Washington Editor

Variagenics Inc. late Thursday said it cut 30 percent of its staff as part of a restructuring plan aimed at conserving cash and focusing its resources on oncology molecular diagnostic development programs.

In addition to reducing its 130-person staff by about 40 employees who worked in research and administration, Cambridge, Mass.-based Variagenics will discontinue its NuCleave business.

NuCleave, a mass spectrometry-based genotyping platform, was intended to help pharmaceutical companies correlate genetic variances with drug response and to advance drug and diagnostic products through the clinical trial process.

"There were certain activities that we had previously been engaged in that are no longer within our core area of focus right now," Richard Shea, Variagenics' chief operating officer and chief financial officer, told BioWorld Today. "We want to focus primarily on applying pharmacogenomics to cancer, and the NuCleave business is not part of that core mission anymore."

Furthermore, he said, "One thing that pharmacogenomics companies have been doing is developing databases of genetic variation - so called SNP databases - and I think what all of these companies are deciding is that spending a lot of money on accumulating databases, in and of itself, doesn't get you pharmacogenomics validation. What you really need to be doing is moving forward into associating these SNPs [single nucleotide polymorphisms] or associating the genetic variation with clinical response in drug efficacy or drug toxicity."

Variagenics uses a targeted drug pathway approach to identify therapeutically important genetic markers, including SNPs, haplotypes and, for cancer studies, loss of heterozygosity and other related indicators. The information is then applied to clinical programs and ultimately to the creation of diagnostics for predicting patient response to drugs.

Through the restructuring efforts, Shea said Variagenics expects to lower its cash burn rate to about $4 million per quarter by the fourth quarter of 2002, compared to the current rate of about $6 million per quarter.

"The programs we are working on are going to take some time and we just want to have sufficient financial resources to be able to complete our development efforts," Shea said. "So it just made sense for us to focus down our efforts and to reduce our burn rate. This puts us in a stronger position so that we don't have to go to the market. Obviously, it is not a good time to go to the financial markets."

Variagenics ended the first quarter with cash reserves of $73.1 million, which it said should be sufficient to execute its current business plan.

Revenues for the first quarter were $700,000, compared with $1.1 million for the same period in 2001. The first quarter net loss excluding non-cash equity compensation was $6.5 million, compared with $2.6 million for the first quarter of 2001.

In a prepared statement, Joseph Mohr, Variagenics' president and chief business officer, said, "Over the last several years, Variagenics has amassed significant assets, including an extensive database of genetic markers, core technologies in marker discovery, assay development and validation, and a valuable intellectual property portfolio. We are ready to move toward the next stage in the company's growth and development, and believe we have focused and right-sized Variagenics toward future profitability."

Variagenics' former president and CEO, Taylor Crouch, resigned in late April. Shea said the company did not release any information regarding Crouch's reasons for departing.

At the time of Crouch's resignation, Mohr was named president and chief business officer, and Shea, the chief financial officer at the time, also became chief operating officer.

Also within the last month, Variagenics granted a worldwide nonexclusive license to Third Wave Technologies Inc., of Madison, Wis., relating to Variagenics' methylenetetrahydrofolate reductase patent rights. Variagenics granted a similar license to Nanogen Inc., of San Diego, in November.

Variagenics in early May entered a deal with Novartis Pharmaceuticals Corp., a unit of Novartis AG, of Basel, Switzerland, to study two Novartis compounds in clinical development for prostate cancer. The deal calls for Variagenics to use its pharmacogenomics platform to identify potential markers for drug efficacy for the compounds.

The company's stock (NASDAQ:VGNX) closed Friday at $1.61, up 11 cents.