Hoping to fatten its pipeline with new products, Neurobiological Technologies Inc. reported a private placement Tuesday, raising $19.4 million.
The Richmond, Calif.-based company has two later-stage products - the approved Alzheimer's disease drug Namenda and a peritumoral cerebral edema candidate, xerecept - but nothing beyond that.
The $19.4 million will help cushion the company's reserves. At the end of 2003, the company had $2.6 million in cash, but recently it received a $2.25 million milestone payment related to Namenda approval.
"If we look at the funding that they're going to get, this is fairly significant for them, and really does give them the resources they need to start building their pipeline," said Rob Whetstone, a spokesman for Neurobiological (NTI).
Neurobiological sold about 3.9 million shares of common stock at $5 apiece to an undisclosed group of institutional investors. Investors also are receiving warrants to purchase an additional 582,000 shares of common stock at $6.73 per share. Merriman Curhan Ford & Co., of San Francisco, acted as sole placement agent in the transaction.
Paul Freiman, the company's president and CEO, said in a prepared statement that the financing strengthens NTI's balance sheet, providing the resources for the company to broaden its pipeline by in-licensing or acquiring products.
"Now, they have the financial resources to really act on this," Whetstone told BioWorld Today. "They're going to really aggressively pursue this."
Namenda (memantine) was launched in January and is the only approved drug for the severe stages of Alzheimer's disease. Four other marketed Alzheimer's disease drugs treat more mild symptoms.
NTI received the $2.25 million payment in February from Merz Pharmaceuticals GmbH, of Frankfurt, Germany, for the FDA approval of Namenda to treat the moderate to severe stages of Alzheimer's. Merz synthesized and developed the compound and began marketing it in Europe in the 1980s for Parkinson's disease. Forest Laboratories Inc., of New York, markets Namenda in the U.S. The drug received approval last October. (See BioWorld Today, Oct. 20, 2003.)
In January, Forest announced plans to seek approval for a mild to moderate indication of Namenda as a monotherapy for Alzheimer's disease.
Forest also decided to continue studying Namenda for neuropathic pain after Phase III data showed in May that it failed to provide a statistically significant effect on the change from baseline in nocturnal pain, compared with placebo. However, the drug did show positive benefits in patients who had the most severe pain. Forest expects to begin a Phase II trial examining the drug at different dosages, then later conduct Phase III trials that could be used for a new drug application submission in 2006. Any sales of the drug would result in a 13 percent royalty payment to NTI.
NTI receives a 1 percent royalty on Namenda's U.S. sales for Alzheimer's disease. Early sales estimates of the drug in that indication range between $500 million and $750 million. Freiman said in October he expects peak sales to reach $1 billion.
Namenda, which received European approval for Alzheimer's in 2002, is an antagonist of the N-methyl-D-aspartate receptor that works by blocking abnormal effects of glutamate, which plays a role in learning and memory.
H. Lundbeck A/S, of Copenhagen, Denmark, exclusively markets the product for Alzheimer's disease throughout most of Europe, while Merz co-markets it in German-speaking countries.
NTI plans to soon begin a Phase III program of xerecept for peritumoral brain edema. Xerecept, a synthetic preparation of the naturally occurring peptide corticotrophin-releasing hormone, has received orphan drug designation from the FDA in that indication.
NTI owns full rights to xerecept, and Freiman said the product could be on the market in 2006, if the trials are successful.
"It's already undergone a special protocol assessment with the FDA," Whetstone said. "They will begin the Phase III studies shortly."
The trials will be conducted at more than 20 sites in the U.S. and Canada. About 359,000 patients are estimated to be living with brain tumors in the U.S. Cerebral edema is a complication of malignant brain tumors. NTI said xerecept has shown in previous studies that it could be a safer treatment than synthetic corticosteroids, which can cause muscle wasting, osteoporosis, hyperglycemia, vision problems and psychosis.
NTI's stock (NASDAQ:NTII) dropped 31 cents on Tuesday, closing at $5.31.