Cell Genesys Inc., as part of a clinical tightening, said it is dropping gene therapy programs in favor of its cancer vaccines and oncolytic virus therapies.

In a time when gene therapy is coming under global scrutiny, the cuts came more from fiscal need than from any doubt in gene therapy itself, the company said.

"We've been discussing the need for focus for months," said Peter Working, Cell Genesys' senior vice president, research and development. "We remain quite optimistic that gene therapy will provide some valuable treatment options. Our decision relates to the near-term promise [of Cell Genesys' other programs]."

Foster City, Calif.-based Cell Genesys will concentrate on its GVAX cancer vaccines and oncolytic virus therapies. It is dropping preclinical in vivo gene therapy programs that include hemophilia and other genetic deficiency diseases, as well as the vector platform that supports them, Working said.

"The move for us was a move to increase focus on cancer," he told BioWorld Today. "We are continuing preclinical gene therapy where it relates to cancer, where it relates to anti-angiogenesis."

With the discontinuance of programs also comes a reduction in head count. Twenty-six positions are being cut. Nine people are expected to be relocated within the company, so the move will result in a net loss of 17 employees from the 330-employee firm.

Just more than a year ago, Cell Genesys formed a subsidiary, Ceregene, to focus on gene therapy. Cell Genesys invested $10 million in the unit at the time of the spinout and the cuts announced Tuesday don't affect how it backs the subsidiary. Ceregene now has 31 employees. (See BioWorld Today, Jan. 12, 2001.)

"We are in close interaction with them," Working said. "We are, in fact, in regular discussions with them to provide technical support if they need it. And we will provide them access to any relative technology we have."

Cell Genesys posted its fourth-quarter and year-end earnings last week, reporting a net loss for the quarter of $12.3 million. For the year, it lost $27.3 million, or 76 cents per share. As of Dec. 31, it has $166.9 million in cash, cash equivalents and short-term investments. CEO and Chairman Stephen Sherwin has given guidance for a $60 million to $65 million operating burn rate for 2003, a figure that takes into account the gene therapy reductions.

The GVAX cancer vaccine line takes on even more importance now. The company has its GVAX Leukemia, Pancreatic, Lung, Prostate and Myeloma products in clinical trials.

"We anticipate starting a Phase III trial for our prostate cancer vaccine by midyear," Working said. "We expect to start two Phase II trials in lung cancer in the near term." Also, he said, the company plans to begin a Phase I/II trial of its oncolytic virus therapy for prostate cancer, CG7870, before midyear, and it has identified a bladder cancer oncolytic virus therapy for which it plans to file an investigational new drug application by the end of the year.

Gene therapy in general has caused alarm lately, following the development of a leukemia-like illness in two children in a French gene therapy trial. Both patients had been treated with retroviral gene therapy for X-linked severe combined immunodeficiency disease. The FDA, in response, put a clinical hold on all gene therapy trials in the U.S. that use retroviral vectors and a FDA advisory committee is scheduled to meet this month to discuss further action. (See BioWorld Today, Jan. 16, 2003.)

Cell Genesys' technologies do not use retroviruses and it was not affected by the FDA's clinical hold.

Looking past the unsavory task of releasing employees, the company's future is hinged on its trials.

"It's difficult to bid our employees farewell," Working said. "It personally saddens me deeply, but the focus has to be on us looking forward. Our focus needs to be, and is, on the product development and manufacturing of the materials we need, and then the execution of the trials."

Cell Genesys' stock (NASDAQ:CEGE) fell 37 cents Tuesday to close at $9.14.