By Mary Welch

Staff Writer

Emisphere Technologies Inc. netted $20.4 million by selling 2 million shares of stock at $11 each in order to help fund Phase III trials for its oral heparin formulation.

"We were very happy with the $20.4 million," said Charles Abdalian, chief financial officer for the Tarrytown, N.Y., company. "We had several new investors and that was one of our objectives - to get a broader range of institutional holders. We're a very good story."

Hambrecht & Quist LLC, of New York, served as the underwriter. The 2 million shares increased the outstanding stock - now at 14.2 million shares - by 17 percent. Emisphere's stock (NASDAQ:EMIS) closed Thursday at $12.062, down 62.5 cents.

In addition to general corporate purposes and other development projects, the money will be used to fund the development and licensing of its oral heparin formulation.

"They wanted and got that $20 million mark because it allows them to complete Phase III trials without a partner," said Gary Davis, senior analyst with Jesup Lamont Securities Corp., of New York. "That is significant because they are negotiating with potential partners and it gives them more leverage if they can complete the trials themselves."

The company intends to start dosing patients in its Phase III trials by the end of the year with its oral liquid heparin to prevent deep-vein thrombosis (DVT) following hip replacement. About 2,225 patients will participate in the first trial, which should last one year, Abdalian said.

Heparin is an anticoagulant, antithrombotic compound that is prescribed for a number of cardiovascular indications, including DVT. Thirty percent to 50 percent of all patients who undergo hip replacement and knee replacement surgeries will develop DVT without preventive treatment. DVT can lead to life-threatening pulmonary embolisms.

Currently, DVT is treated with heparin injections for up to two weeks. Some 450,000 patients annually in the U.S. are on DVT-prevention medication.

"We believe that people don't like to give themselves injections so that an oral liquid formulation will be very welcomed," Abdalian said. "Heparin has been on the market since 1917. In Phase I/II we proved our delivery mechanism. So there is less risk than if we were a developing company entering Phase III. There still is risk but to a lesser degree."

Davis said the oral formulation has "blockbuster potential. Heparin is a $1.5 billion market, and if you add related products, it's a $2 billion market. This is the only oral version out there and there is nothing in clinical trials. It's an enormous market - bigger than the insulin market and there are oral formulations of that. If anything, people aren't receiving enough anti-coagulant drugs because they come home from the hospital and don't give themselves shots. It's an underdeveloped market."

Emisphere had counted on Elan Corp. plc, of Dublin, Ireland, to partially fund the Phase III trials. The two companies struck a deal to co-develop the product in October 1995, with Elan supplying $7.5 million in start-up money. Elan also purchased $7.5 million in Emisphere stock. In January 1998, Elan purchased another $4 million worth of Emisphere stock.

In August 1998, both companies invested $5 million in a 50-50 joint venture to continue heparin's development. Elan owns 8 percent of the company. (See BioWorld Today, Aug. 7, 1998, p. 1.)

However, that partnership was reorganized a few months ago with Emisphere taking back all rights to develop and market the oral formulation, while Elan maintained a financial interest in the product's success. As part of the deal, Emisphere assumed full responsibility of the Phase III trials. (See BioWorld Today, July 7, 1999, p. 1.)