Washington Editor

A stock and warrant sale is bringing $32.2 million in gross proceeds to Memory Pharmaceuticals Corp., which on Friday said it plans to use the money to support its research and development efforts.

In particular, the financing signals the Montvale, N.J.-based company's need to fund its two lead products. They include a compound called MEM 1003, a neuronal L-type calcium channel modulator that's in a pair of Phase IIa trials, and MEM 3454, a nicotinic alpha-7 receptor partial agonist for central nervous system indications. The latter is ready to begin Phase IIa testing.

"It's the right time to raise money," said Jzaneen Lalani, Memory's vice president of legal affairs. "It's going to be used for our two lead clinical programs, in addition to advancing our other candidates."

In the private placement, Memory entered a definitive purchase agreement for about 28.2 million newly issued common shares at $1.11 apiece, as well as warrants for another 7.1 million shares exercisable at $1.33 each. Memory's stock (NASDAQ:MEMY) rose by 1 cent to $1.20.

The added capital should more than double the company's cash reserves, which were reported at $32.1 million on June 30. Lalani told BioWorld Today that absent the latest financing, Memory would have been able to sustain operations only through the next quarter.

In the second quarter, Memory took a $5.5 million net loss on a non-GAAP reporting basis, and its research and development expenses totaled $6.4 million. Since then, the company has received a $2 million milestone payment from Amgen Inc., per terms of the companies' year-old alliance for developing PDE10 inhibitors.

But Memory's two lead programs cost the most these days, necessitating the placement.

The company has been seeking a collaborative partner for MEM 1003, even as a Phase IIa study in Alzheimer's disease enrolls patients. It should be completed during the first half of next year. In addition, dosing has gotten under way in a Phase IIa trial of MEM 1003 in patients with acute mania in bipolar disorder, a study supported by a year-old partnership with the Stanley Medical Research Institute in Bethesda, Md.

That relationship doesn't tie up any rights to MEM 1003, though, and Memory is continuing to seek a partner for the compound going forward.

In parallel, the company is planning to begin a Phase IIa trial of MEM 3454 for Alzheimer's later this year. That study has been delayed because of FDA concerns around potential toxicity issues, so Memory withdrew an investigational new drug application to consider that matter, but the year-end timeline remains within sight.

Eventually, MEM 3454 could be licensed by F. Hoffmann-La Roche Ltd. after this study, by way of a longstanding agreement between the companies on nicotinic alpha-7 receptor agonists. Other potential indications include schizophrenia and attention deficit hyperactivity disorder in adults.

The partnership with Basel, Switzerland-based Roche has several preclinical compounds and leads, including MEM 63908, another partial agonist of the nicotinic alpha-7 receptor that's being developed for Alzheimer's. The PDE10 program that's partnered with Thousand Oaks, Calif.-based Amgen also remains in preclinical stages.

Two other compounds, PDE4 inhibitors called MEM 1414 and MEM 1917, are lined up for partnerships, as well. Previously, they had been part of a collaboration with Roche.

The offering is expected to close in two tranches, based on the applicability of certain Nasdaq rules. The first is expected to close on or about Oct. 16 and will result in about $26.7 million in gross proceeds. Closing the second tranche may be subject to stockholder approval.

Prior to the transaction, the company had about 38 million shares outstanding. The deal comes just about a year after Memory raised $29 million in net proceeds through the issuance of about 16 million shares and warrants for another 5.6 million.

The latest placement included Great Point Partners LLC in Greenwich, Conn., as well as MPM Capital LP in Boston, in addition to existing institutional backers and other accredited investors. Concurrent with the financing, MPM General Partner Vaughn Kailian joined Memory's board.

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