WRAPUP 1-Small drug developers cut jobs to save cash in crunch

* Small drug cos cut jobs, halt trials to preserve cash

* CombinatoRx, A.P. Pharma cut over a third of staff

By Esha Dey

BANGALORE, Nov 5 (Reuters) - As the credit crunch worsens, more small drugmakers are resorting to desperate measures like cutting jobs and halting trials of less-important drugs to save up cash for development of their lead products.

Pharmaceutical companies CombinatoRx Inc (CRXX.O) and A.P. Pharma Inc (APPA.O) on Wednesday became the latest in a series of drug developers to cut jobs, as they focus efforts on near-term value drivers and conserve capital.

"People were expecting the credit markets to loosen up by the fourth quarter, but now it seems they might even get worse," Stephen Dunn of Dawson James Securities said.

"Companies are thus resorting to headcount reductions as there is no visibility when the market would be able to provide cash."

CombinatoRx, whose main drug candidate Synavive failed to meet the main goal of a mid-stage trial last month, plans to cut nearly 45 percent of its jobs to reduce cash burn and lower its capital needs. [ID:nWNAB8080]

"We don't need to raise cash currently; (still) the cost of raising cash in this current market is too high," CombinatoRx's finance chief Robert Forrester said.

CombinatoRx is developing Synavive, or CRx-102, as a treatment for knee osteoarthritis.

Ladenburg Thalmann analyst Jeff Nelson seconds the view that the company has enough cash in hand, but is not optimistic about its ability to find a partner for the drug.

However, A.P. Pharma, which is low on cash, cut 35 percent of its workforce and plans to keep several earlier-stage development programs on hold to focus on its main drug. [ID:nWNAB8080]

"This is a good move for (A.P. Pharma) and gives them enough time to look for partnerships," Nelson said.

He is hopeful of the prospects of the company's key drug that is being developed for the treatment of chemotherapy-induced nausea and vomiting (CINV), and expects the company to find a partner.

PAUCITY OF PARTNERS

Several tiny development-stage drug companies are, however, finding it increasingly difficult to find partners to fund further drug development.

Last week, Maxygen Inc (MAXY.O) said it would delay the manufacturing of its blood-disorder drug until it identifies a partner to share costs.

Separately, Vanda Pharmaceuticals Inc (VNDA.O) suspended all development activities saying it does not have enough capital for the additional trials required by regulators.

Both companies also announced reductions in headcount.

"These companies have been through a dry period for quite sometime... they can't hold out any longer without significantly reducing their cash burn," Dawson James' Dunn said.

In contrast, big pharmaceutical companies that are also slashing headcounts are doing this for more classical reasons.

Also on Wednesday, the world's second-biggest drugmaker, GlaxoSmithKline Plc (GSK.L) said it would cut about 1,000 U.S. sales jobs by the end of 2008 as it reorganizes to compete in an increasingly tough market.

This follows similar actions at Merck & Co. (MRK.N) and Sanofi-Aventis (SASY.PA), as Big Pharma deals with generic competition and upcoming patent expirations on several blockbuster drugs. (Editing by Anthony Kurian)