By Don Long

Molecular Biosystems Inc. (MBI) said it will cut 40 members of its 140-person staff - about 28 percent - and more in the future. The San Diego company said the cuts are due to a smaller-than-predicted volume of sales of its Optison ultrasound contrast imaging agent.

MBI spokesman Bob Giargiari said the cuts are being made "across all functions," but not at the most senior levels. The initial staff layoffs are expected to save about $5 million annually through reductions in payroll and related expenditures. Additional reductions, predicted to be up to another 40 employees, will come in the company's manufacturing staff, since the company said it will outsource the bulk of its manufacturing operations. An agreement and transference of the manufacturing could take up to 18 months to complete.

Approved by the FDA this past January, Optison is used in diagnosing heart disease by enhancing the ultrasound images produced by echocardiograms. Following its approval, analysts predicted it would produce first-year sales of $100 million, but product and royalty revenues have yet to top $4 million for the year. And the company's second-quarter losses were reported at $7.1 million

A key reason for the product's slow start, Giargiari told BioWorld Today, is that the early market expectations "were inflated for a diagnostic product requiring a change in the way physicians practice medicine.

"Our president went on record a year ago saying that launch of this product would take time, since it is a missionary type of effort," Giargiari said. "That is, it's going to require a major change throughout the hospital system and a change in physician awareness."

Noting that other imaging systems have used contrast agents as a matter of course, Giargiari said that "ultrasound, typically, has not had these agents available to it. Physicians and sonographers have to get comfortable with it, and it requires some level of education among administrators."

The company must also confront an economic barrier. Use of Optison costs $110 for each administration, and reimbursements either do not cover or only partially cover its use. That is another factor that will change, Giargiari said: "We're getting favorable response from private insurers and from Medicare."

Ultimately, he said, the key factor needing to be overcome was "inertia" by health-care decision-makers, but that sales representatives report a highly positive response and a growing enthusiasm among physicians using the product. "It's been used for hundreds of thousands of patients with no adverse events and it works every time. Now, it's just a matter of increasing the depth of this use and [the number of physicians] using it routinely."

Mallinckrodt, of St. Louis, is selling Optison in most international markets, with Chugai Pharmaceuticals licensing it for sale in Japan, South Korea and Taiwan. MBI's cutbacks are not expected to change those agreements.

Giargiari said that the company will take a charge against revenues for its third quarter ended Dec. 31, but that it is too early to predict what the amount will be.

Product Development Staff Spared

Meanwhile, the company issued a statement saying it would not reduce staff related to the continued development of Optison or the ongoing development of other products in its pipeline. In the statement, MBI's president and CEO, Bobba Venkatadri, expressed confidence in Optison and the steps the company is taking to stabilize its position.

"We believe that outsourcing the manufacturing of Optison will free up resources and enable us to focus on the continued development of our most promising new products," Venkatadri said.

Those new products are Oralex, an ultrasound agent for diagnosis of upper gastrointestinal problems, and MB-840, a computed tomography liver imaging agent.

MBI's stock (NYSE:MB) closed Wednesday at $3.813, down $0.187. n

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