Xoma Corp., struggling since 1992 when its sepsis drug failed togain FDA approval, said Thursday it laid off 84 employees to reduceannual expenses by $7.5 million and keep operating while searchingfor a partner to co-develop its lead product, Neuprex.

"This is our second major belt tightening and we hope it's our last,"said David Ringler, director of corporate communications for theBerkeley, Calif., company.

The 37 percent staff cuts bring the number of employees at Xoma to145. Prior to the first restructuring in 1992, the company had 360workers.

Xoma chairman and CEO, John Castello, said the restructuring is"not a be-all and end-all in itself. We still need a partnering deal."But, he added, "This will help us get where we want to go and spendless cash and we will be focusing on a very small number of things."

Neuprex, a recombinant bacterial permeability increasing protein, isbeing developed for a variety of indications, including trauma andinfectious diseases, such as sepsis and hemorrhagic shock. Phase Itrials have been completed.

"We think Neuprex has an excellent safety and pharmacologicalprofile and it's time to get it into the clinic," Ringler said.

Castello noted he has been negotiating with potential partners sincelast year.

In addition to reducing the workforce, Ringler said, Xoma eliminatedsome early stage research programs and will halt development on itsGenimune immunofusion product. Genimune is being studied fortreatment of leukemia and lymphomas.

"We're taking [Genimune] right up to the edge of the investigationalnew drug process," Ringler said, adding that further developmentwill depend on whether the product can be licensed out to anothercompany.

Xoma ended 1994 with $40 million in cash. The $7.5 millionreduction in expenses is expected to lower the company's annualburn rate by 25 percent.

For the first three months of 1994, Xoma reported a net loss of $23.5million. The company has not released financial results for the lastquarter of the year, but Ringler said those figures would include aone-time restructuring charge of $2.5 million.

Xoma announced its staff and program reductions after the marketclosed Thursday. The company's stock (NASDAQ:XOMA) endedthe day at $4, up 19 cents.

The restructuring is the latest move by Xoma to recover fromsetbacks that began in 1992 with its E5 anti-endoxtin monoclonal antibody, which failed to gain FDA approval.In October 1992, Xoma slashed 85 jobs in its first reorganization.

E5 still is under development in a collaboration with New York-based Pfizer Inc. The drug is in Phase III studies for sepsis and Pfizerhas filed for marketing approval in Japan.

Xoma suffered a more recent product setback in December withPhase III trials of another monoclonal antibody, CD5 Plus. Xomaannounced its was discontinuing development of the drug after itfailed to show statistical significance in preventing acute graft-versus-host disease in bone marrow transplant patients. n

-- Charles Craig

(c) 1997 American Health Consultants. All rights reserved.