MUNICH, Germany - MediGene AG, a publicly traded company based in Martinsried, has decided to spin off its cardiological drug discovery program. The company said the move will allow it to concentrate on its core business and increase the value of the program by expansion and alternative financing.

MediGene's financial report on the first half of 2002 also disclosed higher losses than had been expected. Losses for the first six months of this year were estimated at €21.7 million, compared to €14.1 million in 2001. The result was largely attributed to increased research costs. Analysts estimated the spin-off may bring annual savings of €10 million.

Markets reacted negatively to the two announcements, with the company's stock falling 9.7 percent to €6.14 last week, before recovering in the next two days of trading to €6.32. This is well below the company's IPO price of €42 in June 2000.

MediGene has not yet decided on the exact disposition of the cardiological drug discovery program. Management would prefer for it to become an independent company, which MediGene would manage together with strategic partners and financial investors. No potential investors were named.

"By spinning off its cardiological activities, MediGene is taking an important step toward internal focusing," Peter Heinrich, CEO of MediGene, said in a prepared statement. "The current concentration on the core area of tumor diseases makes it possible for us to bundle our own resources, in order to give optimal impetus to our research activities, our broad drug pipeline and the imminent market launch of our first cancer drug."

MediGene will concentrate on its research and development projects in tumor diseases and free itself up for acquisition and individual licensing of other advanced products.

A number of analysts, including those at Commerzbank, downgraded their recommendation on MediGene's stock to "sell." Morgan Stanley changed its estimate of the company's losses, but did not reduce the stock below the present recommendation of "equal weight." Since April, analyst opinion on MediGene has been inconsistent, with upgrades and downgrades following in rapid succession.

The company has six compounds in clinical development and testing. They include Leuprogel, a treatment for prostrate cancer, which may enter the market next year, and Polyphenon E, a treatment for genital cancer, which is in Phase III testing.