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12:00 AM
 | 
Dec 04, 2006
 |  BioCentury  |  Finance

Ebb & Flow

ConjuChem (TSX:CJB) recently disclosed positive Phase I/II data for PC-DAC: Exendin-4, a once-weekly therapeutic to treat diabetes. But the company was in a bind. It only had C$19 million ($16.7 million) in cash at July 31 and was burning about C$3 million a month. Moreover, the company's balance sheet includes C$60 million of debt that matures in December 2008.

CJB was out looking to raise money, but CFO Lennie Ryer said the company got a consistent message from would-be investors. "The smart money needed to see the debt taken care of if they were to invest," he said.

The solution came during Thanksgiving week, as CJB gave away a pound of flesh - and then some - in a follow-on, but raised C$120.3 million ($105.9 million) through the sale of 185 million units at C$0.65. To address the debt, CJB committed to put C$57 million of the proceeds in an escrow account that will be used to extinguish the debt in 2008.

CJB's financing almost quintuples the company's shares outstanding, which swelled to 240 million from 55 million. "The financing was highly dilutive and some existing shareholders didn't take warmly to such massive dilution, but our alternatives were few and far between," said Ryer. "We were running on fumes."

With the non-escrowed proceeds, CJB will be able to fund further development of PC-DAC: Exendin-4. The compound is in a multi-dose Phase I/II study, for which data are expected in the first quarter of 2007. "We'd then like to quickly move into Phase II testing and also hope to put another peptide into preclinical or clinical development," said Ryer.

In the single-dose Phase I/II trial, once weekly PC-DAC: Exendin-4 reduced glucose levels from baseline. Importantly, there were no cases of vomiting in the trial - vomiting had derailed DAC:GLP-1, its previous diabetes compound.

PC-DAC: Exendin-4 would compete with Exenatide LAR from Amylin (AMLN) and Eli Lilly (LLY), which is in Phase II testing. That compound, a once-weekly version of the diabetes drug Byetta exenatide, uses Medisorb drug delivery technology from Alkermes (ALKS). CJB closed Friday at C$0.70, up $0.04 over the last two weeks during Ebb & Flow's Thanksgiving holiday hiatus.

Kalypsys eclipse

Kalypsys last week announced the largest venture financing of the year. The company's $100 million series C round - of which $89 million came from existing investor Tavistock Life Sciences - is geared towards building a company with about five years of cash that churns out at least one IND per year.

The company was spun out of the Genomics Institute of the Novartis Research Foundation in 2001 with ultra-high throughput drug discovery technologies and a compound library. Its most advanced compound, the PPAR delta agonist KD3010, is in Phase I testing for metabolic disorders, including obesity, dyslipidemia and diabetes. Preclinical compounds include KD7040, a topical inhibitor of inducible nitric oxide synthase (iNOS) for neuropathic pain, and KD5170, an oral HDAC inhibitor for cancer.

"The situation at Kalypsys is a technology that can rapidly generate clinical candidates," said Tavistock CEO Shehan Dissanayake. "The rate limiting step in choosing which compounds to move forward is access to capital. In many cases, a company would look to the public markets to provide money to move these compounds forward, but the public markets do not want to fund early stage companies."

As a result, said Dissanayake, Tavistock and the other series C investors "decided to step in and provide money that gives the company flexibility to move its compounds into the clinic at a scale where they don't need to raise money for the next four to five years."

Other investors in the round were Sprout Group; CMEA Ventures; and KT Venture.

For Kalypsys, the new warchest "ensures that we won't become a one-trick pony," said President and CEO John McKearn. "Also, we don't have to sell off our programs prematurely or partner at disadvantageous terms," although the company's strategy still remains to partner its compounds, typically when they are in the clinic.

Au Contrave

Investors in Orexigen think they have a rare find - a private, late-stage obesity play. Indeed, MPM's public-focused fund, MPM BioEquities, led the company's $30 million series...

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