Xenova Group plc narrowed its development focus and cut staff about 24 percent in moves designed to allow the U.K. firm to have enough cash to get through 1996.

The Slough, England company said Monday the actions are expected to reduce quarterly expenses to 1.6 million ($3 million) and save more than 4 million ($6.4 million) through 1996. The staff is being cut from 139 to 106. A one-time charge of 250,000 will be taken in the second quarter to cover severance and other costs.

"Our first priority is to manage our financial resources and to continue developing our most advanced and most promising drug discovery and development programs," Xenova CEO Louis Nisbet said. "We have more drug leads than can be financed through the current capital markets and this translates into a need for increased focus."

Nisbet said Xenova will concentrate on three development programs, one of which is in human testing, and on six discovery programs, five of them with partners.

Xenova has a collection of nearly 30,000 fungi and bacteria and access to 7,000 plant species, about 2,500 of which already have been collected, Nisbet told BioWorld. The company uses microbial and plant chemistries in its drug-screening and lead-finding efforts.

"We've pulled out 240 different biologically active chemicals, one- third of which are totally novel," Nisbet said. "Within the novel ones, there are about a dozen new chemical classes. We've been very successful, but you can't develop everything."

Linda Miller, an independent biotechnology analyst, was with PaineWebber Inc. when it helped underwrite Xenova's July 1994 initial public offering. She said there's a "fine balancing act every development stage company has to contend with."

"There's always this pull on the part of companies to do enough programs to create a portfolio and diversify risk, but they must put an adequate amount of resources on any one program to be competitive," Miller said. "It's a growth and pruning. The ideal way to do it is without head count reductions, but unfortunately the times don't allow that process to take place gradually."

Among the programs to be continued is development of XR5000, an anti-cancer compound that inhibits topoisomerase. Rights to the compound, which is in Phase I trials in the U.K. and New Zealand, were acquired from the London-based Cancer Research Campaign.

Phase II studies are expected to begin in the second half of this year, Nisbet said, adding that an investigational new drug application for Phase II U.S. trials also may occur this year.

Xenova's lead compounds in its thrombosis program are plasminogen activator inhibitors from the XR334 series. Compounds are designed to block pai, a molecule that regulates t-PA. Nisbet said correlation has been seen between elevations in pai and deep vein thrombosis, unstable angina and following balloon angioplasty. Xenova hopes to secure a corporate partner ahead of Phase I.

The third development program to be continued involves cancer multidrug resistance inhibitors from Xenova's XR 1500 series. The plan is to be in Phase I this year, Nisbet said.

The company's projection of having cash through 1996 doesn't include potential new sources of revenue, the most likely coming from corporate partnerships, Nisbet said.

Xenova reported cash and equivalents of 13.7 million on March 31 ($22.1 million), with a net loss of 2.7 million. Collaborative partner Genentech Inc., of South San Francisco, owns about 10 percent of Xenova's 10 million outstanding shares.

Xenova is screening compounds for Genentech targets in cardiovascular, autoimmune and inflammatory areas. The company also has drug-discovery partnerships with Genzyme Corp., of Cambridge, Mass., in acute inflammation, particularly respiratory diseases; Warner-Lambert Co., of Morris Plains, N.J., in neurological and cardiovascular areas; Suntory Ltd., of Osaka, Japan, in small molecule drugs for inflammatory diseases, particularly rheumatoid arthritis; and PharmaGenics Inc., of Allendale, N.J., in restoring function of the p53 tumor suppresser gene. Xenova also will keep its own p53 program going.

"This whole [restructuring] move is clearly a strategic one," Nisbet said. "It's not driven by a specific event. We'd term it prudent management."

Miller said, "I don't view this as surprising, and I'm glad they did it now rather in six to nine months, when the pressure would be greater." n

-- Jim Shrine Staff Writer

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