Hyseq Pharmaceuticals Inc., seeking to continue its transition to a drug discovery and development company, accelerated the completion of its agreement with BASF Plant Science LLC, meaning Hyseq will eliminate about 80 positions by year's end.

Hyseq, of Sunnyvale, Calif., made the original agreement with American Cyanamid Co., of Parsippany, N.J., in 1999, before Cyanamid's acquisition by BASF AG, of Ludwigshafen, Germany, in 2000. The work was to have extended through mid-2003 and the original agreement called for Hyseq to receive up to $60 million for providing gene sequencing on 12 plant species. American Cyanamid was renamed BASF Plant Science LLC. (See BioWorld Today, Dec. 15, 1999.)

To date, Hyseq has worked on eight plant species and received $40 million from the collaboration, Hyseq President and CEO Ted Love said.

"The new arrangement essentially frees us from doing any additional species," Love said. "We've reduced the amount of work in the range of 20 percent to 25 percent."

Both companies, Love said, will benefit from the cost savings as a result of ending the collaboration sooner than expected. Love also said Hyseq will receive "the vast majority" of the remaining $20 million expected under the original agreement.

"Our desire is to really focus on biopharmaceuticals, and we came up with an approach that would be a win-win for both companies," Love said.

Hyseq, moving closer to its goal of a drug discovery company, will eliminate 79 employees as a result of discontinuing the agricultural program. All but about 20 research positions are directly related to the BASF Plant Science program, Love said. The realignment will be implemented over the next few months, and Hyseq expects to shrink to 125 employees by year's end. Love would not comment on specific details of severance packages for affected employees, but did say "the employees at Hyseq did a tremendous job," and that it was important to the company that it "treat them very well as they were departing from the company."

The program for BASF Plant Science had focused on the plants with the greatest commercial potential first, Love said, with less-promising plants slated to be sequenced at the end of the program.

"[BASF] has been overwhelmed by the information they have gotten from the sequencing effort," Love said, explaining that now BASF Plant Science wants to focus on developing commercial opportunities from those findings.

Hyseq will continue its efforts toward completing the work on the eight plants by the end of the year.

In January, Hyseq in-licensed the thrombolytic alfimeprase from Amgen Inc., of Thousand Oaks, Calif. The product is a derivative of the fibrolase enzyme and is being developed to treat arterial occlusions. It is scheduled to begin Phase I trials this quarter, Love said. That program is the focal point of the company now. (See BioWorld Today, Jan. 10, 2002.)

"We want to make sure we've got the financial and other capacity to get alfimeprase across the finish line," Love said.

Hyseq completed a private placement, raising $15 million in gross proceeds, in April. The money was slated for the development of drugs from its gene database and for the Phase I trials. (See BioWorld Today, April 10, 2002.)

As of March 31, Hyseq had about $6.5 million in cash. The company had a net loss of $18.9 million in the quarter, with a pro forma net loss of $8.9 million that excludes a one-time, noncash expense of $10 million on the issuance of warrants to Amgen.

Hyseq's stock (NASDAQ:HYSQ) rose 14 cents Wednesday to close at $3.57.