In a move to save money, CuraGen Corp. slashed almost a third of its staff to focus on advancing its therapeutic pipeline through clinical development.

The New Haven, Conn.-based company laid off about 110 people, leaving a work force of 240 remaining employees. The move is designed to conserve resources by lowering its cash burn rate next year and beyond, in order to enable the company to use its cash position to finance further development of its product candidates. As of June 30, CuraGen had about $375.1 million in available cash and investments.

"As we take our pipeline of very promising therapeutics that are in the clinic or close to entering the clinic, it's important to focus resources on those projects because of their potential to create near-term value," said Glenn Schulman, CuraGen's manager of investor relations and corporate communications. "And we'll maintain, without furthering our current research into them, all our preclinical targets and compounds that have been identified and built up over the years."

At present, CuraGen has two products in Phase I development: CG53135 is expected to transition to Phase II later this year for the prevention of oral mucositis, while PXD101 is expected to move into Phase II in the first half of next year for the treatment of solid and hematological cancers. The company owns all rights to CG53135; PXD101 is the subject of a $100 million licensing agreement with TopoTarget A/S, of Copenhagen, Denmark. (See BioWorld Today, June 7, 2004.)

Also, CR002 is expected to enter Phase I later this year for kidney inflammation, and the company expects CR011 to enter the clinic in 2006 for metastatic melanoma. Both stem from an antibody collaboration with Abgenix Inc., of Fremont, Calif.

"We've re-prioritized, so we're not going to pursue as much the preclinical and discovery work," Schulman said, adding that in the past CuraGen scaled down its research from 8,000 genes and targets to 200. "We still maintain [those targets], so by putting them on the shelf for the time being and maintaining them, we can call upon them as we need as the pipeline advances."

As a result, the staff cuts are concentrated among employees that directly and indirectly support early stage programs at CuraGen.

"It's a very difficult decision," Schulman added. "But we're balancing clinical trials and our need to move forward to get our products through Phase I and into Phase II, to really generate the value that the capital markets might not be giving them right now."

The downsizing represents the third such move in the past two years. CuraGen last year reduced its operations by about 80 employees to focus more closely on drug development, about seven months after an initial reduction of 128 employees. The company had noticed a decline in the need of its genomics expertise for discovering targets and made the decision to focus on advancing its pipeline. (See BioWorld Today, Nov. 8, 2002, and June 20, 2003.)

CuraGen has subordinated convertible debt of $130 million due in February 2007 and subordinated convertible debt of $110 million due in February 2011. The restructuring will lower CuraGen's cash burn rate next year. The impact of the restructuring on financial guidance for the remainder of this year will be provided when the company reports third-quarter results on Oct. 28. Detailed financial guidance for next year will come in conjunction with year-end financial results, scheduled for release in early February.

Charges relating to the corporate restructuring are estimated to be $4 million, including non-cash charges of about $1.3 million relating primarily to assets to be written off.

Employees affected by the layoffs are eligible for a severance package that includes severance pay, continuation of benefits and out-placement services.

"At the current time, we're focusing our resources to move our products forward through the clinic and bring them to their value inflection," Schulman said, "and just maintain that position for the time being."

On Tuesday, CuraGen's stock (NASDAQ:CRGN) dropped 11 cents to close at $5.12.