Esperion Therapeutics Inc. raised gross proceeds of $64 million in a public offering, picking up enough to ensure itself of three years cash, after pricing 4 million shares at $16 apiece.
The Ann Arbor, Mich.-based company lost about $8.4 million in the quarter ended June 30, at which time it reported reserves of about $32.2 million in cash and short-term investments. Esperion said it expects the offering to close Aug. 6.
"For us, [$32.2 million] was a spend rate of something between 12 and 15 months," Timothy Mayleben, Esperion's chief operating and financial officer, told BioWorld Today. "But we felt that with very positive Phase II data recently reported at the end of June and a concomitant significant increase in investor interest, this was an opportune time to get out and update the story."
Esperion, which is developing therapies for cardiovascular and metabolic diseases related to high-density lipoprotein cholesterol, features four clinical products in its pipeline. A recently concluded Phase II study of ETC-216 in patients with acute coronary syndromes met its primary efficacy endpoint, demonstrating statistically significant regression of atherosclerosis.
Esperion could raise an additional $9.6 million if underwriters trigger their 600,000-share overallotment option. A New York-based syndicate is underwriting the deal, with bookrunning from Lehman Brothers and co-management from Citigroup Global Markets Inc., Needham & Co. Inc., U.S. Bancorp Piper Jaffray and SG Cowen Securities Corp. (See BioWorld Today, July 15, 2003.)
"We've got a very broad portfolio of product candidates," Mayleben said. "This was an opportunity to bring some money in to fund the development of our very broad and very exciting product pipeline. It also gives us the luxury of considering various partnering alternatives and continuing to develop products while we consider those alternatives."
He said Esperion would compile a data package on ETC-216, including the latest findings and those from prior clinical and preclinical studies, as part of a potential partnership with Pfizer Inc. The New York-based company has initial partnering rights to late-stage development of the drug, which Esperion in-licensed from Pharmacia Corp. Pfizer acquired the Peapack, N.J.-based company for $60 billion over the past year.
A Phase II trial of ETC-588 completed enrollment last month in acute coronary syndromes. A separate Phase II study of the compound continues to enroll carotid atherosclerosis patients. Mayleben said Esperion expects results from both studies during the first half of next year.
Phase I products include ETC-642, for which enrollment continues in patients with stable cardiovascular disease, and ETC-1001.
Following the announcement of the planned stock sale, Esperion's stock (NASDAQ:ESPR) closed at $19.89 July 14. By Friday, the shares had fallen to $15.78, losing 35 cents. But the shares' value declined for reasons other than the dilutive news of the offering.
Last Monday, the stock closed at $19.88 after daily volume of about 680,000 shares. Volume increased on Tuesday to 6.8 million shares and the stock fell to $17.38 when a hedge fund called Durus Capital Management LLC divulged it had become the company's largest shareholder through purchases on the open market. The stock slipped to $15.20 Wednesday on volume of 3.6 million shares.
Durus, managed by Scott Sacane, disclosed that it owned about 9.7 million Esperion shares - nearly 33 percent of the company's 29.4 million shares reported outstanding June 30.
"The big concern was the inadvertent nature of the acquisition of the shares and really significant questions as to whether he would be able to hold onto those shares," Mayleben said. "The uncertainty that that created in the market was really unfortunate from a timing standpoint, and it was unfortunate that the company had not been informed of his activities, which he was obligated to do under SEC rules."
On Wednesday, Esperion entered an agreement providing that Sacane would not increase his group's holdings, nor would the fund sell any of its shares before Oct. 29. After that date, Durus would be subject to ongoing resale limits, restricting its sales during any three-month period to 1 percent of Esperion's outstanding shares or no more than the average weekly volume of the stock. Durus also agreed to voting restrictions requiring that any shares it owns beyond 20 percent of Esperion's outstanding voting securities be voted in proportion to the votes cast by all other stockholders besides Sacane's group.
Mayleben said the offering's underwriters also placed restrictions on Durus, which acquired the stock over time since September.
Industry observers have suggested that Sacane is not necessarily interested in controlling the fortunes of companies such as Esperion. Rather, Durus is seen as attempting to attract other buyers to the stock over time in an effort to increase the fund's value.
Esperion wasn't the only one caught off guard by the hedge fund's disclosures early last week. Durus said it now holds 23 percent of Allos Therapeutics Inc., of Westminster, Colo.; more than three-quarters of the outstanding shares of Aksys Ltd., a Lincolnshire, Ill.-based maker of dialysis products; and large institutional holdings in two cardiac device firms - Norcross, Ga.-based Novoste Corp. and Irvine, Calif.-based Cardiac Science Inc.