By Lisa Seachrist

Washington Editor

La Jolla Pharmaceutical Co. raised $13.64 million in a private placement of 4.04 million shares of common stock to new and previous investors in order to fund a Phase III clinical trial of its lupus nephritis drug.

The shares were sold at the discounted price of $3.375 apiece. The transaction is expected to close Feb. 16. San Diego-based La Jolla Pharmaceutical's stock (NASDAQ:LJPC) closed Friday at $4.97, up 59.4 cents.

"We intend to start a Phase III clinical trial of our lupus drug by the second half of this year," said Andrew Wiseman, senior director of business development and head of investor relations for La Jolla Pharmaceutical. "We've already scheduled a meeting with the FDA to discuss the trials."

The drug, LJP 394, is designed to prevent or delay potentially life-threatening renal flares associated with lupus. The drug stumbled in a Phase II/III study last May when an interim analysis showed it was unlikely to meet its primary endpoints of reducing renal flares and reducing use of chemotherapy and steroids. Four months later, development partner Abbott Laboratories, of Abbott Park, Ill., withdrew its development support of LJP 394.

The drug is based on the company's Toleragen technology and, given intravenously, is designed to reduce the level of auto-antibodies to double-stranded DNA. These antibodies are thought to promote lupus kidney disease. LJP 394 is comprised of four double-stranded DNA strands conjugated to a triethylene glycol platform. The drug cross-links to B-cell receptors, initiating a signal shutting down auto-antibody production.

Wiseman said the company reanalyzed the data after developing an assay to assess how well LJP 394 binds to B-cell receptors. For the 80 percent of patients for whom the drug binds well, there was a statistically significant reduction in the use of steroids and chemotherapy. The company also saw a reduction in renal flares. However, it didn't quite meet the standards of statistical significance. With this data, La Jolla Pharmaceutical decided to design a second Phase III trial.

In addition, the company expects to initiate clinical studies of a second product designed to combat antibody-mediated thrombosis.