By Karen Pihl-Carey

Staff Writer

Preparing to move its lead product into a Phase III trial, Pharmadigm Inc. raised $12 million in a Series E convertible preferred stock offering.

The company closed on part of the offering Tuesday. The rest will be secured in a closing scheduled for June 30.

"Predominately, the funds are being used for the continued development of our first two products, Inflarest and Inflabloc," said Martin McGlynn, president and CEO of the Salt Lake City-based company. "Inflarest is in late-stage clinical trials, and Inflabloc is set to enter clinical trials later this year."

Pharmadigm placed the stock with Zurich, Switzerland-based Friedli Corporate Finance, a Swiss venture capital firm and an existing shareholder in Pharmadigm. Since its inception in 1991 as Paradigm Biosciences Inc., the company has raised close to $50 million. It changed its name to Pharmadigm in 1996.

The company's last financing was in April 1999, when it raised $8.6 million. (See BioWorld Today, April 20, 1999, p. 1.)

Inflarest, an injectable formulation of dehydroepiandrosterone (DHEA) sulfate, completed a Phase II trial in severe burn victims. The trial evaluated the product's safety and efficacy in accelerating wound closure in patients undergoing autologous skin grafting. The company also completed a Phase IIa trial evaluating the safety of Inflarest when added to standard therapy in patients admitted to an emergency room with acute exacerbation of asthma. Pharmadigm expects to initiate a larger Phase II safety and efficacy trial in acute asthma next month. Two Phase III pivotal trials in severely burned patients could begin within the next few months, McGlynn said.

"We're currently in discussions with the FDA to finalize our plans for Phase III trials in severely burned patients who are undergoing autologous skin grafts," McGlynn told BioWorld Today. The trials would enroll patients in both the U.S. and Europe. "We would anticipate that once we begin patient enrollment that the trials will take about 10 to 12 months to complete," McGlynn said.

Results from the randomized, double-blind, placebo-controlled, multicenter Phase II trial of Inflarest in 63 severely burned patients showed that the re-epithelialization of the donor site at day seven was 43 percent in the placebo-treated group, vs. 44 percent, 58 percent and 46 percent in the 5 mg/kg, 10 mg/kg and 15 mg/kg drug groups, respectively. Mean donor site healing among the 10 mg/kg per day dose group was 9.4 percent per day, vs. 4.3 percent in the placebo group - a statistically significant difference (p=.02).

The clinical progress of Inflarest, which also has been called PB005, has been slower than anticipated. "Because the patient population is relatively small, the rate of recruitment is quite slow, and we had hoped that we would be able to recruit patients far more quickly into this study," McGlynn said.

Pharmadigm's immediate focus is to win approval for the product to treat the small population of severely burned patients undergoing autologous skin grafting. The FDA has granted Inflarest orphan drug status for the indication. To gain orphan drug status, a potential product must have a market of less than 200,000 people a year. "If we are successful in the Phase III trials, continued success would bode well for future activities in the broader burn patient population," McGlynn said.

In January 1999, Pharmadigm entered into an agreement with Mipharm SpA, of Milan, Italy, for the European development of Inflarest. The agreement included an equity investment by Mipharm in Pharmadigm, as well as funding of the clinical trials and registration in Europe. Mipharm holds the exclusive right to market Inflarest in Italy, the Vatican and San Marino.

McGlynn said Pharmadigm will seek partners for other European countries, but plans to retain U.S. rights, "although we are entertaining various forms of collaborations with other companies in the U.S. who have distribution capabilities in this arena."

Pharmadigm's second product, Inflabloc, also an injectable formulation of DHEA, is expected to begin clinical testing later this year in clinical conditions associated with vascular ischemia. The company plans to evaluate the safety and efficacy of Inflabloc, which also has been called PB007, in inhibiting tissue damage caused by ischemia/reperfusion associated with heart attack, stroke and major cardiovascular surgery.

Aside from its two products in development, Pharmadigm wholly owns a subsidiary called Prometagen Inc., which is developing a proprietary, tissue-specific, non-viral DNA vector for use in DNA vaccines and gene therapy. The primary selling point of the technology, McGlynn said, is safety in that it expresses proteins into specific target tissues and not in every part of the body.

Pharmadigm likely will go public when the market gets better, McGlynn added.

"It is our intention to bring the company public at an appropriate time when we feel that we would have a substantive valuation, one that would be attractive to our existing shareholders, as well as the new shareholders who would purchase stock in the IPO [initial public offering]," he said.