Less than a month after completing its merger with Corautus Genetics Inc., VIA Pharmaceuticals Inc. is raising $25 million through the private sale of approximately 10.29 million shares at $2.43 per share.

That's a steep discount to Friday's closing price of $4.58, but VIA's senior vice president and CFO James Stewart said the market has determined the price to be "fair" given the high quality of the investors brought into the deal. He also pointed to the fact that there is no warrant coverage involved.

Even so, shares of VIA (NASDAQ:VIAP) traded down 13.8 percent, or 63 cents, to close at $3.95 on Monday.

The financing has been approved by VIA's board of directors and by its majority shareholder, Bay City Capital Fund IV, L.P. A first closing of about 1.89 million shares generating $4.58 million was expected Monday. A second closing of 8.4 million shares generating $20.42 million will follow a mailing regarding stockholder approval of the transaction. Lazard Frères & Co. LLC served as the lead placement agent for the offering, with Rodman & Renshaw LLC and ThinkEquity Partners LLC serving as co-placement agents.

Once completed, the deal will allow VIA to meet the Nasdaq listing requirement that companies have a minimum of $15 million in unaffiliated float. Last month, VIA received a letter from Nasdaq stating that the merged entity combining publicly traded Corautus with privately-held VIA did not meet that requirement. Stewart noted that although the financing will address the issue, the merged company's initial listing application still is under review at Nasdaq.

The VIA-Corautus merger, unveiled earlier this year, combined VIA's pipeline of cardiovascular drugs targeting inflammation in the blood vessel wall with Corautus's Nasdaq listing, shareholder base and cash. Atlanta-based Corautus paid San Francisco-based VIA slightly more than $11 million in cash for 23.6 percent ownership in the merged entity. The merger came a few months after the Phase IIb failure of Corautus' VEGF-2 gene therapy for angina, which had suffered previous setbacks and was subsequently discontinued. (See BioWorld Today, Feb. 9, 2007.)

After merger-related expenses, Stewart said, VIA had about $8 million in available cash. The anticipated $23.2 million in net proceeds from the current PIPE will provide enough cash to last more than a year, given VIA's burn rate of $1.6 million to $1.7 million per month.

Most of the proceeds will be used to support two ongoing Phase II trials of VIA-2291 in patients undergoing carotid endarterectomy (CEA), or surgical removal of arterial plaque, and in patients at risk for recurrent cardiovascular events following acute coronary syndrome (ACS). The CEA trial is enrolling about 60 patients at multiple sites in Italy while the ACS trial is enrolling 200 patients in the U.S. and Canada. The trials, which are both scheduled to wrap up in the first half of 2008, will provide information on safety, efficacy, dosing and mechanism of action via measurements of leukotrienes and biomarkers of inflammation, gene expression profiling, medical imaging of the coronary vessel wall to evaluate plaque density and histological examinations.

VIA-2291, exclusively licensed from Abbott in 2005, is a reversible inhibitor of 5-lipoxygenase, an enzyme involved in the biosynthesis of leukotrienes. Marketed asthma drug Zyflo (zileuton, Critical Therapeutics Inc.) also inhibits 5-lipoxygenase and also originated at Abbott, of Abbott Park, Ill. Yet while Zyflo is intended to treat the inflammation, swelling and bronchoconstriction in asthma, VIA-2291 is designed to target the inflammation in atherosclerotic plaques that can increase the risk of heart attack or stroke.

Prior to completing its merger with Corautus, VIA licensed two other programs targeting cardiovascular inflammation. In March, the company entered a 12-month exclusive option period for licensing of preclinical leukotriene A4 (LTA4) hydrolase inhibitors from Osaka, Japan-based Santen Pharmaceutical Co. Ltd. And earlier in the year, VIA purchased a library of more than 2,000 preclinical and clinical compounds targeting various phosphodiesterase (PDE) subtypes from Mulhouse, France-based Neuro3d SA.

Stewart said that if the PDE inhibitor library contains a development candidate, he is "optimistic" VIA could file an investigational new drug application in late 2008. But barring that, he characterized both programs as "pretty young" for predicting timelines to the clinic.

VIA also has a research collaboration with the UK-based University of Liverpool to identify new drug targets involved in vascular inflammation.