Tercica Inc. is raising $48 million in a stock offering, as the company prepares to file a new drug application next month for Increlex, its recombinant human insulin-like growth factor-1 (rhIGF-1), for children with short stature.

The South San Francisco-based company offered 6 million shares of its common stock at $8 per share. Net proceeds are estimated to total about $44 million, said Tim Lynch, Tercica's chief financial officer. He added that proceeds are expected to fund the "pre-launch activities for Increlex, which we anticipate launching in early 2006."

If Increlex receives marketing approval, it would be "the first new chemical entity in growth in 30 years," Lynch said, adding that "it's a much-anticipated product" for pediatric endocrinologists who treat short stature.

Human insulin-like growth factor-1 works by mediating the effects of growth hormones, but Tercica's Increlex aims at targeting a specific IGF-1 deficiency market: those who are growth hormone resistant.

"If you're deficient in growth hormone, there's a very robust market for the use of growth hormone-replacement therapy," Lynch told BioWorld Today. "However, in the last five to 10 years, there's been an emerging appreciation for the number of children who are resistant to growth hormone and can't produce enough IGF-1 on their own."

The company reported positive data in June from a Phase III trial involving 65 children, with results showing a statistically significant increase in growth rate over an eight-year period. (See BioWorld Today, June 22, 2004.)

Lynch said the company estimates a market of about 30,000 children in the U.S., though Tercica's initial NDA is for children with severe primary IGF-1 deficiency, a subset of that broader 30,000.

The company has ongoing trials for other indications to capture a larger portion of the IGF-1 deficiency market. A Phase IIIb label-expansion study began in October to evaluate Increlex as therapy for children with less severe short stature. The study is expected to take about two years.

"In that same population, we're going to examine twice-daily vs. once-daily dosing of rhIGF-1," which now is given in twice-daily subcutaneous injections. That trial is expected to begin this quarter.

Lynch said treating adult IGF-1 deficiency, which is related to metabolic disorders rather than stature, is planned for "farther down road," along with trials evaluating the drug as a treatment for diabetes. For now, the focus is on the short stature pediatric market.

Tercica retains worldwide rights to Increlex and would be able to sell the drug itself, at least in the U.S. "because of a very concentrated physician base," Lynch said, estimating that about 400 to 500 pediatric endocrinologists nationwide address short stature.

He said the company plans to place about 30 Tercica sales representatives in the field when Increlex is launched early next year, funded in part by the money raised in this recent financing.

"That was really quite an accomplishment for the company," Lynch said, adding that it gives Tercica about $90 million in the bank and "will be sufficient to get us through 2006."

It also marked the first financing round for Tercica since the company went public in March, with a $49.5 million initial public offering, selling 5.5 million shares at $9 per share. (See BioWorld Today, March 18, 2004.)

Lehman Brothers, of New York, acted as sole book-running manager, while SG Cowen, also of New York, served as joint lead manager. Chicago-based Robert W. Baird & Co.; Arlington, Va.-based Friedman, Billings and Ramsey; and New York-based Harris Nesbitt were co-managers.

Tercica's stock (NASDAQ:TRCA) rose 1 cent Tuesday to close at $8.26.

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