When flailing giant Elan Corp. plc made known its plan to restructure at the end of last month, tremors were felt worldwide. The Securities and Exchange Commission had raised questions about off-balance-sheet accounting procedures related to Elan's joint ventures, of which the company has no less than 55, and there had been shareholder lawsuits along with the more ordinary kind of problems, such as the suspension of clinical dosing of the Alzheimer's drug partnered with Wyeth-Ayerst Laboratories.

But what's emerged as a clear trend toward restructuring can't be entirely, or even mainly, blamed on regulator scrutiny in the wake of the Enron Corp. and ImClone Systems Inc. scandals. Instead, it's something much more mundane: that ol' debbil market, which continues to take the biotechnology industry (and others) on a wild ride.

The list of those making major changes and tightening their belts includes mostly smaller-cap firms, and among the companies making formal disclosures of their plans are Ribozyme Pharmaceuticals Inc., Genaera Corp., Keryx Biopharmaceuticals Inc., EntreMed Inc., Genaissance Pharmaceuticals Inc., Targeted Genetics Corp., BioTransplant Inc., Corvas International Inc., GlycoDesign Inc. and Geron Corp.

Of these, Targeted Genetics which said it will cut its research and administrative staff by 25 percent (45 out of 175 employees) and suspend Phase I trials of tgDCC-E1A in ovarian cancer and head and neck cancer, saving $2.5 million per quarter is the company with a link to Elan.

One of the latter's dozens of JVs include a deal with Targeted Genetics. The JV, called Emerald Gene Systems, was expected to yield $9 million in debt financing for Targeted Genetics, but Elan is not expected to continue with the deal.

Otherwise, the restructurings, which often include staff reductions and the halting of selected, earlier-stage programs, seem almost entirely motivated by a need to conserve cash in harsh times. And that (not the influence of Elan's woes) is the main reason for Targeted Genetics' moves, too, the company said.

Even so, the picture is not desperately bleak for the belt-tightening firms. Keryx, for example not an often-heard name said it was reducing its work force by 45 percent and cutting pay for the rest of the staff by 5 percent to 10 percent. At the same time, though, the company is putting the final touches on plans for a Phase III trial with its prostate cancer drug, KRX-123, a kinase modulator developed through the firm's KinAce platform technology, which links bioinformatics with protein chemistry.

Another example is Ribozyme Pharmaceuticals, letting go 30 of its 120-person staff, but also pushing Angiozyme, its angiogenesis inhibitor, into Phase II studies for metastatic colorectal cancer, with 12-week results expected at year's end and 24-week results expected in the first quarter of 2003.

The list goes on. EntreMed, which once loomed large in the general news media, has chosen to lose 30 of its 115 workers. The company has three compounds in Phase II trials and will keep going with them: protein drug candidates Endostatin for Stage IV metastatic melanoma and Angiostatin with chemotherapy for non-small-cell lung cancer; and an orally available small-molecule drug candidate called Panzem for various cancers, including breast.

Corvas, dropping 40 percent of its staff (or about 40 employees), is saving $8 million by the strategy, which will help the company focus more sharply on its lead product, the injectable anticoagulant rNAPc2 for acute coronary syndromes, specifically unstable angina and non-ST-segment elevation myocardial infarction. Those indications are expected to be the subject of Phase II trials by the end of the year.

Genaera parts with 35 percent of its researchers, primarily in the preclinical area, but has a pair of fairly well-advanced compounds in squalamine (an anti-angiogenesis product in Phase IIb trials for non-small-cell lung cancer, and due to enter a wet macular degeneration study soon) and Lomucin, a mucoregulator compound in Phase I for asthma. A potential $55 million deal centered on an interleukin-9 program for asthma with MedImmune Inc. is moving along nicely, Genaera said.

NeoTherapeutics Inc. is one of the more poignant and late-breaking restructuring stories. The company, with a recent Phase III failure with its Alzheimer's compound and an apparently solid prostate cancer drug nearing Phase III trials, first had said only that it had retained an investment banker and financial adviser to help find strategic alternatives, after restructuring the neurology and oncology divisions and taking "cost-saving" steps at its functional genomics division, aiming to reduce the burn rate to about $800,000 per month.

Details came shortly. Late last week, the firm which lately also had seen its CEO and chief financial officer retire said it had found ways to cut the burn rate to $500,000 per month. NeoTherapeutics eliminated 21 positions (leaving it with 23 full-timers) and stopped further development of Neotrofin (leteprinim potassium, which already had failed in the Alzheimer's trial).

The company said it would forge ahead with satraplatin, the near-Phase III prostate cancer drug, seeking to in-license more anticancer compounds while out-licensing anti-psychotic and attention-deficit drugs, at the same time asking shareholders to approve a reverse stock split plus the issuance of $10 million in equity. A name change is in the offing, too.

BioTransplant is laying off 23 percent of its workers (going from 82 to 62), but will be fine-tuning its plan for the AlloMune System, which is designed for deployment in transplants to make them safer, and has recently acquired Eligix Inc., with several products marketed in Europe. Those products include a cell-separation system for ex vivo use with patients undergoing allogeneic bone marrow and peripheral stem cell transplantation for blood disorders. BioTransplant will have enough cash to get almost to the end of 2003, the company said, and a collaboration with MedImmune related MEDI-507, or siplizumab, is reportedly going well.

Joel Sendek, senior analyst with Lazard Freres & Co., noted in a research report that BioTransplant following a more prudent path, like other firms that are restructuring intends to develop kits consisting of MEDI-507 in combination with products approved in the U.S., instead of the original strategy, which included the use of the Eligix systems, not U.S.-approved. MEDI-507 binds to the CD2 antigen receptor on T cells and natural killer cells, suppressing their immune response. Sendek expects AlloMune approval in 2007.

Geron is saying goodbye to 30 percent of its team (33 in research and 10 in support), keeping about 93 employees to help advance the anticancer drug GRN163, a short, modified thiophosphoramidate oligonucleotide designed to inhibit telomerase, which has been tested in animal models in brain cancer, prostate cancer, lymphoma and multiple myeloma. The company, which has a manufacturing deal for the compound with Ribozyme Pharmaceuticals, plans to file an investigational new drug application by the end of this year and start one or two trials in 2003.

GlycoDesign didn't say how many staffers it's letting go, but estimated the firm has operating resources until 2005, having stopped development of the renal cancer product GD0039 in May.

For Genaissance, reducing staff by 20 percent to 110 employees (mainly in its DNA sequencing facility and related informatics), the difficulty has to do with pharmacogenomics and investor patience. Still, the company, which analyzes genes to predict drug response, said it intends to reach the break-even point financially in 2005, even if getting there means boosting annual revenue by 25 percent to 30 percent.

Will the restructuring march go on? Probably, at least for a while. Although investors tend to view such changes with varying degrees of suspicion or, in some cases, even favor, since some firms have no other way of going forward and realizing their promises to investors.

As Rajesh Shrotriya, newly appointed CEO and board chairman of NeoTherapeutics, put it during a conference call last week: "Plans are important, but it's implementation that makes the difference between success and failure."

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