe renal-cell carcinoma from benign kidney tumors; and miRview Meso Prognostic, which sub-classifies mesothelioma patients based on their prognosis.

“We may bring back some of the tissue-based [tests] to finish them up as we've started them, but it is very much dependent on our financial situation,” Berlin said.

'Substantial Doubt'

Rosetta has been struggling as of late with diminishing revenues and a depressed stock price — factors that have raised questions as to how long it can support its ongoing operations.

Late last month, the company disclosed in a filing with the US Securities and Exchange Commission that its revenues for the first half of 2011 fell to $59,000 from $97,000 in the same period a year earlier. The company posted operating expenses of $5.6 million for the six-month period, and had $3.1 million in cash and cash equivalents on hand.

Its shares, meantime, have been trading around $1.25 apiece, although this reflects a greater than 20 percent jump on news of the restructuring. Rosetta shares were trading around $6.60 roughly one year ago.

In the SEC filing, Rosetta said that it will have to “obtain additional capital resources to maintain its commercialization, research, and development activities beyond June 30, 2011,” which raises “substantial doubt about the company's ability to continue as a going concern.”

Berlin told Gene Silencing News that Rosetta publicly stated at the end of March that its cash runway will extend “into November,” but cautioned that this guidance has not yet been updated.

According to Rosetta, the restructuring will provide it with “sufficient cash and equivalents to enable [it] to raise additional capital to fund operations.”

Berlin declined to comment in detail on the company's fund-raising efforts, but said that it is focused on “non-dilutive financing,” including payments related to distribution deals and revenues from licenses to its intellectual property. Rosetta is also evaluating possibilities for “monitizing our other assets” such as its 50 percent stake in its agbio spinout Rosetta Green, which recently went public in Israel (GSN 2/24/2011).

Rosetta's shares of Rosetta Green, he noted, are currently valued at “nearly” $5 million.

After news of the restructuring, Rosetta announced a deal to privately place $1.9 million of stock and warrants (see related story, this issue).

Have topics you'd like to see covered in Gene Silencing News? Contact the editor
at dmacron [at] genomeweb [.] com

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