National Editor

Metabolex Inc. said it's likely to reduce its work force by 20 percent, while putting on hold the plan for Phase II trials of its lead drug and installing a new CEO as part of a restructuring that will give the company operating cash for up to two more years.

As of Dec. 31, Hayward, Calif.-based Metabolex had $6.5 million in cash. Two collaborations generate a total of about $10 million per year and "that will run the company for a while, at least 18 months," said Mark Bagnall, chief financial officer.

"We putting three development programs on hold, and actively talking to all the usual suspects in the venture capital world," he added.

The lead drug, MBX-102, is an insulin sensitizer. A single isomer of a racemic drug, it has previously been studied in human clinical trials as a potential treatment for lowering lipids. In animal models, MBX-102 has shown the ability to lower glucose by reducing insulin resistance, as well as lowering total cholesterol and triglycerides.

Other drugs in the pipeline - a second generation of MBX-102, and another class of compounds - await preclinical toxicology testing. Like MBX-102's Phase II study, that work can be quickly restarted when the company gains more solid footing, Bagnall said.

"We can't start them [again] without additional outside sources of cash," he said.

Going ahead full-strength are diabetes-focused Metabolex's two major collaborations: one with Pfizer Inc., of New York, aimed at discovering drug targets related to insulin secretion, and another with Tokyo-based Yamanouchi Pharmaceutical Co. Ltd. to analyze 100 diabetes and obesity targets from Metabolex's database. (See BioWorld Today, July 3, 2001, and March 21, 2002.)

Fourteen of privately held Metabolex's 75 employees have been told that "because we're in the process of fund-raising, while you're not laid off, if we don't complete a fund-raising in the next six weeks, your job will end at that time," Bagnall said.

"Their notice was given [Monday]," he added. "There's a further group of chemists who have been subcontracted to another company. We're not being specific about the number but it's less than 10."

The moves happened rather suddenly because a prospective investment fell through, Bagnall told BioWorld Today.

"We did start a financing process last year," he said. "I think we saw 50 investment groups," and in late summer entered an agreement with one.

"As the market soured and their view of the world changed, they and we decided we would part company," Bagnall said. "It was unfortunate, because they were a very good group of investors. It just wasn't going to work. Unfortunately, that left us in a position where we didn't have enough left to have the leeway to go off and find new [investors] without making these changes."

On the other hand, he said, the Pfizer and Yamanouchi deals put Metabolex in better standing than many smaller biotechnology firms.

"It's good to be able to part company with an investor group amicably and move on," he said.

Also as part of the restructuring, Harold Van Wart, the company's president and chief operating officer, has been appointed president and CEO. Previous CEO Thomas Glaze is assuming the position of vice chairman of the board.

Van Wart has been with the company since October 2000, when he came aboard as senior vice president of research and development. He was promoted to president and COO in May 2001. Before Metabolex, he was vice president and head of arthritis and fibrosis research at Roche Bioscience, of Palo Alto, Calif.

"Hal has a background in drug development," Bagnall said. "His role was fundamentally to take drugs out of research into at least the early stages of development - proof of concept, Phase II clinical studies. What we were looking for, obviously, is somebody with that kind of skill and leadership."