A stock drop of more than 50 percent last week did not keep ConjuChem Inc. from raising C$25 million (US$18.9 million) Wednesday in a convertible notes financing to fund its two lead products.
The drop resulted from a higher-than-expected nausea and vomiting side effect in the Phase II trial of DAC:GLP-1 for Type II diabetes.
"There was a noticeable overreaction, and that is a comment made by many," said Jacques Lapointe, president and CEO of Montreal-based ConjuChem.
Baker Brothers Investments seemed to agree with Lapointe. The New York-based firm purchased the C$25 million of convertible notes.
"This is a very knowledgeable investor and the fact that they have put more money into the company, we certainly see it as an endorsement of what we're doing and our plans," Lapointe told BioWorld Today.
The convertible notes have a four-and-a-half year term and pay 7.07 percent per year in interest. Baker Brothers has an option to convert the debt into ConjuChem's common stock at C$5 per share.
The agreement also provides for ConjuChem's issuance of 0.35 warrants per common share with an exercise price of C$6.25. ConjuChem may require the conversion of the debenture once it reaches predetermined financial events.
With a burn rate of about C$3 million per month, Lapointe said the company has enough cash with this financing to take it into late next year. As of the end of April, ConjuChem had about C$30 million in cash, he said.
The financing is expected to close by Aug. 20. The company will use the funds for the development of DAC:GLP-1, and an earlier clinical product, DAC:GRF, for growth hormone deficiency in children and adults.
Last week, ConjuChem released Phase II data showing that patients treated with DAC:GLP-1 experienced 30 percent lower blood glucose than patients who received no treatment. The compound hit its primary endpoint, but demonstrated that 50 percent of the 206 patients enrolled experienced mild to moderate nausea and vomiting. The stock plunged 53.2 percent, to close at C$4.80 that day. (See BioWorld Today, July 19, 2004.)
The drop didn't phase Lapointe, however, who said the company was not overly concerned about the nausea and vomiting side effect. At the very least, ConjuChem has a product that can be dosed daily, instead of weekly, he said.
"This is a long-term game," Lapointe said. "And that's really how we're playing it."
ConjuChem's stock (TSE:CJC) lost 4 cents Wednesday, to close at $C4.79.
As for its second product, the company announced on Tuesday Phase I results of DAC-GRF, showing the compound was well tolerated with no serious adverse events reported. The maximum tolerated dose was determined to be 125 mcg/kg. Lapointe said the company would continue Phase I testing with single and multiple doses, then would move into a Phase II trial in the first half of 2005. The company plans to enter a Phase III trial of DAC:GLP-1 in the second half of next year.
GLP-1, an insulinotropic hormone, is a naturally occurring 36-amino-acid peptide that has been shown to normalize blood glucose levels by stimulating insulin secretion and lowering glucagon secretion. Its half-life is extended with ConjuChem's Drug Affinity Complex (DAC) technology. The technology also prolongs the half-life of growth-releasing factor, which covalently bonds to albumin to form DAC:GRF.
Aside from its two clinical products, ConjuChem is working at the preclinical stage on a long-acting insulin product and an HIV therapeutic.
"Those have the potential of moving into late preclinical this year," Lapointe said. "The pipeline is moving very well. Our ambition is to get at least another product into the clinic next year."