Further focusing its business solely in the oncology area, OSI Pharmaceuticals Inc. on Thursday reported a series of staffing adjustments and management realignment efforts.

The moves also entailed the divestiture of OSI's diabetes research program.

The Melville, N.Y.-based company said it trimmed about 8 percent of its work force, or 40 positions, to lower its overall headcount to about 490. The majority of the job cuts were felt in OSI's discovery research area, primarily in biology sciences.

"We've been moving toward oncology for a while," said Kathy Galante, OSI's director of investor and public relations. "Historically, we had been a collaborative-based and service-oriented company. But with our collaborative-funded-based programs and services such as assays and screening, we decided we would complete all those collaborations - which we are in the process of doing - and move away from that collaborative-funded-based revenue."

The shift toward a single focus is not necessarily news for OSI, which almost a year ago increased its oncology holdings with a $200 million cash-and-stock deal for the oncology business of Foster City, Calif.-based Gilead Sciences Inc. (See BioWorld Today, Nov. 27, 2002.)

OSI's lead cancer candidate is Tarceva, a small-molecule, epidermal endothelial growth factor receptor drug candidate in several Phase III trials. It is being developed in a three-way alliance formed early last year with South San Francisco-based Genentech Inc. and Roche Holdings Inc., of Basel, Switzerland. (See BioWorld Today, Jan. 9, 2001.)

"When we obtained Tarceva in 2000, we saw an opportunity to build an oncology franchise around this," Galante said.

While OSI does not have any marketed products, the EGFR inhibitor has progressed deeply in a number of clinical trials. Three trials are studying Tarceva as a front-line therapy for non-small-cell lung cancer. Galante said a study in refractory patients is the only existing controlled trial with survival as its primary endpoint.

"We would anticipate completion of enrollment in that by the end of the year," she said. "Originally, we set out to get about 330 patients in that study, but we expanded it to 700 while remaining on the same timeline."

Two combination studies have completed enrollment, the first a U.S. trial conducted by Genentech and the other a trial outside the U.S. conducted by Roche. Another trial, studying Tarceva in treating pancreatic cancer, is continuing enrollment as well.

But the EGFR drug class suffered a bit of a setback two months ago on news from AstraZeneca plc and its EGFR inhibitor, Iressa. The London-based firm concluded that Iressa and other similar drugs may be effective as monotherapy for non-small-cell lung cancer patients and perhaps could be effective with chemotherapy when given sequentially, but not concurrently.

The AstraZeneca news on Iressa sent OSI's shares plummeting 57 percent - its stock (NASDAQ:OSIP) fell $18.74 in a single day's trading, closing at $14.05. (See BioWorld Today, Aug. 21, 2002.)

OSI's stock has ticked back up since, closing Thursday at $15.73, down 36 cents. The company said it remains on solid financial footing, though - OSI closed fiscal 2002 with about $470 million in cash.

And OSI is banking on a belief that not all EGFR inhibitors will act the same as Iressa.

"Iressa and Tarceva are very similar in many regards, but there are also differences as well," Galante said. "They're in the same family or the same class, but there are differences in potency and pharmacokinetics. We're very encouraged by some Phase II data that we had conducted in single-agent studies, particularly in non-small-cell lung, and the survival we have gotten out of that. And that was the foundation of the Phase III program."

Other candidates behind the Tarceva program include three next-generation chemotherapeutics acquired in the Gilead deal - OSI-211, OSI-736 and OSI-7904L. Another product in early clinical development is OSI-754, a farnesyl transfer inhibitor. And OSI could earn royalties from products resulting from a prior collaboration with New York-based Pfizer Inc.

With its oncology pipeline well entrenched, OSI reported plans to divest its discovery research program in diabetes. The company hired Petkevich & Partners LLC to assist in the sell-off, planned for the next three to six months.

OSI's diabetes program includes a partnership with the Vanderbilt University Diabetes Center in Nashville, Tenn., a funded alliance with Osaka, Japan-based Tanabe Seiyaku Co. Ltd., and six gene-targeted discovery programs in the lead-seeking and lead-optimization phases, primarily focused in glucose regulation and obesity.

In the past year, it has closed other business areas, including a discovery research alliance in cosmeceuticals with Anaderm Research Corp. Three months ago, OSI paid an $8 million early-out fee to the wholly owned subsidiary of Pfizer. The alliance concentrated on areas including skin pigmentation, skin wrinkling and hair loss. (See BioWorld Today, July 18, 2002.)

OSI at the end of last year completed a cardiovascular disease collaboration with Aventis SA, of Frankfurt, Germany.

OSI said the moves would allow it to hire additional cancer research specialists, simultaneously increasing its investment in cancer-related academic research collaborations and technology in-licensing plans.

The hiring initiative appears under way, with OSI reporting a series of senior management changes. Neil Gibson was promoted to vice president of research and will assume responsibility for OSI's preclinical cancer research efforts. Prior to joining OSI in 2001, Gibson was the director of cancer research at Bayer and a senior research investigator in Pfizer's cancer discovery group. Arthur Bruskin, formerly OSI's head of research, moved into the position of vice president of strategic planning.

OSI also reported two senior research appointments at its Oxford, UK, facility. Jim McCormack, formerly the vice president of target cell biology at Novo Nordisk A/S, of Bagsvaerd, Denmark, was named OSI's vice president of UK research and will report to Gibson. Martin Page joined OSI as its director of cancer biology at the Oxford facility. Previously, he was the head of oncology drug research at Oxford GlycoSciences Ltd. in Oxford.