In a move that will cut 85 jobs, Xoma Corp. announcedThursday that it is restructuring its Berkeley, Calif., and SantaMonica, Calif., operations and altering its product focus.

"Due to the delays we have encountered with E5 and CD5 Plus,we are refocusing and streamlining our organization," saidcompany President Jack Costello,

"We've decided to shift Xoma's principal research focus to BPIbecause of its clinical and commercial potential," Costello said.

Xoma's new strategy will focus on the development of productsbased on human bactericidal/permeability increasing (BPI)protein for the treatment of infections.

Company spokeswoman Carol DeGuzman said Xoma isenthusiastic about BPI. "In our animal models and lab testing, ithas shown good results as an anti-bacterial and anti-endotoxin," said DeGuzman. "Specifically, in animal studieswe've shown BPI inhibits cytokine release including TNF, IL1,& IL6."

The company plans to file for FDA authorization to beginhuman testing of a genetically engineered portion of BPIprotein in the first quarter of 1993.

Xoma said it will also develop new T cell-targeted products forautoimmune disease therapy, and will continue development ofE5 for gram-negative sepsis and of CD5 Plus for graft-vs. hostdisease. The company hopes to begin another round of PhaseIII clinical trials of E5 by the end of the year in a programshared with Pfizer Inc.

Carol Werther, an analyst with Cowen and Co. in Boston, saidthat even with Pfizer's help, E5's approval time frame is nowpushed out quite a bit. "With a number of competing productsin the market for sepsis by late 1995, early 1996, it'll becompetitive for E5."

However, DeGuzman said: "Xoma obviously believes that E5 hasclinical and commercial potential, and we don't think it'll bethat long. We could have approval within two years."

Brandon Fradd, an analyst with Montgomery Securities in SanFrancisco, shares Werther's skepticism of E5. "So far E5 datahasn't been really great, and once again, it's not yet in a PhaseIII trial, which could lead it to approvability."

Fradd also doubted the value of BPI once Synergen Inc.'s Antrilis on the market, particularly since the Boulder, Colo.,company's drug is farther along in development than BPI. "Iwonder if there'll be much of an anti-endotoxin market at thatpoint," Fradd said. "It seems that Xoma is spending money thatwill go nowhere."

In addition to reducing its staff to 240 employees, Xoma plansto scale back trials of CD5 Plus for treating autoimmunediseases. CD5 Plus is in Phase III clinicals for treatingrheumatoid arthritis and in early-stage clinicals for treatingpsoriasis and lupus erythmatosus.

For the third quarter ended Sept. 30, the company will take aone-time charge to earnings totaling approximately $10 millionto include costs associated with the restructuring, costs relatedto idle manufacturing capacity, and a reserve established for aportion of the company's E5 raw materials inventory.

The company's stock (NASDAQ:XOMA) was off 25 cents a shareto $9.50.

-- Michelle Slade Associate Editor

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

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