Lipid Sciences Inc. has several applications for its delipidation technology, but for now, the company is focusing it on viral infection as it cuts staff to reduce spending.

As part of a restructuring, Lipid Sciences, of Pleasanton, Calif., said it would eliminate 11 employees and concentrate on its Viral Pathogen Inactivation platform, pursuing first its use in fighting HIV. In doing so, Lipid Sciences is discontinuing a clinical safety trial in Australia studying its Vascular Lipid Removal platform.

"Our focus has turned to strictly getting the viral side updated," said Deborah Lorenz, vice president, investor relations and corporate communications at Lipid. "It looked as though we could make strides on the viral side quicker."

A quicker route to commercialization might make sense to a company that took the quick route to the public markets by undergoing a reverse merger with Phoenix-based NZ Corp. in November 2001. The merger gave Lipid Sciences access to the public markets and gave NZ Corp. an opportunity to "improve on the shareholder value for their company," Lorenz said. It also gave Lipid Sciences a means to cash.

"The merger provided a portfolio of real estate assets," she told BioWorld Today. "Our goal was to have those closed by March 31 of this year and we are working on that." And although the markets are down and biotechnology investors are perhaps hesitant, real estate remains strong, a bonus for Lipid Sciences, she said.

The company's technology came from Bill Cham, a co-founder and director of Lipid Sciences. His time as principal research fellow at the University of Queensland in Brisbane, Australia, was mainly spent on lipoprotein metabolism. He has studied reverse atherosclerosis, which is basically the process of removing lipids from lipoproteins in plasma without disrupting the protein itself.

Lipid Sciences' dual platforms are based on lipid removal. The Vascular Lipid Removal platform is designed to remove cholesterol from low-density lipoprotein and high-density lipoprotein particles without destroying the protein structure. The platform is thought to have benefit in fighting atherosclerosis.

The Viral Pathogen Inactivation platform is designed to remove the lipid coating from viruses, bacteria and other pathogens but not damage protein structures. Thus stripped, the pathogens are inactivated and the exposed proteins are thought to stimulate an immune response.

Lipid Sciences began a Phase I trial in Australia of its Vascular Lipid Removal platform in an expected 10 healthy volunteers. However, in September, the company stopped the trial after "volunteer No. 2 noticed an adverse reaction," Lorenz said.

"We took some time to look at the reaction, which was not dissimilar to what you would find in a dialysis treatment," she said, another treatment that involves taking blood from a patient, treating it and introducing it back into the body. The company initiated an investigation, but has not disclosed the exact nature of the reaction.

"It would be a competitive disadvantage to disclose that," Lorenz said. "We've tried to describe it as non-life-threatening and similar to dialysis, so people understand it is a common reaction."

Although work is continuing in the cardiovascular area, Lorenz said, the next clinical trial the company starts will be in HIV.

"[Lipid Sciences] is looking to move forward with the nonhuman primate study late this year and, based on that, make a determination to when to move to Phase I," she said. "We have not given a hard date."

The reduction to 20 employees includes the stepping down of Barry Michaels as chief financial officer and the elimination of certain other management positions, as well as other management juggling. Sandra Gardner has been named chief accounting officer. Marc Bellotti is now vice president, research and development, and Dale Richardson is vice president, business development. But what the company doesn't have is a CEO - Phil Radlick resigned from that position, as well as his role as president, in October.

"We are in the process of looking for a new CEO," Lorenz said. "The search continues and we've had a number of qualified candidates come before the board. We'd prefer [to have the position filled] sooner rather than later, but it takes some time."

When it's all said and done, the moves are expected to reduce operating expenses by 30 percent to 40 percent in the second half of 2003 when measured against the same time frame in 2002. The company has not released its fourth-quarter earnings yet - they are scheduled for March 26 - but the company posted a net loss in the third quarter of about $4 million. For the first nine months of the year, it reported a net loss of $10.2 million. As of Sept. 30, it had $26.7 million in cash and cash equivalents and real estate holdings of $15 million. By making the cuts now, Lorenz said, it allows Lipid Science to focus on what got it here.

"The determination was made that we want to be able to continue to be adequately funded without worrying about the markets breathing down our neck for funds," she said. "We don't want to compromise the science; we never want to do that."

Lipid Sciences' stock (NASDAQ:LIPD) rose 15 cents Wednesday, or 16.5 percent, to close at $1.06.