National Editor

Genomics partnering has its benefits, but there's nothing like hard cash - and DeCode Genetics Inc. priced an offering of $125 million in senior convertible notes due 2011, which is $25 million more than the originally targeted amount.

The notes will bear 3.5 percent interest per year and will be convertible into shares of DeCode stock at the holder's option at $14 per share, which amounts to an initial conversion rate of about 71.4 shares per $1,000 principal amount of the notes, and a 35 percent premium over Wednesday's closing price.

DeCode's stock (NASDAQ:DCGN) closed Thursday at $10.31, down 6 cents.

Buyers of the notes have an option to purchase up to $25 million more in the offering, which is expected to close April 14, and DeCode may redeem the notes starting April 20, 2009.

In February, DeCode entered a seven-year deal to conduct clinical trials of developmental compounds belonging to Merck & Co. Inc., of Whitehouse Station, N.J., which bought a $10 million stake in Reykjavik, Iceland-based DeCode, consisting of about 690,000 common shares at $14.50 apiece, plus a warrant to buy up to $50 million of additional shares at $29 each over the next five years. The pair already had a collaboration for obesity drugs. (See BioWorld Today, Sept. 30, 2002, and Feb. 27, 2004.)

Company officials could not be reached, but DeCode stated in a press release that proceeds from the notes will go mainly to finance the firm's own drug development efforts, including an in-licensed candidate known as DG031 from Leverkusen, Germany-based Bayer AG, which had been developing the drug for asthma. DeCode aims to find out in a Phase II trial whether the inhibitor of the 5-lipoxygenase-activating protein, or FLAP, works against myocardial infarction.

Variations in the gene encoding FLAP - which modulates production of leukotrienes - are involved in a twofold increased risk of heart attack and stroke. Inhibiting FLAP might stop the inflammatory cascade and thus the likelihood of plaque rupture, which is what happens just before heart attack and is the most common form of stroke.

DeCode, which uses population genetics to find targets, also plans to file an investigational new drug application by the end of the year to move an unnamed compound into Phase I for peripheral arterial occlusive disease. A series of lead compounds were developed last year.

Also in stroke, DeCode in 2003 finished high-throughput screening and initiated medicinal chemistry work on a lead series of compounds to inhibit the activity of the enzyme PDE4D. In schizophrenia, the company's screening work also has identified hits described as "promising," which might point toward lead compounds to signal between Neuregulin 1 and the ErbB4 receptor, key components of the pathway identified through DeCode's gene discoveries. Both projects are part of a therapeutics deal entered two years ago with Roche Holdings SA, of Basel Switzerland. (See BioWorld Today, Jan. 30, 2002.)

DeCode brought in $46.8 million in revenues during 2003, with a net loss of $35.1 million.