Staff Writer

Renovis Inc. is reducing its staff by 40 percent in a move to trim costs following the Phase III failure of its lead compound nearly three months ago.

The South San Francisco-based company was left with no products in clinical development when its neuroprotectant compound NXY-059 (Cerovive) failed to demonstrate efficacy in the 2,300-patient SAINT II Phase III trial in stroke. Partner AstraZeneca plc ended development of the product following those results. Renovis had ended clinical development of two earlier-stage clinical compounds in 2005.

Renovis President and CEO Corey Goodman told BioWorld Today that the company ended 2006 with nearly $100 million in cash - enough to fund operations at least through 2009. That gives it a number of options going forward, the first of which is moving its late-stage preclinical compounds into human trials, he said.

"By significantly reducing our burn, we have the cash to take these programs into the clinic and get proof-of-concept data before we'd have to raise money again," Goodman said. "It puts us in a position of strength. We are in control of our own destiny in taking these forward."

Goodman did not discount other strategic options, such as finding a merger partner, in-licensing compounds, outlicensing preclinical programs or other arrangements. "All those things are on the table," he said, and will be evaluated in terms of what is best for shareholders and building value.

Renovis had about 115 employees when the SAINT II trial data were released. It now will have about 70. It expects to take a restructuring charge of about $1 million this quarter.

Its stock (NASDAQ:RNVS) fell 70 percent Oct. 26 on the SAINT II data, to close at $3.43. It gained 17 cents Wednesday to close at $3.62.

The nearest-term clinical program at Renovis is from its collaboration with Pfizer Inc. focused on vanilloid receptors (VR1). Renovis said Pfizer is on track to initiate clinical development this year on that program, which initially targets pain and urinary incontinence. Behind that Renovis has the unpartnered programs P2X7 and P2X3, antagonists of purinergic receptors, scheduled to enter the clinic in 2008. And Renovis has a collaboration with Genentech Inc. on another preclinical program.

Bret Holley, an analyst at CIBC Work Markets Corp., said the staff reductions at Renovis did not come as "that big of a surprise. The company's timelines for commercialization are a lot longer now. That [SAINT II trial result] significantly changed the profile of the company."

Its cash position gives Renovis some breathing room, Holley said. "They can make a lot of progress internally if they decide to go that route, but strategic options are always open to a biotech company."

Mark Monane, an analyst at Needham & Co. LLC, suggested one such option at Renovis would be exploration of merger opportunities. "Rather than in-license late-stage compounds, we believe management is more likely to explore an M&A route to expand the company's pipeline," he wrote in a research note. "In the meantime, Renovis plans to pursue development of [the] three preclinical programs."

Work with Pfizer focuses on developing small-molecule inhibitors of vanilloid receptor 1 for treating inflammatory pain, neuropathic pain, urinary incontinence and other disorders. Renovis got $10 million up front and $7 million in research funding from that May 2005 collaboration, which also could yield up to $170 million to Renovis in milestone payments per product, plus low-double-digit royalties on resulting sales. (See BioWorld Today, June 1, 2005.)

One internal program at Renovis is development of antagonists of the P2X3 purinergic (ATP) receptor, which it expects will have applications in treating chronic, persistent pain. Another is on inhibition of P2X7, a potential target in inflammatory disease that could yield compounds for rheumatoid arthritis, inflammatory bowel disease and chronic obstructive pulmonary disease. Renovis said it has selected a clinical candidate from the P2X7 program and plans to begin investigational new drug application-enabling studies in the first half of this year.

The deal with Genentech dates to late 2003, and focuses on development of therapeutics in the areas of angiogenesis and nerve growth. Most of the effort in that program now is Genentech's development of monoclonal antibodies for cancer that inhibit angiogenesis, which could complement its Avastin franchise. Renovis is entitled to modest milestone and royalty payments on resulting products, Goodman said. Renovis also has certain rights in that collaboration to develop products in the area of nerve growth.