Contributing Writer

Blood substitute developer Hemosol Inc. and drug delivery firm Aerogen Inc. each reported large personnel reductions in moves designed to conserve cash, both bundling their work force announcements with product development updates.

Jason Hogan, Toronto-based Hemosol's director of investor relations, said the company would release 70 workers, or about 35 percent of its work force, thus leaving 125. Hogan said the bulk of the releases are in manufacturing operations, with the remainder spread over administrative functions.

The cutbacks and other cost-cutting moves will result in a one-time charge in the second quarter of about C$1.5 million (US$980,000). But the longer-term impact, Hemosol said, will be to reduce operating expenses from an estimated C$5 million a month to about C$3 million a month.

Hemosol also changed the timelines for reporting data from its two trials of Hemolink (hemoglobin raffimer) in patients undergoing coronary artery bypass grafting (CABG) surgery, citing "administrative complexities" in running the trials concurrently.

"There was just a lot of administrative and logistical burden at the sites, and we weren't able to recruit at the pace we anticipated," Hogan said. He noted that in terms of employment, there might be some additions in regulatory and clinical staff in order to speed up enrollment and maintain focus on developmental activities.

The delays counter projections that the company made in March that the trials were on schedule. Those projections came after Health Canada rejected a Hemolink submission and asked the company for additional data.

The first trial, designated HLK 213 and using Hemolink in primary CABG, has passed an interim safety review and is continuing patient enrollment, according to Hemosol, projecting data reporting for this trial in the fourth quarter.

The second trial, a similar CABG study designated HLK 214 and involving patients undergoing a repeat procedure, "has been slowed by the significant competing demands of HLK 213," Hemosol said. It said it will not meet the third-quarter reporting date originally set but did not indicate a new reporting date.

Hogan said that the reporting delays would result in a three- to six-month slowdown in winning clearance for Hemolink in the UK, but that approval there is still expected by next year. He said that in terms of U.S. approvals, the company would use trial data to develop a pivotal Phase III trial. Hemosol said it would not draw down its credit facility until the timing of data reporting for the trials is confirmed.

Despite the delays in trial data, Hemosol said it is moving ahead with various commitments for "construction and commissioning" of about $25 million for its manufacturing facilities. While its new Meadowpine facility will be completed on schedule, in the third quarter, it will delay a final validation program of the facility, once again, it said, to put more resources into the Hemolink trials.

Besides its flagship product Hemolink, Hemosol is developing other oxygen therapeutics, a hemoglobin-based drug delivery platform and a cell therapy focused on the treatment of cancer

Aerogen, of Sunnyvale, Calif., developers of devices for inhaled drugs, said it has "streamlined" its staff in the U.S., releasing 32 employees, or about 30 percent of its domestic work force.

The company said it is making the cuts to conserve cash needed for development and marketing of current products for respiratory therapy in both the hospital and home markets, and the development of the Aerodose insulin inhaler as it continues "the process of selecting and signing the optimal partner" for the product, it said in a statement.

Aerogen said these and other initiatives will give it enough cash to support its programs through the second quarter of 2003 and that it will provide additional details in a July 25 earnings report.

Separately, Aerogen said that three executives have transitioned to "consultant" status. Casper de Clercq, vice president of marketing and sales, and Carol Gamble, Aerogen's general counsel, will focus on the process of selecting and signing a partner for the Aerodose insulin inhaler. Deborah Karlson, chief financial officer, will remain as a full-time employee until the end of this quarter and then work as a consultant.

Aerogen is preparing to launch its Aeroneb Professional Nebulizer System (Aeroneb Pro), a system for the hospital setting recently cleared for marketing by the FDA, and CE marked. Company plans call for European commercialization this month and in the U.S. shortly after.

Other products being developed include the Aeroneb Pro 2, the Aerodose inhaler for respiratory therapy and an inhaled insulin product. It also has a new development program with the U.S. Army Medical Research Institute of Infectious Diseases in Fort Dietrick, Md., related to the use of inhaled vaccines to counter bioterrorism.

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