Incyte Genomics Inc., known for its databases and research solutions, is acquiring Maxia Pharmaceuticals Inc. and its pipeline of early stage drugs for an amount that could reach $42.3 million. Also Tuesday, the company released its third-quarter earnings and said it was reducing staff by 37 percent and planning to seriously reduce expenses.

First, the acquisition. Early Tuesday Incyte said it will pay $28.3 million in cash and stock for Maxia, with another $14 million hinged on future clinical performance of Maxia's compounds. When completed, San Diego-based Maxia will function as a wholly owned subsidiary of Incyte. The transaction has been approved by the boards of both companies and is expected to close after clearance is received from California regulatory authorities and the approval of privately held Maxia's shareholders.

"We're moving to drug discovery and we want to build a pipeline more rapidly," said Robert Stein, president and chief scientific officer at Incyte. "We've reviewed a lot of opportunities. We thought they had made progress in several areas that are difficult and think they have a lot of promise."

Incyte's stock (NASDAQ:INCY) fell 16 cents Tuesday to close at $5.69.

After the markets closed Tuesday, Incyte again released news, this time saying it is severing 37 percent of its 700-person work force and consolidating its research facilities in Palo Alto, Calif.

In a prepared statement, Incyte CEO Paul Friedman said the company "concluded that [it] can substantially reduce costs without compromising [its] products and services."

The plan it has crafted will attempt to do just that. Incyte, through a combination of decreased spending, job reductions and office consolidations, plans to eliminate about $88 million of expenses annually, starting in 2003. The cut employees will come from Incyte's Palo Alto; Beverly, Mass.; and Cambridge, UK, locations. Four research facilities in Palo Alto will be consolidated into two sites. Incyte said it will incur charges of about $40 million in the fourth quarter related to these actions.

Also, Incyte said it launched its first fully staffed drug discovery program. The group is working to develop orally available small molecules that antagonize the interaction of a specific chemokine with its receptor - an area that might be useful in treating chronic inflammation associated with rheumatoid arthritis and other inflammatory diseases. Stein told BioWorld Today the company hopes to select in 2003 a compound for development.

Incyte offers its LifeSeq databases, cDNA clones and resources for single nucleotide polymorphism discovery. The databases provide human and model organism DNA sequence data, protein information and a research tool to assess drug candidates. But Incyte has been cultivating a drug discovery environment - it has built up its chemistry capacity at its Newark, Del., location, and has 80 scientists there. It said it plans to hire 80 to 100 more scientists during the upcoming year to support drug discovery.

The acquisition of Maxia fits neatly into that stressed focus of drug discovery, although Maxia's pipeline is young. It has MX6, a topical treatment for cervical dysplasia that has completed Phase II work and is the company's most advanced product, but it was acquired from Galderma Research Inc. and Incyte isn't going to bring it on board when the acquisition is completed; the product will instead go back to Galderma. Everything else Maxia has is either discovery stage or preclinical. Its products for Type II diabetes, MX6054 and MX6198, are late preclinical and partnered with Johnson & Johnson, of New Brunswick, N.J., and it also has products or research under way in heart disease, inflammation and cancer, giving Incyte a buffet from which to choose.

"We will focus on a subset, initially, to push hard," Stein told BioWorld Today, adding that while Maxia has made "remarkable progress against a number of targets," the key is selecting those Incyte feels it can "get across the finish line." The companies have been evaluating the compounds together even while acquisition negotiations were under way, so deciding what programs to pursue "shouldn't take us an infinite amount of time," he said.

Magnus Pfahl, Maxia's chairman and CEO, will remain and head the site in San Diego, and all 28 Maxia employees will be retained, adding to Incyte's drug discovery efforts.

Incyte's third-quarter earnings showed the company had a net loss of $38.4 million for the period, or 57 cents per share, including $8 million partially related to prepaid license and software write-offs. It had third-quarter revenues of $22.4 million. As of Sept. 30, it had $452.8 million in cash and marketable securities, and said it expects to end 2002 with a cash position somewhere between $410 million and $420 million.

The acquisition, the launch of the drug discovery program, the anticipation of additional scientists, even the restructuring and staff reduction, all give Incyte the feel of a company on the move. Or, as Stein put it, a company "getting ready to make some drugs."