With a fresh deal signed earlier in the week to acquire a new psoriasis drug, Connetics Corp. said Friday it had entered definitive agreements for a private placement of 3 million shares at $20.25 each, yielding gross proceeds of about $60.8 million.
And the placement was done in less than two days, said John Higgins, chief financial officer of Palo Alto, Calif.-based Connetics.
"We were looking originally at a $30 million to $40 million deal," he told BioWorld Today. "We up-sized the deal a bit and closed. It was literally about a day-and-a-half process."
Higgins gave some of the credit for the speed to "this unexpected and very significant positive event on [Feb. 9]," otherwise known as the acquisition of the new drug, oral Soriatane (acitretin) for psoriasis, from Basel, Switzerland-based F. Hoffmann-La Roche Ltd. "There's been a lot of demand for large blocks of stock" since then, he said.
Connetics' shares (NASDAQ:CNCT) closed Friday at $21.47, down 94 cents.
Proceeds of the financing will be used partly to pay for Soriatane and for general corporate purposes, including working capital.
Connetics said last week it would pay $123 million for exclusive U.S. rights to Soriatane, a marketed retinoic acid analogue approved by the FDA in 1997 for severe psoriasis. Soriatane sold about $41 million last year. (See BioWorld Today, Feb. 10, 2004.)
When the Roche deal was disclosed, Connetics said it would pay for the rights in cash plus a $30 million bank note from Goldman, Sachs & Co. in New York to the extent needed. Now, the company won't need the note, although it was "clearly a high-quality loan for us to finance the [Soriatane] deal with."
Connetics markets Olux (clobetasol propionate) and Luxiq (betamethasone valerate) foams.
Olux is prescribed for short-term treatment of the inflammatory and pruritic manifestations of moderate to severe corticosteroid-responsive dermatoses of the scalp, as well as for short-term treatment of mild to moderate plaque-type psoriasis of non-scalp regions, excluding the face and intertriginous areas. Luxiq is indicated for inflammatory and pruritic manifestations of corticosteroid-responsive scalp dermatoses.
Higgins said a "very elegant selling message" can be delivered in pitches of Soriatane, which he called the "perfect fit" with Connetics' marketed lineup.
In the company's development pipeline are Extina, a foam formulation of the antifungal drug ketoconazole; Actiza, a foam formulation of clindamycin for treating acne; and Velac Gel, a combination of clindamycin and tretinoin, also for acne.
A new drug application was submitted in July for Extina. Positive summary results from the Phase III trial with the foam for seborrheic dermatitis were disclosed in April. In December, Actiza's NDA was submitted, with positive Phase III data disclosed two months earlier regarding the drug vs. Clindagel (clindamycin phosphate gel) from Galderma Laboratories LP, of Fort Worth, Texas.
Enrollment in two Phase III trials evaluating Velac was completed in January of this year, with an NDA expected to be filed in the second half of 2004.
After the purchase of Soriatane and counting the most recent financing, Connetics will have about $45 million in cash, Higgins said.
"That, for us, is a very solid amount of capital, given that we're profitable and enjoy a positive cash flow," he said. "We will generate anywhere from $15 million to $25 million in cash this year from our business." Connetics became profitable in the third quarter of last year.