Oral drug delivery company Emisphere Technologies Inc. raised $15 million for ongoing development of its oral heparin and insulin products, and for other corporate purposes.

The Tarrytown, N.Y.-based company secured the financing through a term loan with funds managed by MHR Fund Management LLC, of New York, in exchange for a note convertible into shares of Emisphere at a premium to Friday's closing price. In connection to the financing, Mark Rachesky, president of MHR Fund Management, was named to Emisphere's board.

Emisphere said this financing, plus anticipated milestone payments stemming from collaborations, should allow the company to advance its clinical programs, including a Phase III trial of oral heparin set to begin after an agreement is reached with the FDA. Heparin, which predominantly is used to prevent blood clot formation following surgical procedures, is being evaluated in an oral capsule formulation, which was developed using Emisphere's eligen technology. Eligen is based on the use of synthetic compounds that move drugs across biological membranes without altering their chemical form or efficiency.

Last week, the company completed dosing in a clinical trial aimed at comparing its oral heparin to versions of heparin administered intravenously or subcutaneously. Results are expected soon and should show that the oral formulation has the same molecular composition as the other versions.

In addition to heparin, Emisphere is developing an oral form of insulin, which is in a 90-day Phase II trial in 120 Type II diabetic patients. The study's endpoints involve a reduction in HbA1c levels and weight loss. A previous trial in 13 early-stage diabetic patients suggested that the company's oral insulin tablets, administered four times per day before meals and at bedtime over a two-week period, could affect glycemic control without provoking any hypoglycemic events.

Emisphere hopes to complete Phase I studies of an improved formulation of an undisclosed small-molecule compound aimed at treating bone-related diseases. Following an initial clinical trial of the compound using the eligen technology, Emisphere received its first milestone payment from partner F. Hoffmann-La Roche Ltd., of Basel, Switzerland. In that collaboration, Roche is using Emisphere's delivery platform to evaluate formulations of existing drugs that could be administered more conveniently than products on the market. Emisphere received an up-front fee and stands to receive up to $18.5 million in milestones for each product developed using eligen, plus royalties on product sales. (See BioWorld Today, Nov. 19, 2004.)

Another partner, Basel, Switzerland-based Novartis AG, is preparing to initiate Phase III trials of oral calcitonin for osteoporosis, and to begin a study to evaluate an oral recombinant human growth hormone, which can be used to treat hGH deficiency in children, as well as metabolic and cardiovascular disorders.

Emisphere also plans to file an investigational new drug application to begin testing of acyclovir, an antiviral compound commonly used to treat herpes. The company's eligen-based acyclovir is designed to improve the drug's bioavailability for treating Type 1 and Type II herpes.

The company last raised funds in April, when it brought in $15.74 million in a public offering primarily to repay a debt to an affiliate of Dublin, Ireland-based Elan Corp. plc. Emisphere reported total operating expenses for the second quarter of $8.4 million. It ended the quarter with a net loss of $5.8 million, or 25 cents per share. As of June 30, the company had cash, cash equivalents and investments of about $10 million.

Emisphere's stock (NASDAQ:EMIS) closed Monday at $3.85, up 8 cents.

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