A young cell therapy firm, PharmaFrontiers Corp., is raising $23 million after its board approved a private placement of its common stock.
"We need to put gas in the tank," Chief Financial Officer William Rouse told BioWorld Today, "money in the bank, fuel for going forward."
The company, of The Woodlands, Texas, plans to offer its shares at 50 cents apiece. Noting that two large investors are completing their due diligence, Rouse said the deal is likely to close in the next two weeks. There was a favorable early reaction to the announcement, as PharmaFrontiers’ stock (OTCBB:PFTR) on Friday gained 10 cents, or 20 percent, to close at 60 cents.
Should a deal close, the new financing will fund operations for the next two years to allow the company to carry out its clinical development plans. In that time frame, the company hopes to hit several milestones, and atop the list is a pending Phase IIb study of its lead product, Tovaxin.
A vaccine for multiple sclerosis, it has generated positive Phase IIa data. The study produced a 93 percent reduction in annual relapse rate among patients with the relapsing-remitting form of the disease and lowered the amount of myelin-reactive T cells "to almost zero" in most patients, Rouse said. The FDA reacted favorably to those findings and "gave us the green light" to move Tovaxin forward, he added.
Costs associated with the coming Phase IIb trial are "the reason for the sale of equity at this point," Rouse said. Patient enrollment is around the corner and expected to begin upon settlement of the placement. Already, the company has begun production at its in-house manufacturing facility, and a contract research organization is identifying sites for the 150-patient study. A double-blinded, placebo-controlled trial, its primary endpoint will employ MRI to characterize the extent of brain lesions, and a secondary endpoint will measure the relapse rate.
"We’re very optimistic," Rouse said, "because of the efficacy that we have seen so far, and the fact that there are no safety issues."
The safety factor weighs heavily on multiple sclerosis treatments, especially in light of last year’s market withdrawal of Tysabri (natalizumab, from Biogen Idec Inc. and Elan Corp. plc). Use of that product, which Rouse said restricts all T cells from entering the central nervous system, led to a rare demyelinating infection in three patients, and two died. Next week, an FDA advisory committee is scheduled to consider allowing Tysabri back on the market.
Tovaxin’s leukocyte interactions, in contrast, are confined to myelin-reactive T cells only. The patient-specific product is derived from a patient’s own cells, via drawn blood, and returned through four to five subcutaneous injections. Since myelin-reactive T cells will return, the Phase IIb study also will test a booster to extend the therapeutic vaccine’s benefit.
PharmaFrontiers owns exclusive worldwide rights to the personalized medicine therapy gained through a late 2004 acquisition of a privately held Houston firm called Opexa Pharmaceuticals Inc. Incubated at Baylor University, that company was built on the T-cell vaccine technology from which Tovaxin stems.
Looking down the road, Rouse said PharmaFrontiers would consider all approaches to commercializing Tovaxin. For a small company, he said it is possible to sell the product on its own in the North American market of relapsing-remitting multiple sclerosis patients, who number about 400,000. PharmaFrontiers, which is likely to seek partners abroad, also would consider domestic partnerships as well.
With its expected funding, PharmaFrontiers also plans to begin Phase I trials in rheumatoid arthritis using a T-cell vaccine approach. It has an exclusive worldwide license for cell therapies to treat rheumatoid arthritis from the Shanghai Institute of Biological Science in China. These T-cell vaccine approaches were developed by Jingwu Zang, a researcher at both schools.
Additionally, the company plans to complete the preclinical development of its autologous stem cell technology to treat Type I diabetes and file an investigational new drug application. That technology, licensed from the University of Chicago and Argonne National Laboratory, was the basis for establishing PharmaFrontiers two years ago.
In the middle of 2004, the company completed a reverse merger to gain its public listing. After the placement, PharmaFrontiers should have about 66.6 million shares outstanding. The company had about $4.4 million in cash reserves as of Sept. 30. It has 18 employees, and plans to hire six more in the coming weeks for further oversight of Tovaxin’s Phase IIb development.
In other financing news:
StemPath Inc. entered a definitive agreement to raise C$1 million (US$868,000) through a private placement with New Generation Biotechnology Funds. The early stage Ottawa-based company plans to use the proceeds to bring its first drug candidates, aimed at treating acute myocardial infarction and skeletal muscle myopathies, into preclinical testing. The financing involves convertible debentures purchased in two tranches: The first is worth C$700,000, and the second - conditional upon certain performance milestones - is worth the remainder.
Separately, Cepheid Inc. filed a preliminary prospectus supplement with the SEC for an underwritten public offering of 10 million common shares, plus a 1.5 million overallotment option. At the close of business Friday, the Sunnyvale, Calif.-based molecular diagnostics company’s stock (NASDAQ:CPHD) finished at $9.36, up 28 cents, meaning the deal could bring in close to $110 million. New York’s UBS Investment Bank is the proposed offering’s sole book-running manager, along with co-managers William Blair & Co. and Robert W. Baird & Co.