POINT RICHMOND, Calif., Nov. 13, 2013 /PRNewswire/ -- Transcept Pharmaceuticals, Inc. (Nasdaq: TSPT), a specialty pharmaceutical company focused on the development and commercialization of proprietary products that address important therapeutic needs in the field of neuroscience, today announced plans to reduce expenses by implementing a reduction in force and restructuring its Board of Directors. Transcept plans to adopt these changes in order to conserve cash while it works with Leerink Swann to evaluate strategies to maximize value for shareholders.
Transcept plans to eliminate 6 employee positions, or approximately 43% of its workforce. The majority of these positions will be eliminated by year-end, with certain employees retained through a transition into early 2014. Once fully implemented, this organizational change will reduce current annualized payroll and benefit expenses by approximately $865,000. Severance and benefit continuation charges in accordance with existing agreements are estimated to be approximately $532,000 and are expected to be recognized primarily during the fourth quarter of 2013 and first half of 2014. Transcept also expects to recognize a stock compensation charge associated with the modification of certain stock options in connection with the reduction in force that will be determined and recognized primarily in the fourth quarter of 2013. After full implementation of the reduction in force, Transcept will have 8 remaining employees.
Effective at the end of December 2013, Transcept will also restructure its Board of Directors. Glenn A. Oclassen, the Company's President and Chief Executive Officer, will assume the role of Chairman of the Board and Chief Executive Officer. Concurrently, G. Kirk Raab, the Company's current Chairman of the Board, will move to the position of Lead Director. Christopher B. Ehrlich, a longstanding member of the Transcept Board of Directors, will resign from the Board effective at the end of December 2013. This restructuring will save the Company approximately $180,000 on an annualized basis, or 36% of its board governance costs.
Transcept has agreed to increase the change-in-control severance benefit for Leone Patterson, the Transcept Chief Financial Officer, from 1.25 times her base salary to 1.5 times her base salary. To offset this potential increase in expense, the change-in-control severance arrangement for Glenn A. Oclassen has been reduced from 2 times his base salary to 1 times his base salary.Glenn A. Oclassen, President and Chief Executive Officer, stated, "These cost containment steps are consistent with our long standing principle of conservative cash management and, once fully implemented, will save Transcept a total of approximately $1.0 million on an annualized basis." Mr. Oclassen continued, "This decision was a difficult one for all of us, especially given the high quality of the people affected. We are extremely grateful to all of our employees for their significant efforts and contributions to Transcept, and to Mr. Ehrlich, for his valuable service to our Board of Directors."