West Coast Editor

Another $15 million in the coffers for Novelos Therapeutics Inc. will add oomph to the Phase III push with NOV-002 for lung cancer, and provides the firm with enough cash to operate through the middle of 2008.

By then, Newton, Mass.-based Novelos expects to have enrolled the pivotal study with NOV-002, one of two oxidized glutathione-based compounds undergoing tests - and if all warrants involved in the financing deal are exercised for cash, the firm would get about $10 million more for the pipeline.

"That could get us into early 2009, pretty close to completing the Phase III," which is testing NOV-002 for advanced non-small-cell lung cancer, in a study being conducted under a special protocol assessment, said Harry Palmin, Novelos' president and CEO.

The company's stock (OTC BB:NVLT) closed Friday at $1.31, up 1 cent.

Novelos has an agreement with institutional investors to raise $15 million in gross proceeds by selling shares of a new series of convertible preferred stock, along with warrants to buy common stock.

The firm will sell 1,500 shares of Series B convertible preferred stock with a stated value of $10,000 per share, a cumulative annual dividend of 9 percent of the stated value and a conversion price of $1 per share of common stock.

Investors also get warrants, callable in certain circumstances and expiring in five years, to buy a total of 7.5 million shares of common stock at $1.25 each. The deal is expected to close in a week to 10 days.

Novelos, which is trying NOV-002 in combination with chemotherapy, also has the compound in Phase II trials for chemo-resistant ovarian cancer and early stage breast cancer. NOV-002 not only protects against the poisonous effects of chemo but also potentiates it, Palmin told BioWorld Today.

"That is a completely unique proposition, both in development and what's on the market," he said. "Targeted biologics don't work well. Quite frankly, they have pretty severe side effects, and they're very expensive."

NOV-002 apparently works three ways - by blocking cancer cells from flushing out cytotoxic therapy, by boosting red blood cells and platelets (which makes chemo more tolerable) and by boosting white blood cells, to enhance the immune system.

In Novelos' lineup behind NOV-002 is NOV-205, in Phase Ib trials for chronic hepatitis C nonresponders to pegylated interferon and ribavirin.

"More players are coming [into the HCV space]," Palmin acknowledged, "but a lot of safety issues are coming up with the direct antivirals. There's really not much for these [refractory] patients." Around the middle of 2007, "I would expect to see results from the Phase Ib trial, and the idea is to use it as a gating item to move into longer-term dosing," he said.

NOV-002 and NOV-205 have completed other trials in humans and won approval in the Russian Federation, where they first were developed. Marketed by Moscow-based PharmaBAM under the trade name Glutoxim, NOV-002 has been given to more than 5,000 patients, and has been tested in trials against NSCLC, colorectal cancer, pancreatic cancer, breast cancer and ovarian cancer.

Regarding partners, Novelos maintains a "very straightforward approach," Palmin said.

"We want to retain U.S. rights until we have Phase III results, meantime looking for a partner ex-U.S." Once the full data become available, the firm would begin casting seriously for a U.S. commercialization deal. "A good time to start those discussions would be when we're fully enrolled," he said.

Elemer Piros, analyst with Rodman & Renshaw in New York, started coverage of Novelos in December with a target price of $3.25. Global sales of NOV-002 could hit more than $1 billion by 2018, he wrote in a research report.

Investors in Novelos' Series B include Xmark Opportunity Funds, OrbiMed Advisors and other selected institutional investors, with Rodman serving as the placement agent, and Emerging Growth Equities Ltd. acting as the sub-placement agent.

In other financing news:

• Poniard Pharmaceuticals Inc., of South San Francisco, said it plans to publicly offer up to 9.5 million shares of common stock pursuant to a registration statement already on file. Poniard plans to grant to the underwriters a 30-day option to buy another 1.425 million shares of common stock to cover overallotments, if any. All shares are being offered by Poniard, with CIBC World Markets Corp. and Lazard Capital Markets LLC are acting as joint book-running managers. Pacific Growth Equities LLC and Leerink Swann & Co. are acting as co-managers.