Labopharm Inc. is raising about C$22 million (US$16.3 million) in a bought-deal financing, giving it two years of cash as it gears up for a product launch.
The shares will be publicly offered in Canada at $4.90, with underwriters, led by National Bank Financial Inc., of Montreal, having an overallotment option on another 15 percent of the issue size.
The funding gives Montreal-based Labopharm resources to "meet all of our commitments," CEO and President James Howard-Tripp said. "We will now have sufficient cash to have in excess of two years' cash on hand."
The transaction is expected to close around July 15. The bought deal, which is "not used much in the U.S.," said Warren Whitehead, Labopharm's chief financial officer, "almost happened in the blink of an eye."
In a bought deal, "the liability switches from the company to the underwriters, where [underwriters] make a firm commitment" regarding price and number of shares. Once that deal is done, it's up to the underwriters to find buyers in the market.
"They complete the whole thing in a couple of hours," Whitehead told BioWorld Today, and although the actual investors are not yet known, he said, "We will probably know over time - we know it's mainly institutional."
In this case, the underwriters' option is for a total of C$3.3 million. Given that, the total financing could bring Labopharm about C$25.35 million assuming the full overallotment option, Howard-Tripp said. The price per share is a 5 percent discount to the company's Thursday closing price on the Toronto Stock Exchange, he said.
The company's stock (TSE:DDS) fell C35 cents Friday to close at C$4.85.
Before the financing, Labopharm had about 12 months of cash, Howard-Tripp said. The company is expecting revenue from licensing deals for Tramadol, which is nearing a new drug application filing, but "people were not privy to that information," he said, and investors were getting uncomfortable with just one year of cash on hand.
The financing takes care of that. It also allows Labopharm to complete the commercialization process for Tramadol in Europe and the U.S., as well as progress new products to the clinic and sport a "more robust balance sheet" in Tramadol negotiations, Howard-Tripp said.
Tramadol, an analgesic, was marketed in the U.S. by Johnson & Johnson, of New Brunswick, N.J., as Ultram, he said, but the product was dosed at 50 mg, taken four to six times daily. In Europe there is a twice-daily version, but using Labopharm's Contramid controlled-release technology, the company's goal is to provide a once-daily dose of Tramadol with a lower side effect profile.
It has completed enrollment of more than 1,000 osteoarthritis patients for two Phase III Tramadol trials in the U.S. and anticipates having results from the 12-week trials in the fourth quarter. It plans to combine results with data from its completed European Phase III trials and file a new drug application. It filed in Europe in the first quarter, and has marketing deals secured for France, Italy, Spain and Portugal. It is in discussions in the U.S.
Founded in January 1995, Denis Langlois bought technology from the University of Montreal and the University of Quebec in Montreal to start the company, and it is still in contact with two of the original four founding scientists. The company went public in Toronto in June 1996. It has 68 employees now, and, Howard-Tripp said, it expects to add between seven and 20 people in the next 12 months.
The company has eight other products in development, including Oxybutynin and Trimebutine maleate, a product partnered with Axcan Pharma Inc., of Mont St. Hilaire, Quebec. It also has DDS-2003, a product Labopharm "wants to advance to the clinic in the relatively short term," Howard-Tripp said. Like Tramadol, the product is in the central nervous system/pain area.
"We'll use the same model we used with Tramadol to bring remaining products forward, or any other products," Howard-Tripp said, noting that Tramadol was brought from the bench to a European filing in about three years. "We think it should take 18 months to three years to get a product through.
"As we move forward and consider sales and marketing, it's prudent we look at a degree of specialization," he added. "And we've chosen CNS/pain."