V.I. Technologies Inc. released a string of news Friday.

It is restructuring its operations to reduce expenses, allowing it to conserve cash until it completes its merger with Panacos Pharmaceuticals Inc., of Gaithersburg, Md. The reduction cuts the company's work force by about 40 percent.

On Nov. 23, Vitex said it had temporarily suspended enrollment in the Phase III surgical study of the Inactine system for red blood cells, following the identification of an immune response to Inactine-treated red cells in a patient in the study. The company's stock fell 11 cents, or 14.9 percent, to close at 63 cents when the news of the suspension was made public. Friday, the stock (NASDAQ:VITX) dropped 12 cents, or 18.5 percent, to close at 53 cents. (See BioWorld Today, of Nov. 29, 2004.)

Also, Vitex, of Watertown, Mass., said Friday that it executed a private equity financing agreement with a group of investors for $20 million, contingent on closing the merger with Panacos and other terms agreed between Vitex and the investors. The financing was led by Great Point Partners LLC, of Greenwich, Conn. Investors from Panacos will participate in the financing, including Ampersand Ventures and A.M. Pappas and Associates, the two largest investors in Panacos. Under terms of the private placement, Vitex will issue 100 million shares of common stock at 20 cents per share and detachable warrants to purchase up to 45 million shares of common stock at 24 cents per share exercisable over five years.

The private placement investors will have the right to appoint a member to the company's board, which will continue to have a majority of independent directors. Also, Vitex intends to have a shareholder-rights offering of its common stock with a maximum value of about $5.5 million. Although the detailed terms of the rights offering have not yet been determined, Vitex will offer shares of its common stock to its stockholders at 20 cents per share - the same price as in the private placement. The shareholder rights offering is planned for early 2005 and also is subject to the closing of the Panacos merger.

Panacos, for its part, said on Friday that it began a Phase IIa trial of its HIV drug candidate, PA-457. Privately held Panacos plans to complete dosing and report preliminary results in the first half of 2005. In the study, HIV-infected patients not on other therapy will receive PA-457 once daily for 10 days. The primary endpoint of the study will be reduction of viral load. PA-457 is the first in a new class of oral HIV drugs designed to inhibit virus maturation.