Associate

Tercica Inc. has survived nicely in the venture capital markets as a Genentech Inc. protégé, raising $65.5 million in two rounds. Linked to one of the industry's brightest stars and with a financing window finally ushering in initial public offering filings (although no pricings yet), Tercica is now looking to the public market.

The South San Francisco-based company filed to raise $86.25 million, although it has not yet set its price per share or number of shares. It has proposed the Nasdaq ticker symbol "TRCA."

In its prospectus, it said it expected to use proceeds and existing cash and cash equivalents for late-stage clinical trials of recombinant human insulin growth factor-1 (rhIGF-1), its in-licensed product from Genentech, also of South San Francisco. It also said it would use funds for launch and post-launch sales and marketing activities for the product, manufacturing transfer and validation of rhIGF-1, and general corporate purposes, including the possible acquisition of new products.

The company had cash and cash equivalents of $10.4 million as of June 30, but it raised about $44 million in July in a Series B financing, giving it cash and cash equivalents of $47.3 million as of Aug. 31. It said it expects proceeds from the offering and its current cash to fund capital requirements through at least the end of 2005. (See BioWorld Today, July 18, 2003.)

It posted a net loss of $7.7 million for the first six months of the year.

The company is developing rhIGF-1 in short stature, diabetes and other endocrine system disorders, based on the license it took from Genentech for a range of indications. In May 2002, the company raised its Series A round of about $21.5 million and disclosed the rhIGF-1 licensing. Genentech took an equity stake in Tercica through the deal, and could receive milestone payments and royalties. (See BioWorld Today, May 24, 2002.)

IGF-1 is a 70-amino-acid protein needed in tissues for normal growth and metabolism in humans.

The company has Phase III data of rhIGF-1 in children with severe pediatric insulin growth factor-1 deficiency (IGFD). It plans to complete the transfer and validation of its rhIGF-1 manufacturing process and submit a new drug application to the FDA by early 2005 in that indication. But it also has plans for the compound in several other areas.

It has a Phase III trial planned for late 2004 in pediatric IGFD, a Phase II trial planned for early 2005 in adult IGFD, a Phase II trial planned for late 2004 in Type A diabetes and a Phase II trial planned for early 2005 for Type II diabetic patients with severe insulin resistance.

In December, the company entered a development and commercial supply contract for the manufacture of bulk rhIGF-1 with Cambrex Bio Science Baltimore Inc., of Baltimore. In July, it signed an international license and collaboration agreement with Genentech obtaining rights to develop and commercialize rhIGF-1 for a range of indications, including short stature, outside the U.S. The companies have established a joint steering committee, including three representatives from each side, to oversee the product's development and commercialization.

Genentech owns just more than 4 million shares of Tercica, making it a 5.6 percent shareholder of the company. MedImmune Ventures Inc. and Care Capital LLC each owns 4 million shares, and have 5.5 percent stakes in Tercica. Its largest stockholder is MPM Capital LP, which has about 26.8 million shares, or a 36.8 percent holding. Prospect Management Co. II LLC owns about 13 million shares, or 17.9 percent, and Rho Ventures has 8 million shares, or 11 percent.

As of Aug. 31, the company had about 72 million shares of common stock outstanding, held by about 44 stockholders.

Tercica has enlisted Morgan Stanley & Co. Inc., of New York; Lehman Bros. Inc., of New York; and Pacific Growth Equities LLC, of San Francisco, as underwriters.

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