By Lisa Seachrist

Washington Editor

Shaman Pharmaceuticals Inc. said it completed a private placement worth $10 million of senior convertible notes. This most recent fund raising brings the company's total cash raised this year to $30 million, which should support operations through 1999.

"One reason for doing this one is that we feel that our stock price doesn't recognize the value in the company," said Lisa Conte, CEO for the South San Francisco company. "We have a number of clinical events occurring in the third quarter of this year that should increase the value of our stock."

The convertible notes will mature in July 2000 and bear interest at a rate of 5.5 percent per year. The notes are payable in either cash or common stock at the discretion of the investors. The interest on the notes is payable in either cash or stock at the discretion of the company. The placement was managed by Diaz & Altschul Capital L.L.C., of New York; the Delta Opportunity Fund Ltd., of New York, was the principal investor.

Initially, the notes are convertible for 100 percent of the trading price with a floor of $5.50 a share. Shaman's stock (NASDAQ: SHMN) closed Thursday at $5.625, up $0.188. Starting in November the notes are convertible into common stock at a 10 percent discount from trading prices.

"This essentially creates a win-win situation for us and for our investors," Conte said. "The investors are protected by the floor and hopefully the value of the company will increase in November based on the clinical events. This placement offers us immediate cash and limits our dependence on uncertain financial markets as we prepare to expand our clinical programs."

Conte said she doesn't expect the notes to be converted all at once, but investors are likely to convert periodically as the company announces clinical progress.

Shaman plans to release during the third quarter of 1997 Phase II results of two studies of its lead compound, Provir, a treatment for watery diarrhea. The drug is derived from the Croton plant, found in Latin America. The trials evaluate Provir in watery diarrhea patients and in AIDS patients with diarrhea.

"Diarrhea remains a serious condition in AIDS patients that persists despite, if not exacerbated, by protease inhibitors," Conte said. She noted that the company plans to file a new drug application for Provir in 1998.

In addition to Provir, Conte said the company will move its lead diabetes compound into the clinic and file an investigational new drug application in the fall. The product, which is as yet unnamed, lowers both glucose levels and triglyceride levels in animal models of Type II diabetes. This compound is one of ten that have served as the basis for collaborations with Lipha S.A., a wholly owned subsidiary of Merck KGaA, in Darmstadt, Germany, and Ono Pharmaceuticals Inc., of Osaka, Japan.

"This placement offers us the resources and cash cushion to continue with our clinical development programs and negotiate better marketing deals when that time comes," Conte told BioWorld Today. *