By Mary Welch

Cell Genesys Inc. cut its staff by 20 percent and reduced expenses by 30 percent in a restructuring that will let the company end this year's third quarter with about $35 million in cash.

Stephen Sherwin, chairman and CEO of Foster City, Calif.-based Cell Genesys, called the move "portfolio management," and said the company will focus on advancing clinical-stage programs.

"We will have ongoing research programs at the preclinical stage, but there will be less of it going on than we have historically been doing," Sherwin told BioWorld Today. "We will be de-emphasizing preclinical testing in cancer, cardiovascular [conditions] and hemophilia."

Last week, the company reported data from a Phase I/II trial of GVAX, its vaccine for prostate cancer. The vaccine consists of irradiated prostate cancer cells that have been genetically modified to continually produce granulocyte-macrophage colony stimulating factor. Preliminary results showed the treatment was safe and well tolerated, and resulted in anti-tumor effects as shown by blood levels of prostate-specific antigen.

Results from GVAX trials in lung cancer and melanoma are due early next year.

GVAX had been under development by Somatix Therapy Corp., of Alameda, Calif., which Cell Genesys bought last year in a deal valued at $115 million. (See BioWorld Today, Jan. 14, 1997, p. 1.)

In May, Cell Genesys reported initial Phase I/II trial data for its T cell gene therapy for colon cancer. Results showed a significant reduction in blood levels of TAG-72, a tumor-associated protein. A second trial for the same indication — involving an intrahepatic artery delivery (as opposed to the first trial, in which the delivery method was intravenous) — was started this summer. In this therapy, T cells are genetically modified to recognize TAG-72, enabling them to destroy colon cancer cells that express this cell surface protein. Further results are expected by year's end.

The company's other programs involve AIDS gene therapy in two different trials: one with patients who have failed antiviral drug therapy and still have detectable levels of the virus in their blood; and patients in whom HIV is not detectable in the blood.

"We deliberately wanted all the trials to yield data within six months, so that we could compare and contrast," Sherwin said. "Today, it is not possible to pick a lead clinical program, but we will do that in the first half of 1999, and will advance our lead product with a corporate partner by the second half of 1999."

Restructuring is expected to lower operating expenses by $10 million per year, or 30 percent, by reallocating resources, eliminating fixed costs and laying off staff. Before the work-force reduction, Cell Genesys, which posted a second-quarter 1998 net loss of $8.3 million, had 140 employees.

Peter Freudenthal, an analyst with the Bank of Boston/Robertson Stephens & Co., in New York, lauded the move.

"Better to do it when you have $35 million than when you have $5 million, like most biotech companies," he said. "Few CEOs have the intestinal fortitude to do it — laying off people — until they're running out of money. [Sherwin] is doing the right thing. He's focused on the business."

Cell Genesys's stock (NASDAQ:CEGE) closed Thursday at $3.437, down $0.25. *

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