Assistant Managing Editor

Despite reporting promising early data for its G-CSF drug MAXY-G34, Maxygen Inc. said it had not yet been able to secure a partner for that program and will instead implement a corporate restructuring plan to include a 30 percent reduction in headcount and a delay in further spending on MAXY-G34 development work.

The staff cuts will be staggered between January and the end of April 2009 and will come primarily from activities related to MAXY-G34, said Russell Howard, CEO of Redwood City, Calif.-based Maxygen. The company will be left with about 65 employees.

MAXY-G34, a next-generation, long-acting G-CSF (granulocyte-colony stimulating factor), is in development to treat chemotherapy-induced neutropenia, a market currently dominated by Neupogen (filgrastim) and Neulasta (pegfilgrastim) from Thousand Oaks, Calif.-based Amgen Inc. Worldwide combined sales of those drugs totaled $4.3 billion in 2007.

Maxygen's drug is in a Phase IIa trial in breast cancer patients, and early results from that trial "have been encouraging," Howard told investors during a conference call. "Yet, to date, we've not been able to attract a suitable partner to help us bear the cost of this program."

He said the company had arrived at a "crossroads" this month, having to decide whether to put forth a large sum of money for Phase III manufacturing of MAXY-G34. After some consideration, and given the existing financial environment, Maxygen felt it was "unwise to make this investment without a partnership in hand," Howard said.

The move came as a surprise to analyst Han Li, of Stanford Equity Research, who wrote in a research note that Maxygen is "in a relatively strong financial position compared to most early stage biotechnology companies," with about four years of cash and no debt.

Howard said Maxygen expects to end this year with a cash position of about $200 million. But its cash likely won't be used to fund Phase IIb studies of MAXY-G34, as Howard said the firm also is averse to entering that next phase of trials without a collaboration of some kind. That means the MAXY-G34 program clearly will suffer delays.

"We're unlikely to file a BLA [biologics license application] by 2012 as originally planned," Howard added.

In the meantime, Maxygen intends to seek strategic alternatives and has hired investment bank Lazard to review options, including selling off assets or trying for the more profitable M&A route.

"Given the current M&A climate, and the relative dearth of novel biologic platforms, we expect Maxygen could attract interest from multiple pharma/biotech players," analyst Eric Schmidt, of Cowen and Co., wrote in a research note.

Shares of Maxygen (NASDAQ:MAXY) gained 32 cents, or 9.8 percent, Thursday to close at $3.59.

Though the firm has not yet succeeded partnering MAXY-G34, it has signed collaborations for two other programs this year. In July, it sold preclinical hemophilia drug MAXY-VII to Leverkusen, Germany-based Bayer HealthCare for $90 million up front, plus another $30 million in potential milestones. (See BioWorld Today, July 3, 2008.)

Last month, Maxygen formed a partnership with Tokyo-based Astellas Pharma Inc. for preclinical autoimmune and transplant drug MAXY-4. That deal could be worth up to $170 million. (See BioWorld Today, Sept. 22, 2008.)

EPIX Cuts Staff, Narrows Focus

Another company taking a cautious view of market conditions is EPIX Pharmaceuticals Inc., which decided to cut its work force by about 23 percent and realign its resources to its lead clinical programs - PRX-03140 in Alzheimer's disease and PRX-08066 in chronic obstructive pulmonary disease, both of which are in Phase II.

The Lexington, Mass.-based company estimated that reduction will result in savings of about $3 million. The firm also anticipates a reduction in R&D spending associated with narrowing its pipeline focus.

EPIX, which has not yet reported third-quarter earnings, posted a net loss of $2.3 million, or 6 cents per share, for the second quarter. As of June 30, the firm had about $43 million in cash.

The company's stock (NASDAQ:EPIX) closed at 38 cents Thursday, down 7 cents, or 15.6 percent.