By Karen Young

Synsorb Biotech Inc. said it will stop development of its lead product, Synsorb-Cd for recurrent Clostridium difficile-associated diarrhea, and as a result trim staff by nearly 50 percent.

Synsorb President and CEO David Cox cited unacceptably high dropout rates and inadequate enrollment ¿ and the resulting reduced likelihood for approval ¿ to explain why the company is terminating its Phase III trial. Enrollment in the trial began in April 2000 with a target of 680 patients, but to date the company had only 205 patients in the study.

Cox and a management team will evaluate what direction the Calgary, Alberta, company should take next.

¿Our default is to reduce the burn dramatically while we evaluate our options,¿ Cox said, noting that determining the best course of action will come after research and working out options behind closed doors.

Reducing the burn rate will be achieved by cutting staff from 42 to 24. Eighteen employees were dismissed on Tuesday. Depending on the strategy the company pursues, it could eventually be left with as few as six employees, Cox said.

Going forward, the obvious options for the company, he said, range from completely dismantling the company to a complete rebirth, and Cox and his management team will take ¿months, rather than weeks,¿ to determine the best plan. Options between those two extremes include licensing in compounds, merging, or capitalizing more on its 30,000-square-foot manufacturing facility in Calgary. Valued at about C$12 million (US$7.6 million), the facility could be used to manufacture drugs for other companies, for example.

Cox said that ¿when the dust settles,¿ the company¿s situation is not all bad. In fact, he cited Synsorb¿s substantial capital position, experienced management team and the manufacturing facility as assets.

¿To a motivated buyer or partner, [the plant] is a very attractive asset,¿ Cox said.

Synsorb¿s stock (NASDAQ:SYBB) fell 39 cents, or 52 percent, Tuesday to close at 35.9 cents. It has about 39.7 million shares outstanding.

As of Nov. 30, Synsorb¿s assets included C$7 million in cash and 6.3 million common shares of Oncolytics Biotech Inc., also of Calgary, which is developing Reolysin, a potential cancer therapeutic. At the close of trading on Monday, the Oncolytics shares were valued at about C$53 million.

As of the same time, the company had $6.9 million in total debt, of which only $1.9 million is obligated to be repaid within the next 12 months.

In June, Synsorb entered into an equity line agreement with Roseworth Group LLC, of the British Virgin Islands, under which Synsorb could sell up to 1 million shares of Oncolytics Biotech to Roseworth over 12 months. Cox said Synsorb is selling some of the Oncolytics stock now and will continue to do so.

¿Regular sales of Oncolytics stock on a month-to-month basis will be more than enough to meet our operational obligations,¿ Cox said.

Synsorb also owns ¿a substantial slice¿ of BCY LifeSciences Inc., of Toronto, which is developing a therapy for cystic fibrosis, Cox said. As of June 8, Synsorb owned about 11.5 percent of the outstanding shares of BCY.

Synsorb¿s burn rate has been about C$1.2 million per quarter, said Synsorb Chief Financial Officer Bill Hogg. It¿s unclear what the burn rate will be going forward, he said, because there will be costs associated with staff reduction and termination of the Phase III trial. Hogg estimated the cost for maintaining the manufacturing plant at a minimal state to be about C$70,000 to C$80,000 per month.

Two studies of C. difficile-associated diarrhea were under way. The first was exclusively in the U.S., and the second took place at sites in the U.S., Canada, Mexico and Puerto Rico. Two different doses ¿ 16g per day and 24g per day ¿ were co-administered with metronidazole and tested against a placebo. The design called for 340 people in each trial.

While the standard allowance for dropouts from any trial ranges from 15 percent to 20 percent, in Synsorb-Cd¿s case, the rate was 30 percent.

Cox said that despite the fact that the disease is widespread ¿ Synsorb¿s research shows 300,000 severe cases in the U.S. alone ¿ part of the problem was that these patients were distributed among a broad number of physicians at 35 trial sites in each study.

¿The challenge has been to get patients into those sites, many of whom are elderly,¿ Cox said, noting that it also was challenging for many of the elderly patients to make repeat visits during the trial.

Cox said when some patients stopped experiencing diarrhea, there was no motivation for them to continue reporting.

¿The patients had to submit to probably too many tests,¿ Cox said. ¿There is no question that the protocol could have been designed to better deal with that situation.¿

Another problem with the protocol, Cox said, was that it did not include rescue medication, so the only option to get relief was to leave the trial, when patients couldn¿t be prescribed with something else to treat their symptoms.

Also, since diarrhea is common in many elderly patients, it was determined that some of them had diarrhea, but it was not a result of C. difficile.

The product was partnered in Canada with Paladin Labs Inc., of Montreal.