Transcept Pharmaceuticals has announced plans to reduce operating expenses by eliminating 45% of its workforce after the US Food and Drug Administration once again rejected its insomnia drug Intermezzo.

Last week, the agency rejected a resubmitted New Drug Application for Intermezzo (zolpidem tartrate sublingual tablet) which is being developed for use (on an as-needed basis) in the treatment of insomnia when a middle-of-the-night awakening is followed by difficulty returning to sleep. The FDA has issued another complete response letter, (the original rejection came in October 2009), saying that a study conducted to assess the effect of Intermezzo on subjects' next-day driving ability is still not sufficient to grant approval.

Transcept chief executive Glenn Oclassen said that "our staffing needs have changed after the recent news from the FDA" and "we are therefore phasing out certain positions that are non-essential to our plan to pursue potential paths forward with the FDA on the Intermezzo NDA". The company expects to record a restructuring charge of $1.1 million in the third quarter to cover severance payments, but says the move will reduce current payroll and benefit expenses by $2.1 million.

Transcept had cash and equivalents of $59.6 million at the end of June and its burn rate is some $1.2 million per month.