Tercica Inc. is raising $30 million in net proceeds from a discounted public stock sale to fund efforts related to its now-launched lead product, Increlex.
The Brisbane, Calif.-based company agreed to sell 5 million common shares at $6.40 apiece. Tercica granted the underwriter a 30-day, 750,000-share overallotment option. The per-share price reflects a slight markdown from the prior day's close of $6.96. On Tuesday, the shares (NASDAQ:TRCA) dropped 45 cents to close at $6.51.
The placement was made through a shelf registration statement, originally worth $75 million. It was filed with the SEC late last summer, about the time Increlex received FDA clearance.
The company expects to couple its proceeds with existing cash reserves for production and supply activities for Increlex, its recombinant human insulin-like growth factor-1 product that last year received approval for the long-term treatment of growth failure due to severe primary IGF deficiency. That clearance created quite a buzz for Tercica, and shortly after, the company entered a line-of-credit agreement to gain access to as much as $75 million. (See BioWorld Today, Sept. 1, 2005, and Oct. 18, 2005.)
Ina McGuinness, the company's vice president of corporate communications and investor relations, said Tercica has yet to draw down any money from the credit line, which she called "a backup."
"I think we've fulfilled our raising needs for the time being," she told BioWorld Today.
The latest funds also will be directed toward two currently enrolling trials to test Increlex in a less-severe patient population and as a once-daily formulation, as well as associated sales and marketing activities. The product, which is under review in Europe, was launched Jan. 3. Fifteen sales representatives and three regional managers are detailing it to pediatric endocrinologists, but Tercica is "in the throes of training an additional nine salespeople this week," McGuinness said. Further details on the late-stage studies are forthcoming on Feb. 15, when the company holds an earnings conference call.
Additional proceeds are earmarked for general corporate purposes, including the possible licensing, acquisition and development of new products or product candidates, although no such deals are on the table.
Increlex almost immediately faced competition, however, as Insmed Inc.'s iPlex (rhIGF-1rhIGFBP-3) was approved late last year, dropping Tercica's stock value by about a third. The Richmond, Va.-based company received clearance to market its product for short stature in children due to severe primary IGF deficiency and for children with growth hormone deletion who have developed neutralizing antibodies to growth hormone. (See BioWorld Today, Dec. 14, 2005.)
Despite the resulting share pressure, McGuinness stressed that iPlex wouldn't be Increlex's only hurdle. "I don't know that we're as concerned about iPlex as perhaps The Street seems to be, in terms of its impact on us," she explained. "I think the real thing to understand is that we're selling up against growth hormone, and that's the gorilla." That leaves both products jockeying for position among "very conservative specialist doctors" who have only had a single prescription option for 20 years.
Still, she said that relative to iPlex, the differentiating factors favor Increlex. In particular, its track record includes a dozen years worth of clinical successes, which McGuinness said would "resoundingly" resonate with physicians. "There really is no comparison, in terms of the amount of data that's been filed," she added. McGuinness also pointed to convenience measures, noting Increlex's ease of handling, shipping and storage, as well as its quick administration.
A patent suit remains pending between Tercica and Insmed, which in the past have filed lawsuits, injunctions and citizen complaints to block each other's efforts to win approval. The patent complaint alleges that Insmed's drug infringes on Tercica's intellectual property involving IGF-1.
The companies have said the suit would be heard in the second half of this year.
The FDA has designated both products orphan drugs for treating IGF deficiency, basing its decision on a declaration that the products are different.
Tercica's placement is expected to close on or about Friday. The company had about 31.4 million shares outstanding as of Sept. 30, as well as approximately $71 million in cash, cash equivalents and short-term investments.
New York-based Lehman Brothers Inc. is acting as its sole underwriter.