Amylin Pharmaceuticals is reducing its workforce by 25% as the firm suffers the effects of slower-than-expected sales of the type 2 diabetes drug Byetta.

The San Diego-based firm is cutting 340 jobs at headquarters in a move that it says should reduce anticipated 2009 cash expenditures by more than $80 million and cut operating expenses by $100 million. An unspecified charge will be taken in the fourth quarter which will primarily include severance payments.

The restructuring is part of Amylin’s plan to be cash flow positive by the end of 2010 and the company said it remains “fully staffed” to grow product revenue from the injectables Byetta (exenatide) and Symlin (pramlintide). Sales of Byetta, and indeed Amylin’s shares, have fallen since last August when the US Food and Drug Administration said it had received six reports of haemorrhagic or necrotising pancreatitis inf patients receiving Byetta, two of whom died.

Amylin backed the safety of the drug, noting that the deaths were not directly linked to Byetta and diabetics are already at increased risk of pancreatitis compared with healthy patients but the news hurt sales.

Chief executive Daniel Bradbury said that "we've made a difficult, but necessary, decision as a result of factors affecting our business." He added that revenues “have not met the expectations we had when we scaled up our organisation” and the cuts will bring operating expenses more in line with sales”.

The CEO confirmed that the cuts willimpact administration, operations, and R&D, adding that Amylin is working closely with marketing partner Eli Lilly “to enhance the effectiveness and efficiency of the commercial organization”.

The moves comes just a week after Amylin stock was battered by the news that the FDA has rejected data for a once-weekly version of Byetta. The agency rejected data from studies meant to show that Byetta LAR batches made by another development partner Alkermes were comparable to batches made at Amylin's Ohio facility.

If Amylin has to conduct another study, it would likely delay plans for a filing to the FDA for Byetta LAR to the middle of 2009. However Mr Bradbury noted that the firm is committed to bringing exenatide once weekly to market “as quickly as possible”. The Ohio facility is unaffected by the restructuring and after the workforce reduction, Amylin's staff will be 1,800 worldwide, with 900 left in San Diego.