Staff Writer

Clinical Data Inc. has completed a $50 million convertible debt financing that will be used primarily to advance the company's two late-stage drug candidates for depression and cardiac stress.

"We're very pleased that we were able to raise capital with long-term investors in a market like this," Drew Fromkin, president and CEO, told BioWorld Today.

The capital from the debt financing was raised by two investors, New River Management V LP and RJK LLC.

As the Newton, Mass-based company transitions to a biopharmaceutical business, it is focusing much of its resources on its two late-stage drug candidates, vilazodone for depression and Stedivaze, a cardiac stress agent for use in imaging. And it is considering out-licensing or discontinuing the development of noncore programs.

The company's current cash will help it hit key milestones, Fromkin said. At the end of 2008, Clinical Data had $28.4 million in cash, cash equivalents and marketable securities.

The new funds will allow Clinical Data to take vilazodone, a potential first-in-class antidepressant, to the completion of its second Phase III registration trial and to the filing of a new drug application. The filing is expected to occur by the end of the year, pending the Phase III study results, which are expected this spring.

In addition, the capital raised will allow the company to initiate a Phase III program for Stedivaze, a potential best-in-class cardiac stress agent. Clinical Data is in ongoing discussions with the FDA regarding the design of a Phase III study, which is expected to begin in the first half of this year.

Stedivaze came to Clinical Data through its 2008 acquisition of Adenosine Therapeutics LLC, which performed the successful Phase II testing. Clinical Data's pipeline could further expand with its pending acquisition of Avalon Pharmaceuticals Inc., of Germantown, Md.

The company also said it has multiple opportunities for partnerships and collaborations, including its highly selective adenosine compounds, the Familion cardiac testing business that it said is growing at more than 100 percent annually, and its Fc gamma program that is focused on developing predictive tests for response to immunoglobulin G (IgG1) monoclonal antibodies.

"We anticipate closing several strategic business transactions related to some of these assets and others in the coming months," Fromkin said in a statement.

Although the company has not yet said anything official, "My sense is that they will sell the Cogenics side of the business," Andrew Vaino, an analyst with Roth Capital Partners, told BioWorld Today.

The Cogenics division provides genomics services, and its PGxHealth division uses biomarkers to develop and market targeted therapeutics and pharmacogenetic tests to detect serious diseases and help predict drug response.

But much of the company's value is tied to its pipeline antidepressant vilazodone, said Vaino, who estimated that the odds of approval are about 60 percent. One reason he likes the company's stock is that vilazodone has a diagnostic test associated with it. "The so-called biomarker does give it a fairly substantial differentiation," Vaino said.

He noted that with current antidepressants, only half of patients benefit from the first antidepressant used.

But even without a test, "On its own, vilazodone has some advantages," Fromkin said.

He noted its dual mechanism of action as both a selective serotonin reuptake inhibitor (SSRI) and a 5HT1A partial agonist that could make it a first-in-class product.

It demonstrated an early onset of action in the first Phase III study of the product, and sexual side effects were no greater in treated patients than in the placebo group in the first Phase III study of vilazodone, Fromkin noted.

The convertible debt financing consists of unregistered convertible notes payable eight years from the date of issuance, bearing interest at a rate of 9.72 percent annually. Clinical Data may not prepay the notes for the first two years from the date of issuance without prior approval from the investors.

The outstanding principal balance of the notes may be converted into 6,110,600 shares of Clinical Data common stock at the option of the investors, at any time, at a price equal to the closing market price Feb. 25 of $8.12 plus $0.0625 per share.

Shares in Clinical Data (NASDAQ:CLDA) rose 44 cents, closing at $8.56 Thursday.

In other financing news,

• Aradigm Corp., of Hayward, Calif., entered into a definitive agreement with an investor to sell 4 million shares of its common stock for gross proceeds of $400,000 in a registered direct offering. That offering is in addition to the offering Aradigm announced Feb. 23, relating to the sale of approximately 41 million shares of common stock for gross proceeds of approximately $4.1 million. The investor has agreed to purchase the shares of common stock at a negotiated purchase price of 10 cents per share. The transaction is expected to close on or about Feb. 26, subject to customary closing conditions.

• Kamada Ltd., of Ness Ziona, Israel, entered definitive agreements with Ralf Hahn, chairman of the board and one of the controlling shareholders, and UDT Med Holdings LLC to sell 2,621,723 shares of its common stock and 40 percent warrant coverage in a private allocation. The investors agreed to purchase the shares at a purchase price of NIS11 (US$2.67) per share resulting in gross proceeds of $7 million to Kamada. The transaction is expected to close on March 31, subject to shareholder approval. Kamada intends to use the net proceeds to advance its clinical pipeline, including the development of its inhaled alpha-1 anti-trypsin and to accelerate the entrance of its products into the U.S. and European Union markets.