12:00 AM
Nov 17, 2008
 |  BioCentury  |  Finance

Ebb & Flow

Two of the many micro-cap companies with a year or less of cash secured some breathing room last week. Cardiovascular and gastrointestinal company ARYx (NASDAQ:ARYX) raised $21.6 million in a private placement, while stem cell play StemCells (NASDAQ:STEM) raised $20 million in a registered direct offering.

ARYx tapped some VCs, including new investor New Enterprise Associates, which led the offering, and existing investors MPM Capital and OrbiMed Advisors.

The biotech sold 9.6 million shares at $2.20, which was ARYx's closing price on Tuesday, before the deal was announced. The deal includes five-year warrants to purchase 2.9 million shares, exercisable at $2.64. Pacific Growth was the placement agent.

ARYx VP of corporate affairs David Nagler told Ebb & Flow the cash will give the company more room to maneuver in partnering negotiations. ARYx has three programs "currently ready for or about to be teed up for partnering," he said.

The company's strategy is to reengineer approved drugs with safety issues, do early development on the candidates and then out-license them for late-stage development and commercialization.

ARYx's lead candidate is ATI-5923, an anticoagulant modeled on warfarin in Phase II/III testing to prevent blood clots. Data are expected by the end of 1H09. Based on its conversations with FDA, he said, the company believes this could be a pivotal trial.

ARYx also expects data by year end for ATI-2042, an amiodarone analog in Phase IIb testing to treat atrial fibrillation.

Nagler said the company's priority is to partner ATI-5923 and ATI-2042 "as soon as we can."

The company also has ATI-7505 in Phase II trials for gastrointestinal disorders; Procter & Gamble (NYSE:PG) returned rights in July, saying it did not meet undisclosed, pre-specified internal criteria.

At Sept. 30, ARYx had $33.8 million in cash with 3Q08 net income of $3.2 million, primarily due to the recognition of the remaining upfront license fee from P&G. In 1H08, the company reported an operating loss of $21.3 million.

The stock gained $0.08 to $2.35 on the week.

Stem the tide

For its deal, StemCells dusted off a shelf registration after some investors expressed interest, CFO Rodney Young told Ebb & Flow.

The company's share price spiked in early November from a recent low of $0.99 on Oct. 27 to a recent high of $2.29 on Nov. 10 on two events.

On Oct. 30, the company announced that the transplantation of HuCNS-SC purified human neural stem cells into the retina of an animal model provided protection from progressive degeneration. And the U.S. election may have provided uplift, as President-elect Barack Obama has made clear he intends to untie restrictions on federal funding of stem cell research.

StemCells sold 13.8 million shares at $1.45, a 31% discount to the close of $2.09 on Tuesday, before the deal was announced. Investors also received five-year warrants to purchase 10.3 million shares at $2.30. Susquehanna and Dawson James were placement agents.

At Sept. 30, StemCells had $21.3 million in cash, with a nine-month operating loss of $19.6 million.

The stock fell $0.39 (22%) to $1.36 on the week.

Delaying gratification

Medivation (NASDAQ:MDVN) said last week that it and partner Pfizer (NYSE:PFE) are better off delaying an NDA submission for Dimebon by a year in order to get a broader label, rather than first submitting an NDA in mild-to-moderate Alzheimer's disease in 2010 and then hoping later to expand the label to moderate-to-severe AD via an sNDA.

Investors thought otherwise. Medivation shares fell $1.14 to $17.46 on Tuesday, the day after the company made the announcement on its 3Q earnings call, and finished the week down $2.03 (12%) to $15.60.

The companies now plan to run three additional Phase III trials that could push an NDA submission out to 2011.

The partners hope the additional data will allow them to file for a broader initial label, mild-to-severe AD, as well as for use of Dimebon as an adjunct to current therapy in mild-to-moderate AD, CMO Lynn Seely said on Medivation's earnings call.

Dimebon blocks an undisclosed target involving mitochondrial pores. It has completed a...

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