By Mary Welch

Citing a poor investment climate, Anergen Inc. said it has restructured operations, cut staff by 65 percent and will focus on clinical development as well as merger and partnering opportunities. All discovery research programs will be stopped.

"We have had difficulty obtaining investment capital, even though we have had some nice results from our clinical trials," said Barry Sherman, president and CEO. "People are looking for late-stage products and, while we have achieved important early (developmental) milestones, there is still some risk. Those are the two things investors don't want today — risk and cost. Volatility in the marketplace has made it impossible to raise additional funds."

The Redwood City, Calif., company now has fewer than 20 employees, down from more than 50, Sherman said. The company is seeking investors to obtain financing that will allow it to continue its limited operations into the first quarter of 1999. He refused to disclose how much cash the company has on hand, saying that the 1998 third-quarter results have not been released.

The company will focus on the development of its AnergiX technology for rheumatoid arthritis (RA), a program partnered with Organon N.V., of Oss, the Netherlands. AnergiX-RA should finish Phase I trials in the first half of 1999.

A second AnergiX product is under development for multiple sclerosis. The company planned to release today positive data from a Phase I trial in that indication. The study involved 33 patients, all of whom had experienced progressive neurological impairment for at least two years. Twenty-five of the 33 patients received the active drug; eight were given the placebo. Three doses of the drug were studied. There were no adverse effects, according to Anergen, which was to report the findings today at the America's Committee for Treatment and Research in Multiple Sclerosis meeting in Montreal. Neither disability scores nor neurological function worsened significantly following treatment.

AnergiX is a genomics-based pharmaceutical that combines a major histocompatibility complex molecule (HLA-DR2) with a fragment of myelin basic protein (MBP84-102), believed to induce an autoimmune response involved in the onset and progression of multiple sclerosis.

The company's rheumatoid arthritis vaccine, AnervaX, received positive Phase II results and awaits another, larger Phase II trial, which won't occur without outside funding, Sherman said. AnervaX is a synthetic 20-amino-acid peptide designed to block the stimulation of T cells specifically involved in causing rheumatoid arthritis and halt the progression of the disease. (See BioWorld Today, March 6, 1998, p. 1.)

The company is open to a merger or acquisition of the company, Sherman said. It also expects to be delisted from the Nasdaq board and will trade on the over-the-counter market.

"Nasdaq has certain standards, such as a requirement for a minimum of cash on hand, as well as a minimum on the stock's price. Right now, I don't think we would meet either criteria," Sherman said.

Anergen's stock (NASDAQ:ANRG) closed Friday at $0.25, down $0.062. *