Amid rumors that Genzyme Corp. is considering a buyout of the company to gain a bigger piece of the childhood leukemia drug clofarabine, Bioenvision Inc. raised $12.8 million by placing about 2 million shares with new and existing institutional investors.
The price was a 10 percent discount to the previous five days' closing average. Bioenvision's stock (AMEX:BIV) closed Tuesday at $8.45, down 60 cents.
Participants also received warrants to buy about 400,000 shares of additional common stock at $7.50 each.
"Most of the money we spend generally is spent on clofarabine," said David Luci, director of finance and general counsel for New York-based Bioenvision, and the same goes for proceeds from the new round.
The drug is a second-generation nucleoside analogue brand named Clofarex and developed by Bioenvision with San Antonio-based ILEX Oncology Inc. The product is the subject of a rolling new drug application.
"The first portions [of the NDA] have been filed," Luci said. "The last portion certainly we hope to be filed in the next few months," he added, noting that ILEX is responsible for the filing.
Luci said he could not comment on the takeover rumors.
Genzyme, of Cambridge, Mass., disclosed earlier this month its plan to buy ILEX, thereby gaining clofarabine rights in the U.S. and Canada. Bioenvision still holds the rights outside North America, and the possibility of Genzyme taking over Bioenvision to secure full rights to the compound set the gossip mills churning and online bulletin boards buzzing this week. (See BioWorld Today, March 2, 2004.)
Maria Foley, spokeswoman for Genzyme, said the company's talks with Bioenvision consisted of a "courtesy call, introducing ourselves" when the ILEX acquisition plan was disclosed.
"Our situation is the same that we reported a few weeks ago," she said, adding that the takeover idea "was speculation on the part of one person about Genzyme."
Funds from Bioenvision's financing also will be used for development of Modrenal (trilostane), a blocker of the cell-growth pathway, approved and marketed for refractory breast cancer in the UK and soon to start a prostate cancer trial in the U.S.
Modrenal works by acting on the alpha and beta receptors on the cell nucleus wall, Luci said. Those receptors act as an accelerator and brake, respectively.
"The alpha receptor [which makes breast cancer cells proliferate] tends to accelerate estrogen into the nucleus," he said. The beta receptor blocks it.
Modrenal steers estrogen away from the alpha receptor and toward the beta receptor in a way similar to tamoxifen, Luci told BioWorld Today, but the Bioenvision drug also blocks the epidermal growth factor pathway, the opening to which is on the cell wall.
"When a patient becomes tamoxifen resistant, the estrogen - blocked at the nucleus wall - finds its way to the cell wall and finds that entrance to that EGF pathway," he explained.
Modrenal's potential seems good, Luci added, since lead investigators in the UK have advised that "they see us going into the market in second- or third-line therapy, so we don't have to go head to head with tamoxifen or the aromatase inhibitors," which could be used as treatments first.
"Without Modrenal, these patients would be done with the available therapies and would move on to chemotherapy," he said, but patients given Modrenal - even after three or more treatment regimens - showed a response rate of better than 40 percent, whereas chemotherapy's response rate is 10 percent to 15 percent.
"If we go head to head with chemo, we knock them out of the box by two or three times, and you get a good life while you're taking [Modrenal]," Luci said.
Other uses of proceeds include trials of gossypol, Bioenvision's third oncology drug, and Oligon, the FDA-approved anti-infective biomaterial, from which the company gets royalty payments. Gossypol, derived from the cotton plant, is in Phase I trials for prostate cancer and bladder cancer. Oligon technology involves impregnating a polymer material with silver, platinum and carbon particles.
Last summer, Bioenvision said a four-year, 2,482-patient observational study of Oligon for the reduction of catheter-related infection showed a 0.16 percent infection rate with catheters coated with Oligon, as compared to 4 percent with traditional chlorhexidine-coated catheters.
"It purifies the blood as it goes through the catheter," Luci said.
A follow-on tranche to the financing is likely to occur when preferred stockholders from the May 2002 offering decide whether they want to exercise their pre-emptive rights, he said.
"After both closings, we expect to have somewhere around $22 million," Luci said. That amount, supplemented with milestone payments of about $5 million to $10 million due over the next year and a half, would give the company enough cash to operate for two or three more years, Luci said.
SCO Securities LLC, of New York, acted as exclusive placement agent for the transaction.
Vical Raises Public Funds
Also raising money was Vical Inc., which said buyers have agreed to pay about $18.6 million for stock in a registered direct offering of about 3.4 million shares at $5.50 per share. The offering to institutional investors is expected to close March 26.
Vical's stock (NASDAQ:VICL) closed Tuesday at $5.54, down 66 cents.
The San Diego-based firm focuses on nonviral DNA delivery, designing and constructing closed loops called plasmids, which contain a DNA segment encoding the protein of interest, as well as short segments of DNA that control protein expression.
Partners include Merck & Co. Inc., of Whitehouse Station, N.J., which last summer gained an option to use Vical's technology for three cancer targets, in exchange for the return of rights in several infectious disease indications - influenza, herpes simplex virus and human papillomavirus. Vical and Merck have been partners since 1991. (See BioWorld Today, Aug. 22, 2003.)
Placement agent for the offering is SG Cowen Securities Corp. in New York.