Company will focus on two mid-stage candidates, which it hopes to partner.

Metabasis Therapeutics plans to reduce its workforce by approximately 43%, or 38 employees. The company will concentrate on mid-stage compounds MB07811 for hyperlipidemia and MB07803 for type 2 diabetes as well as on advancing its glucagon antagonist program.

Estimated charges of approximately $1.4 million will be recorded in the first quarter in connection with one-time employee termination costs including severance and other benefits.

“Given the tough market conditions, we have decided to refine our research and development focus and increase our efforts to monetize certain of our assets and/or form strategic collaborations,” Mark Erion, Ph.D., president, CEO, and CSO. “We continue to make progress toward recommending a glucagon antagonist for development and as such are optimistic that this program will result in a significant collaboration.

“We also expect to initiate efforts later this year to establish a strategic collaboration for MB07803, our second-generation fructose-1,6-bisphosphatase inhibitor for type 2 diabetes. These efforts will begin after reviewing the results from the recently completed clinical trial in patients with type 2 diabetes as well as after defining the appropriate population of patients that may derive clinical benefit from MB07803 and developing the corresponding regulatory path forward.

“We also believe,” Dr. Erion continues, “that the potential to realize the key value-driving events from our Phase II product candidate for hyperlipidemia, MB07811, will be enhanced by the cost savings incurred from the restructuring and the potential proceeds that may be gained through successful business development efforts as well as from achievement of near-term milestone payments from our discovery programs with Merck on AMPK activators for type 2 diabetes and with Roche on a HepDirect prodrug for hepatitis C.”

In April, Metabasis reported that the research term of its partnership with Merck & Co. had been extended until June 2009 and that it would receive $1.5 million to support activities. Additionally, the agreement with Roche, inked in August 2008, gave Metabasis $10 million up front and could earn the company $193 million in milestone fees pertaining to development, regulatory activities, and sales levels.

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