Two-year-old Chelsea Therapeutics International Ltd. completed its second major financing, raising $21.5 million in a private placement of common stock that will bring its sole clinical-stage product, CH-1504, through Phase II studies.
"The money’s going to support our Phase II proof-of-concept studies with our lead molecule in both rheumatoid arthritis and psoriasis," said Simon Pedder, president and CEO of the Charlotte, N.C.-based company.
Pedder estimated those trials will cost about $8 million total and will yield key data by the first quarter of 2007. The remaining funds raised will go toward expanding Chelsea’s preclinical and clinical pipeline.
"The benefit to having such a significant overage is we’ve been very active in looking at successful in-licensing candidates," Pedder told BioWorld Today.
The $21.5 million was raised through the sale of 7.2 million shares to institutional and other accredited investors, which included an overallotment option worth $6.5 million. Investors also received five-year warrants to buy about 2.2 million shares at $4.20 each. Paramount BioCapital Inc. in New York acted as sole placement agent.
New York-based Healthcor Management LP was the lead investor in the financing, which also included significant participation from RA Capital Management, of Boston; Great Point Partners, of Greenwich, Conn.; GMT Capital, of Norcross, Ga.; Vivo Ventures, of Palo Alto, Calif.; and other health care investors.
Funds will support preclinical development of additional antifolates in Chelsea’s pipeline, as well as working capital and general corporate purposes, in addition to in-licensing new candidates.
"One of the attractions for us in looking at a late-stage molecule is that it would allow us to put a sales and marketing infrastructure in place," Pedder said. "It could support the eventual commercialization of our antifolates, which we think have blockbuster potential."
Founded in May 2004, Chelsea licensed its portfolio of antifolate compounds, which include CH-1504, from the developer, Gopal Nair, at the University of South Alabama College of Medicine. CH-1504 is an orally available and metabolically inert antifolate with anti-inflammatory and antitumor properties. It inhibits several enzymes required for cell proliferation.
Preclinical and clinical data indicated that CH-1504 might have superior safety and tolerability, as well as increased potency, when compared with methotrexate, which is the leading antifolate treatment and the standard of care for abnormal cell proliferation diseases. The therapy isn’t always well tolerated in patients, who can experience nausea, vomiting and diarrhea, and it has some long-term safety concerns in terms of liver and kidney toxicities.
"We believe a lot of those side effects, tolerability and safety issues are tied to the metabolism of methotrexate," Pedder said.
While CH-1504 works similar to methotrexate, it is metabolically inert and might be able to show the benefits of methotrexate without exhibiting the drug’s shortcomings. Current worldwide sales of methotrexate are more than $500 million a year, Pedder said.
"If we meet the target profile, that is we meet the same efficacy but not the same side effects, we could charge a premium to methotrexate," he added, saying sales of CH-1504 could climb to more than $1 billion globally.
And that might only be "the tip of the iceberg," Pedder said, adding that methotrexate is known to work in other indications for which it is not yet approved, such as inflammatory bowel disease, cancer and other immunological disorders.
The Phase II trials of CH-1504 for rheumatoid arthritis and psoriasis should begin early this year. Phase I trials conducted in the UK yielded positive preliminary results for all oral indications of the drug, as did a six-month pilot clinical study in Peru that compared CH-1504 with methotrexate. The pilot study, which included 20 rheumatoid arthritis patients, will not be used as part of a U.S. regulatory filing, but it did suggest that CH-1504 had a lower toxicity and improved tolerability, as well potentially increased efficacy, when compared to methotrexate.
About 2 million Americans are affected by rheumatoid arthritis, and the global market to treat the disease was $6.3 billion in 2004. Psoriasis affects more than 4.5 million Americans.
Some of Chelsea’s preclinical candidates, which target the same indications, should enter the clinic within the next year. They are subtly different from CH-1504 and might be more suitable candidates for oncology indications and Crohn’s disease, Pedder said.
Chelsea has raised $36 million since inception, which includes a $14.5 million first round financing conducted in January 2005. (See BioWorld Today, Jan. 13, 2005.)
Last summer, it listed its stock on the Over-the-Counter Bulletin Board through a reverse merger under the symbol "CHTP," and intends to move the listing to the American Stock Exchange within the next six months. Shares remained level Tuesday, closing at $3.25.
Following the latest financing, the company will have 21 million shares outstanding and enough money to take CH-1504 through proof-of-concept studies, while it in-licenses new products.
"Depending on how many activities we take in, how many additional molecules and at what stage," Pedder said, "it will take us [forward] about a year and a half, possibly more."