Genaera Corp., now trading on Nasdaq at less than $1, released its second-quarter earnings and, like many others, said it is restructuring in an attempt to withstand poor market conditions and focus on its more advanced products.

The change includes dismissing 35 percent of its work force, primarily those in preclinical research programs, Roy Levitt, CEO of Genaera, said in a conference call.

"We implemented a realignment of operations, which was intended to focus our resources on our most advanced product development programs and significantly reduce our expenses," he said. "This initiative is expected to result in sufficient savings to allow our current cash and investments balances to fund operations related to the company's realigned goals through at least mid-2003."

The released employees - who join the legions of out-of-work biotechnology staff affected by the floundering market, including 30 cut by Ribozyme Pharmaceuticals Inc., also announced Wednesday - have been offered severance packages and outplacement support, Levitt said.

He said the restructuring is "a direct result of our decision to further concentrate our investments and internal efforts on our two most advanced clinical development programs: squalamine and Lomucin."

The Plymouth Meeting, Pa.-based company is revising its plan for squalamine, its lead anti-angiogenesis product. It will continue its Phase IIb non-small-cell lung cancer trial and initiate a wet macular degeneration study. Any other studies, including a previously planned advanced ovarian cancer trial, would require additional funding, it said.

Genaera's mucoregulator compound, Lomucin, is in Phase I work in asthma and the company anticipates having results in the fourth quarter. The product also is in cystic fibrosis trials that are partly funded by the Cystic Fibrosis Foundation, which provided a grant of up to $1.7 million.

The company also has an interleukin-9 program, partnered with MedImmune Inc., of Gaithersburg, Md., in a deal signed in April 2001 that could be worth up to $55 million in milestone payments for Genaera. The agreement includes royalties and had MedImmune making a $10 million investment in Genaera. The company said MedImmune continues to make "excellent progress" in the IL-9 program for asthma. (See BioWorld Today, April 23, 2001.)

Genaera posted a net loss applicable to common stockholders for the second quarter of $3.3 million, or 9 cents per basic and diluted share. It pulled in $417,000 in revenue in the second quarter and reported cash and investments of $15 million as of June 30. But perhaps the most telltale sign of both the company's troubles and the state of the biotechnology sector is Genaera's stock price - Genaera's stock (NASDAQ:GENR) closed Thursday unchanged at 80 cents, a value that had angry investors questioning Genaera's leadership in the conference call.

Participants in the call asked why shareholders should continue to have confidence in Levitt's team's ability to run the company, suggested Genaera's problems were not financial but a product of poor management, and asked Levitt outright if there was anyone he was "looking to bring on board who is a deal-closer.'"

But the main question from investors is why Genaera has not been able to land partners for its science - particularly for squalamine - and bring in up-front money plus research funding that would knock aside such short-term problems as a cash crunch and the threat of Nasdaq delisting.

Levitt pointed out that his company has a strong partner in MedImmune but said the company "certainly has had our disappointments with limited resources and pushing the programs along." He added that in the "unusual and remarkable marketplace we are in, we've had to make appropriate adjustments, which we have, which have been extraordinarily painful."

He said Genaera expects to be generating data from its three programs by or before mid-2003, all of which could be positive drivers for the company. And although he acknowledged the difficult fund-raising road for "smaller, entrepreneurial biotech companies" like Genaera, he said that "we remain optimistic that additional resources will be obtained for our programs."

"We intend to be around," he said.