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After an Iplex legal settlement - followed by plans to explore biogenerics while continuing to develop that compound - Insmed Inc. is raising about $18.2 million to keep both balls rolling, and Iplex could provide an edge over Theratechnologies Inc.'s Phase III drug for HIV-associated lipodystrophy, also known as HARS.

Richmond, Va.-based Insmed has agreements with investors to buy about 20 million shares of stock for 90 cents each, and the company will issue 5-year warrants to buy about 2 million more shares at an exercise price of $1.10 each.

The offering was expected to close Friday, when Insmed's stock (NASDAQ:INSM) closed at 89 cents, down 12 cents. Company officials could not be reached but Insmed said proceeds would be used for working capital and general corporate purposes.

In March, Insmed and Tercica Inc., of Brisbane, Calif., settled their patent fight over drugs for insulin-like growth factor 1 deficiency, which resulted in Insmed taking Iplex off the market for short stature - a move that opened the door for Tercica, with licensor Genentech Inc., of South San Francisco, to market their product Increlex. (See BioWorld Today, March 8, 2007.)

"They had a few kids on their drug, and several of them have been transferred over to our drug, so that should be showing up a little bit" on the bottom line, said Ajay Bansal, Tercica's CFO.

The FDA approved rhIGF-1 Increlex (mecasermin) in 2005 for long-term treatment of severe primary IGFD. Insmed's Iplex, a complex of recombinant human IGF-I and its binding protein IGFBP-3, was cleared as a once-daily treatment for children with the same condition.

Tercica reported first-quarter earnings after the market closed Thursday, and on Friday the firm's stock (NASDAQ:TRCA) dipped, closing at $6.19, down 20 cents, although sales of Increlex grew in the wake of the Insmed settlement and the net loss fell.

"Our stock is so volatile, and the trading is really small," Bansal said. "It's difficult to make any link" between the earnings and price changes.

The company chalked up a loss of $12.4 million, or 25 cents per share, for the quarter, compared with a loss of $14.3 million, or 40 cents per share, during the previous year's period. Revenues rose to $1.3 million from $85,000. Thomson Financial analysts had predicted a 30-cent loss per share, and about $1.24 million in revenue.

Increlex sales jumped about 46 percent to $1.1 million, compared with $748,000 in the fourth quarter of 2006. Total-year revenues from Increlex are expected to hit $7 million to $8 million.

Tercica and partner, Paris-based Ipsen SA, reported in January that the FDA accepted the filing of the new drug application for Somatuline Autogel as a 28-day sustained-release formulation to treat patients with acromegaly. Tercica expects a PDUFA date of Aug. 30 for the product, which already is cleared in Canada. Also, Tercica has begun enrollment in an open-label study of the drug to assess self or partner administration in acromegaly patients.

Insmed, with marketing Iplex for short stature no longer an option, is trying the compound against HARS and myotonic muscular dystrophy, the combined market for which has been estimated at about $600 million.

Iplex has proven in Phase II trials to boost insulin sensitivity in HARS patients - rather than simply fail to worsen it, like pure growth hormone - and thus might be used by insulin-resistant patients, and sell better than Montreal-based Theratechnologies' TH9507, a stabilized analogue of the growth hormone-releasing factor. Analysts at Lazard Capital Markets estimated about 63,000 patients, or 25 percent of the 250,000 identified with HARS, could be eligible for Iplex.

Theratechnologies last week finished dosing in a Phase III trial with TH9507 in HARS, and the firm expects to present top-line, 52-week results later this year. The study is examining the safety and efficacy of a daily administration of 2 mg of TH9507 for a period of 26 weeks and long-term safety. A second, confirmatory Phase III study got under way in January.

As for Iplex, top-line Phase II results disclosed in late April showed that the compound, in seven patients given 0.5 mg/kg/day, showed tripled IGF-1 levels, with glucose levels and overall insulin sensitivity improved. Patients also reduced their trunk fat, and researchers noted an encouraging trend in lowering waist circumference.

"We have just barely seen the top-line data, and the number of patients at this stage is relatively few," Bansal noted. "That said, we're very excited about the positive data."

A larger Phase II trial with Iplex in HARS is expected to enroll 150 to 200 patients, and Phase III trials could start in 2009. Along with HARS and MMD, Insmed is exploring Iplex for amyotrophic lateral sclerosis and retinopathy of prematurity (ROP).

In MMD, earlier this month Insmed said preliminary results from a Phase II study at the University of Rochester School of Medicine and Dentistry showed that six months of treatment with Iplex at doses up to 1 mg/kg/day in six patients met the primary study endpoints of being safe and well tolerated. The drug was associated with improvements in muscle mass, cholesterol and triglycerides, and five of six patients showed an improvement in lean muscle mass.

In ALS, the firm already is providing Iplex to patients in Italy under an expanded-access program allowed under the Tercica/Genentech settlement, and data from those treatments could help in further clinical development in that indication.

In ROP, characterized by the growth of abnormal vessels in the retinas of premature babies, Insmed has begun a Phase I study with Iplex at the University of Gothenburg in Sweden and at Harvard Medical School. The condition afflicts 14,000 to 16,000 babies annually, and usually leads to blindness. Data from the trial are expected by the end of the year.

The settlement with Tercica/Genentech included opt-in chances that would give them a profit split from sales of Iplex in non-short stature indications. After the split, Lazard estimates, Iplex revenues for Insmed would total about $15 million in 2012, $45 million in 2013 and $90 million in 2014.

The launch of Geneva-based Serono SA's Serostim - another recombinant form of human growth hormone, already cleared for AIDS wasting - for HARS this year could give a added boost to the market overall.

Meanwhile, Insmed is wading into the unclear zone of follow-on biologics. With an approved manufacturing site in Boulder, Colo., the firm is checking ways to partner with the likes of generic drug-makers Barr Laboratories Inc. and Teva Pharmaceutical Industries Ltd.

Already, Insmed is working on such compounds as growth hormone, alpha-interferon, beta-interferon and granulocyte-colony stimulating factor at the Boulder plant, and could in-license others. But the space is fraught with hazard, as Frazer, Pa.-based Cephalon Inc. has learned.

Cephalon's pioneering approach to handling generic threats - by making deals with would-be competitors - led to a lawsuit last summer from Apotex Corp., of Toronto, which claimed that Cephalon with Barr, Teva and others were creating a monopoly.

Cephalon's agreements keep the firms from selling generic Provigil (modafinil) for narcolepsy before spring 2012, and the case drew scrutiny by the Federal Trade Commission.

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