Anadys Pharmaceuticals (ANDS) has shown 40% of its workforce (or about 20 employees) the door.

In a good ol’ “restructuring,” ANDS says it’s now planning to focus all of its efforts on its lead drug candidate, ANA598, a non-nucleoside polymerase inhibitor in development for hepatitis C (HCV). ANDS also says it will stop work on ANA773, the firm’s earlier stage TLR7 modulator in development for HCV and cancer.

Here was CEO Steve Worland’s thoughts:

“I want to acknowledge the tremendous effort and commitment of all our Anadys colleagues, especially those whose positions have been impacted by this restructuring. The current status of ANA598, which now demands our focused investment, has been achieved as a result of each of their contributions.”

ANDS shares have been tanking the last two months, ever since EASL data failed to impress investors. Though ANA598 was able lower viral titers, 3/24 healthy volunteers dropped out of the study after six to seven days when they developed Grade 2 rashes on a scale of 1 to 4, with 4 being the most severe.

Investors felt the safety/side effect profile would be a limitation going forward and sent ANDS into a nosedive. The stock has not recovered since.

What did the analysts say?

Phil Nadeau of Cowen & Co. wrote:

“12.5 percent rate of rash in two weeks of dosing is worrisome…the stock’s Thursday morning crash indicates investors believe ANA598 will not be successfully developed…an ‘overinterpretation.’”

Piper Jaffray analyst Edward Tenthoff thought ‘598 would be partnered by mid-year and said it was the:

“most desirable HCV polymerase inhibitor in the clinic (given the recent acquisition of ViroChem Pharma Inc. and its VCH-222 program by Vertex Pharmaceuticals)”

CEO Steve Worland, however, gave no update on the partnering progress today. ANDS plans to move forward with a Phase 2 HCV study of ‘598 in combo with pegylated interferon-alpha and ribavirin.

The bloodbath goes on…

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