BioWorld International Correspondent

LONDON - Phytopharm plc announced a £10.1 million (US$19.1 million) placing and open offer six weeks after being forced to pull a £23.9 million fund raising when a partnership deal fell through.

Since then, the share price has fallen by a third, from £1.95 to £1.31, and rather than getting £1.80 for each new share, the issue price is £1.25. The 8.1 million new shares will represent an increase of 18.75 percent in the share capital of the Godmanchester, UK-based company. Canaccord Capital (Europe) is underwriting the placing.

Richard Dixey, CEO, told BioWorld International: "We have reduced our funding requirements from £24 million to £10 million, but this does not represent a huge change in strategy. Much of the expenditure from the [aborted] funding would have been on trials to be carried out in 2006, and rather than paying for them, we have decided to license earlier."

Phytopharm pulled the £23.9 million fund raising at the end of February, when partner Yamanouchi Pharmaceutical Co. Ltd. said it was canceling the license for Cogane (PYM 50028) in Alzheimer's disease. The Japanese company since has paid a £4 million milestone payment and confirmed that the data from the first 60 patients in the ongoing Phase IIa proof-of-principle study met the criteria set out in the licensing agreement.

Now with less money, Phytopharm has dropped plans for a Phase IIb trial of Cogane in Alzheimer's disease and a Phase IIa trial in Parkinson's disease, and will look for a partner once the current Phase IIa Alzheimer's trial is completed at the end of the year.

"The likelihood is that the Cogane license will be for both diseases, so there is no point in doing a separate Phase IIa in Parkinson's. Having the money for these two trials was more a balance-sheet issue to show we had the financial strength when negotiating a license," Dixey said.

To date, 220 of a proposed 238 subjects have been recruited to the Phase IIa trial. Having made £7 million on the Yamanouchi license, Dixey is looking on the bright side; he said it will be easier to license Cogane "unencumbered" by any competing rights.

"We got a call from a potential multinational partner the day after Yamanouchi pulled out, congratulating us on the outcome," he said.

Phytopharm claims a novel - neuroregenerative - mode of action for Cogane, which is based on a plant extract used as a traditional tonic for the elderly in parts of Asia.

"We've begun to educate [potential partners] on how it works, so when the clinical data are available we won't have to start from scratch," Dixey said.

The company also dropped plans for a Phase II trial of Myogane (PYM 50018) in motor neuron disease, and now will conduct a Phase Ib trial before licensing the compound, which has FDA fast-track status.