Gritstone Bio will lay off about 40% of its workforce after missing out on funding it expected to receive this quarter, the company said Thursday.

Gritstone, a maker of vaccines for cancer and infectious diseases, is developing a COVID-19 shot with the help of the U.S. government. In September, the Biomedical Advanced Research and Development Authority awarded the company a contract worth up to $433 million to run a large mid-stage trial testing its shot against an available vaccine. That contract is part of “Project NextGen,” a federal initiative that began last August to search for new and better COVID-19 drugs.

According to a regulatory filing, Gritstone expected to receive up to $10 million from the contract by the first quarter upon hitting certain goals related to the study’s preparation. The bulk of the cash would come afterwards, once the trial is up and running.

Earlier this month, though, a manufacturing-related delay caused Gritstone to push the trial’s start from the first three months of the year to next fall. At the time, Gritstone said the extra time would improve the trial’s “regulatory value” and “interpretability,” as well as enable it to test the shot against a newer coronavirus variant. But the setback also left Gritstone without the extra cash from BARDA. The company had just over $90 million in the bank at the end of September.

“The lack of near-term funding necessitated this difficult step to fortify our balance sheet and cash position, which unfortunately means an impact to our workforce,” said CEO Andrew Allen, in a Thursday statement announcing the restructuring. The company had 233 full-time employees at the end of 2022, according to its last annual report.

Gritstone noted Thursday its “core programs and anticipated milestones” haven’t changed. In the first quarter, it still expects to report preliminary data from the Phase 2 portion of a study evaluating a vaccine it’s developing for colorectal cancer. That shot is a personalized “neoantigen” vaccine, which are engineered to find protein flags particular to a patient’s tumor. Several shots have shown promise in trials across the industry, led by a candidate from Moderna and Merck & Co. that’s in late-stage testing in melanoma.

The COVID-19 trial delay “is a sideline” that’s “driving minimal current value among investors,” Evercore ISI analyst Jonathan Miller wrote in a note to investors this month. The colorectal cancer trial “is the single most important lever for the company.”

Gritstone shares fell by 25% in pre-market trading on Friday. At about $2 apiece, they’ve lost most of their value since the company went public at $15 per share in 2018.