Washington Editor

Padding its savings account and then some, Nastech Pharmaceutical Co. Inc. raised about $57.4 million in gross proceeds through a public offering.

At the end of the third quarter, the Bothell, Wash.-based company had about $24.2 million in cash reserves and had lost $7.6 million in the preceding three months. But the nasal drug delivery firm filed an $80 million shelf registration statement on Sept. 30 and Thursday closed the securities sale.

"The four [underwriting firms] together were advising us on the proper timing and size of these kinds of financings," Nastech President, Chairman and CEO Steven Quay told BioWorld Today. "They felt it was a good opportunity to raise the money now at an attractive price for us and for new shareholders."

In the transaction, Nastech sold 4.25 million common shares at $13.50 apiece; the stock's value has climbed about 60 percent since the company entered a major drug development deal with Merck & Co. Inc. three months ago. At that time, it had about 13.3 million shares outstanding.

The per-share price in the offering represented a slight discount to the prior day's closing bid of $14.07. On Thursday, Nastech's stock (NASDAQ:NSTK) dropped $1.18 to $12.89. The company plans to direct the funds to general corporate purposes, which include product development and working capital needs.

"We have significant programs for which we're going to take advantage of these proceeds," Quay said. "There are a number of uses besides just general working capital."

He noted that Nastech is expecting FDA approval next year for an intranasal calcitonin osteoporosis product. Partnered with Par Pharmaceuticals, of Spring Valley, N.Y., Nastech is charged with manufacturing the generic drug and will use a portion of its latest proceeds to build inventory in advance of an anticipated launch.

Another late-stage product in the company's portfolio, Nascobal (cyanocobalamin) Nasal Spray, recently received an approvable letter from the FDA. A reformulated treatment for vitamin B-12 deficiency, Quay said Nastech is working to gain outright approval next year, since the agency is not requiring additional studies. (See BioWorld Today, Nov. 2, 2004.)

Nasal Nascobal is an updated version of Nascobal Nasal Gel, which has been marketed in the U.S. since 1997 for various vitamin B-12 deficiencies. Worldwide marketing rights to both products are controlled by Questcor Pharmaceuticals Inc., of Union City, Calif. Terms of that relationship also have Nastech in a manufacturing role.

The recently reported deal with Merck, of Whitehouse Station, N.J., could be worth $346 million to Nastech. That agreement is focused on the nasal delivery of PYY for obesity, and Quay said Nastech is in the process of forwarding data to Merck in advance of further studies that are expected to begin next year. (See BioWorld Today, Sept. 28, 2004.)

On its own, Nastech plans to advance a nasal spray of parathyroid hormone (PTH) for osteoporosis. Quay said the company was pleased with findings from two studies conducted earlier this year that compared nasal PTH with subcutaneous PTH, but results are not yet public. Nastech expects to carry the product through the FDA-registration process and market it on its own.

With an eye toward potential revenues from development partners, Quay said the latest funding could prove pivotal to the development of Nastech.

"We think that this financing could be an important bridge for the company to get to the next stage," he added.

In closing the offering, Nastech also granted its underwriters a 637,500-share overallotment option, which expires Jan. 7. Citigroup Global Markets Inc., of New York, is the offering's sole book-running manager. Needham & Co. Inc., also of New York, is a co-lead manager. WR Hambrecht + Co., of New York, and Delafield Hambrecht Inc., of Seattle, are co-managers.

The underwriters expect to deliver shares to purchasers on or about Dec. 14.

Biopure Stays Alive With Stock, Warrants Sale

A discounted stock-and-warrant sale should help float operations for eight more months at Biopure Corp., which obtained commitments for $11.6 million.

The Cambridge, Mass.-based company expects to reap net proceeds of about $10.5 million through the sale of 40 million common shares at 29 cents apiece, as well as warrants for 20 million more shares at an exercise price of 31 cents each. The per-share price of the offering represents a 19.4 percent discount to the prior day's closing bid of 36 cents. On Thursday, Biopure's stock (NASDAQ:BPUR) dropped 8 cents, or 22.2 percent, to close at 28 cents.

Biopure expects to sustain its business through July, given cash on hand and net proceeds from the offering. Through Oct. 31, it had $6.3 million in cash, as well as about 60 million shares outstanding. It recorded a $9.4 million net loss in the preceding three-month period.

The company is developing Hemopure (hemoglobin glutamer - 250 [bovine]), an investigational oxygen therapeutic. On its own, Biopure is researching the product's use for acute myocardial infarction and for a trauma indication in collaboration with the U.S. Naval Medical Research Center. As part of those efforts, the company is conducting two Phase II trials, one in Europe and one in South Africa, replying to questions from the FDA related to animal studies it is conducting for the agency's further evaluation of a previously submitted biologics license application in orthopedic surgery, and maintaining some manufacturing capability.

C.E. Unterberg, Towbin LLC, of New York, acted as the agent for the offering, which is expected to close Dec. 14.

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