Looking to use more than two-thirds of the proceeds for compound acquisitions to beef up its pipeline, Pharmos Corp. raised $21 million through a convertible debt financing with six institutional investors.
The money will let the company move forward with a plan formulated two years ago, said Gale Smith, director of corporate development for Iselin, N.J.-based Pharmos.
The company's stock (NASDAQ:PARS) rose 52 cents Tuesday, or 25.9 percent, to close at $2.53.
"Back in October 2001, we sold a small ophthalmic business to Bausch & Lomb," which had been a partner, Smith told BioWorld Today. "Our lead product was going into Phase III, and the sale triggered the new, sharper focus in the [central nervous system] business."
Some of the proceeds of the sale to Rochester, N.Y.-based Bausch & Lomb, the company hoped, might be used for in-licensing product candidates, "ideally in Phase II," she said. "But no such products materialized, and we needed the proceeds to fund our Phase III [program]."
The new money "allows us to get back on track," Smith said, and start searching for a compound again.
"I'm not sure if we're still looking at Phase II or if we would go with a Phase I product," she said, noting that the Phase II possibilities studied the first time around were "more expensive than what we had originally been thinking."
Pharmos, which also issued warrants exercisable into shares of common stock as part of the deal, said it would use $5 million for working capital and the rest will be held in escrow until repaid or used to pay for acquisitions approved by investors.
The debentures are convertible into stock at a fixed price of $4.04, which is 205 percent above the closing price of the stock for the five days preceding the closing date. They bear an interest rate of 4 percent, to be redeemed in 13 substantially equal monthly increments beginning March 31, and the amounts converted into stock will reduce the monthly redemption amount in inverse order of maturity.
Pharmos also issued three-year warrants to purchase 5 million shares of common stock at a price of $2.04.
Pharmos also said the FDA has granted fast-track status to the lead product, dexanabinol, a tricyclic dextrocannabinoid in Phase III studies for traumatic brain injury. (See BioWorld Today, Jan. 11, 2001.)
Dexanabinol is an anti-inflammatory agent that works by blocking the synthesis of pro-inflammatory cytokines in the injured brain, thus slowing the breakdown of the blood-brain barrier and cellular death via apoptosis and necrosis. It also is an N-methyl-D-aspartate receptor antagonist that prevents the influx of calcium ions into the cells of the injured brain, and it functions as an antioxidant.
"We have a little over 700 patients of the 900 we want to get enrolled," Smith said. Results from the double-blinded trial "will remain frozen right through six months after the last patient is enrolled, so we expect to have the data available in the second half of 2004."
Right now, all the money is on dexanabinol.
"We have it [in the clinic] for another indication but that doesn't really minimize the risk," Smith said. The Phase II study is testing the drug in heart-bypass patients prophylactically to determine if dexanabinol will prevent the onset of cognitive impairment.
"The rationale for going forward with that trial came partly out of the Phase II brain-injury data, which was analyzed using a cognitive and orientation model," she said. "It showed an improvement in the cognitive scores."
Up to 200 patients will be enrolled in the heart study at four medical centers in Israel (where Pharmos has a wholly owned subsidiary in Rehovot), with data expected in the first half of next year.