Staff Writer

Novalar Pharmaceuticals Inc. raised $30 million in a Series D financing to launch NV-101, a dental anesthetic reversal agent currently under FDA review.

New investor New Enterprise Associates led the round, which also included participation by existing investors Domain Associates, SR One and Montreux Equity Partners. The round brings San Diego-based Novalar's financing total to date to $66 million, including a $27 million Series C round closed in 2005, a $5 million Series B round closed in 2003 and a $4 million Series A round closed in 2002.

Proceeds primarily will support the U.S. launch of NV-101, which Novalar President and CEO Donna Janson said could occur in the third quarter of 2008, assuming FDA approval in the first or second quarter. Novalar submitted a new drug application in April, which was accepted for review by the agency in June.

NV-101 is an injectable formulation of phentolamine mesylate, a vasodilator that has been in use for more than 50 years. Novalar's formulation, packaged in prefilled cartridges that fit existing dental syringes, is designed to reduce numbness and restore feeling after a dental procedure.

The beauty of the product, Janson said, is that "the patient is still numb so they don't feel that second injection." In two Phase III trials conducted under special protocol assessment, NV-101 induced a 54.8 percent and a 62.3 percent decrease in time to normal sensation for patients with anesthesia administered in the mandible and maxilla, respectively (p<0.0001).

A Phase II trial in pediatric patients showed a 55.6 percent reduction in the time to normal sensation. In all trials, the drug was well tolerated and did not cause injection pain.

If NV-101 gains approval, Novalar plans to launch it using an internal specialty sales force. The initial launch will be regionally focused, with a national roll-out targeted for early 2009. Janson said Novalar eventually expects to capture about 20 percent of the market, which includes 200 million applicable dental procedures using local anesthetics.

Beyond NV-101, Novalar also plans to use a portion of its Series D financing to advance a second product candidate licensed a few months ago from the Forsyth Institute. The product is an antibiotic-coated polymer fiber designed to prevent infection following a root canal. Janson said Novalar expects to file an investigational new drug application in 2008 and begin clinical trials in 2009.

With one product nearing the market and another in development, Janson said Novalar "could be an IPO candidate within the next year or so," although the company also is open to "M&A possibilities." Either way, Janson said she does not anticipate needing to raise another round of financing.

As part of the Series D, Mike Raab, partner with New Enterprise Associates, and John Savarese, managing director at Montreux Equity Partners, joined Novalar's board of directors. Novalar also announced that Bob More, partner at Domain Associates, was elected chairman of the board.

In other financing news:

• Bionovo Inc., of Emeryville, Calif., closed its previously announced public offering of stock and warrants, generating net proceeds of $24 million. Underwriters BMO Capital Markets Corp., Canaccord Adams Inc. and Merriman Curhan Ford & Co. have the option to purchase an additional 15 percent of the offering to cover overallotments. The funds will support ongoing clinical trials in cancer and women's health.

• Biopure Corp., of Cambridge, Mass., priced a public offering of 16.85 million units at 85 cents each. Each unit consists of one new share and a five-year warrant to purchase one additional share at an exercise price of $1.06. Biopure also will provide an additional 2.5 million units to cover any overallotments. Estimated net proceeds of $13 million will be used for general corporate and working capital purposes, including the advancement of the company's oxygen therapeutics. Shares of Biopure (NASDAQ:BPUR) fell 30 cents, or 28 percent, to close at 77 cents on Thursday.

• HemaQuest Pharmaceuticals, of Newton, Mass., raised $20 million in a Series A round to support clinical development of its lead drug candidate, an orally administered agent for sickle cell anemia and beta thalassemia. The company anticipates submitting an investigational new drug application before the end of 2007. Investors in the funding round included De Novo Ventures, of Palo Alto, Calif.; Forward Ventures, of San Diego; and Lilly Ventures, of Indianapolis.

• iCo Therapeutics Inc., of Vancouver, British Columbia, amended its agreement with Beanstalk Capital Ltd. for a brokered private placement worth $1.8 million to be conducted through iCo. The financing will consist of 1.8 million iCo subscription receipts priced at 98 cents each. Lead agent Canaccord Capital Corp. will have the option to an additional 1 million receipts to cover overallotments.

• Nanosphere Inc., of Northbrook, Ill., priced its initial public offering of 7 million shares at $14 per share, raising $98 million. The company's stock (NASDAQ:NSPH) traded up $2 on Thursday to close at $16. Nanosphere markets the Verigene System diagnostics platform, which combines genomic and protein testing. Underwriters on the deal are Credit Suisse, Piper Jaffray, Leerink Swann & Co. and Allen & Co. LLC.

• Prana Biotechnology Ltd., of Melbourne, Australia, closed its previously announced private placement, raising A$8 million (US$7.4 million). Proceeds will support ongoing development of the company's lead compound, PBT2, which is in a Phase IIa trial for Alzheimer's disease with results expected in the first quarter of 2008.

• Vanda Pharmaceuticals Inc., of Rockville, Md., said it intends to offer, through a private placement, $100 million worth of convertible senior notes due 2014. The interest rate, terms of conversion, offering price, registration rights and other terms are to be determined. Proceeds will be used for the commercialization of the atypical antipsychotic iloperidone, for which Vanda submitted a new drug application for schizophrenia in September. Additional proceeds will support the company's pipeline of clinical compounds for sleep disorders. Shares of Vanda (NASDAQ:VNDA) fell $3.85, or 25.7 percent, to close at $11.15 on Thursday. (See BioWorld Today, Sept. 28, 2007.)