BioWorld International Correspondent

Two Scandinavian biotechnology companies unveiled restructuring plans last week, adding to the growing list of European firms that are cutting scientific staff in response to the weak market. Each is articulating a similar message. Pharmexa A/S wants to focus more on development and reduce its research activity, while Karo Bio AB wants more chemists on board. As a first step toward attaining this goal, it is laying off biologists.

H rsholm, Denmark-based Pharmexa, which is developing therapeutic vaccines based on its AutoVac platform technology, said it was laying off 31 employees as part of an overall headcount reduction of 30 percent. Chief Operating Officer Birger Borregaard forms part of the exodus, which includes support staff as well as R&D personnel.

Karo Bio, whose focus is on finding modulators of nuclear receptors, is reducing its payroll from 133 employees to 116 as part of a wider reshuffling of its R&D staff. Chief Scientific Officer Dana Fowlkes is leaving the company in the spring, but will remain a member of its board. Anders Berkenstam has been promoted to vice president of R&D for Sweden, while Paul Hamilton takes on a similar role within Karo Bio's U.S. organization, which is based in Durham, N.C.

The restructuring at each company will help to conserve cash.

Pharmexa had just under DKK164 million (US$23.7 million) on Sept. 30 and will, it said, save DKK170 million over the next three years as a result of its restructuring. "At some point, we will need to go out and get capital again," CEO S ren Mouritsen told BioWorld International. "That depends on licensing success."

Karo Bio will save approximately SEK10 million (US$1.2 million) this year and SEK20 million in 2004. The company held SEK235.2 million in cash and cash equivalents on Sept. 30.

"We had too few chemists in the company in relation to biologists. It has been difficult to staff internal projects with chemists," Karo Bio's senior vice president for investor relations and corporate communications, Per Otteskog, told BioWorld International. "Before we start to recruit new chemists it is important to re-engineer and correct the imbalance."

Karo Bio USA, which was formed through the purchase in 2000 of Novalon Pharmaceutical Corp., will take on responsibility for target development and validation, while the Swedish part of the organization will focus on medicinal chemistry and pharmacology.

"They've had some overlap between the Swedish operations and the U.S. operations since the acquisition," said Stockholm-based analyst Susanna Urdmark at Handelsbanken.

Karo Bio will need to bring in more income before taking on more staff, Otteskog said, either through new licensing deals or milestone payments from existing partners. It has ongoing programs with Abbott Laboratories, of Abbott Park, Ill.; Bristol-Myers Squibb Co., of Princeton, N.J.; and Wyeth, of Madison, N.J. A five-year collaboration with Merck & Co., of Whitehouse Station, N.J., ended in October. None of those has yet yielded molecules in clinical development. A candidate obesity treatment, discovered in collaboration with Bristol-Myers Squibb, was withdrawn from development last year.

Pharmexa is prioritizing its three most advanced projects. HER-2 DNA AutoVac, a therapeutic DNA-based vaccine for treatment of breast cancer, is slated to enter Phase II clinical trials in several European countries later this year. A protein-based product, also aimed at breast cancer, will enter a Phase I trial in the U.S. this year, while the TNF-alpha AutoVac, for rheumatoid arthritis, is in late preclinical development.

The Pharmexa move, said Richard Parkes, an analyst at London-based ING Financial Markets, "is pretty much in line with what's happening in the rest of the sector. Over the last half of last year, we saw 14 European biotechnology companies announcing headcount reductions." They averaged some 27 percent of the workforce of the companies involved, he said.