Two weeks after agreeing to sell its bioreagents business for C$8 million (US$6.4 million), Stressgen Biotechnologies Corp. is reducing its work force by half to redirect resources to its lead drug program for human papillomavirus-related diseases.

The Victoria, British Columbia-based company, which began the month with 103 employees, will have 39 following the restructuring. Earlier this month the company agreed to transfer 26 employees as part of the proposed sale of it bioreagents assets to a new firm funded by Ampersand Ventures, of Wellesley, Mass. (See BioWorld Today, April 15, 2005.)

The recent move will cut 38 of the remaining 77 employees, amounting to a total staff reduction of about 62 percent.

"We've been looking very carefully at our financial position, and believe that our need is to focus our resources behind our lead compound," said Greg McKee, president and CEO of Stressgen, referring to HspE7, a vaccine getting ready to enter a pivotal Phase III trial later this year in recurrent respiratory papillomatosis (RRP).

"Although these are really tough decisions, to remove staff, we just think it's prudent given where we are now." He added that the terminations were accompanied by severance packages comparable to those of other companies in the industry.

The reduction in staff, in addition to the closing of Stressgen's facility in Collegeville, Pa., by year's end, is expected to lower the company's burn rate by about C$5 million per year.

The firm will maintain U.S. headquarters in San Diego.

The goal is "to make certain that we are focused on HspE7," McKee told BioWorld Today.

Stressgen has undergone several changes during the past two weeks. McKee was appointed head of the company following the retirement of its former president and CEO, Daniel Korpolinski. At the same time, Stressgen sold the bioreagents, while withdrawing plans for a $50 million financing round, citing unfavorable market conditions.

McKee said Stressgen likely will seek to increase its cash position through partnerships involving HspE7, as opposed to fund raising. As of Dec. 31, the company had about C$22.5 million in cash. The company's guidance, including its projected burn rate, will be released later this year.

"We're going through the re-calculation of all that now, based upon the changes and activities that are taking place," he said.

Shares of Stressgen (TSE:SSB) lost C1 cent Thursday to close at C27 cents.

HspE7 was developed using Stressgen's CoVal fusion technology, which combines the immunostimulatory abilities of heat-shock proteins with recombinant technology to fuse, or covalently link, a stress protein with protein antigen. The product is designed to treat HPV, a common cause for most sexually transmitted diseases that can result in internal or external genital warts and precancerous conditions such as cervical and anal dysplasia.

Stressgen has received orphan drug and fast-track status for its lead indication, RRP, a pediatric form of HPV infection usually passed on from the mother. RRP is known to cause warts in the upper airways, such as the larynx and vocal cords and can spread to the trachea and lungs. The only existing treatment involves surgery.

"These kids have to go into surgery on a frequent basis, an average of five times per year and maybe even 20 [times] or more," McKee said.

The company has been in discussions with the FDA regarding the special assessment protocol for the Phase III pivotal trial, which likely would look at an endpoint similar to the Phase II trial. Results of that trial, reported last February, demonstrated a statistically significant increase in intervals between surgery following treatment with HspE7.

"The protocol [for the pivotal trial] has essentially been given the nod," he said, adding that it looks to be a double-blind, placebo-controlled study in about 130 patients at centers in the U.S. and Canada.

In addition to RRP, Stressgen also is evaluating HspE7 in other HPV-related indications, such as cervical dysplasia, genital warts and in patients co-infected with HIV and HPV.

"Our strategy is to get the drug approved for this smaller niche indication that has orphan and fast-track status," McKee said, "and then expand the label beyond that."