Cypress Bioscience Inc. entered into agreements for the private sale of up to $17 million in stock to fund Phase II trials of milnacipran for fibromyalgia syndrome.
The proposed placement involves the sale of about 6.88 common shares and 3.44 million warrants at a unit price of about $2.47 each, to institutional and other investors. The warrants would allow the holder to acquire one share of common stock at an undisclosed premium to the current market price. The purchase price for the combined security is based on a 10 percent discount to the 10-day average closing bid price for the period ending Feb. 15.
San Diego-based Cypress’s stock (NASDAQ:CYPB) fell 41.5 cents Thursday, or 11.4 percent, to close at $3.225.
The sale would represent more than 20 percent of Cypress’s common stock outstanding, which would be 13.2 million shares after the transaction. Because of that, and because it is a private financing in which shares are to be sold at a discount, stockholders must approve it. A stockholders meeting has been set for March 25.
Cypress Chief Financial Officer Sabrina Johnson said the money would take the company into 2003 to continue its strategic focus on milnacipran.
“With the financing that large for a company like us, it gives us the opportunity to execute on our plan into 2003,” she said, noting that it would allow Cypress to look at other potential indications for milnacipran and look more seriously at other compounds that Cypress has identified for fibromyalgia syndrome (FMS).
The funding also gives Cypress the flexibility to do “the right things for the business,” Johnson said.
Cypress signed a license agreement in August with Pierre Fabre Medicament, the pharmaceutical division of bioMerieux Pierre Fabre, of Paris, that provides Cypress with an exclusive license to develop and sell any product with the compound milnacipran as an active ingredient for FMS and related chronic pain syndromes in the United States and Canada. The agreement also gives Cypress an option to expand the license to include other indications.
Milnacipran is approved in 22 countries and marketed in 13 countries for depression, Johnson said. It is not approved for any indication in the United States.
Cypress received the green light from the FDA in January to start clinical testing of milnacipran for FMS. The investigational new drug application was filed in December.
“We are proud of how quickly we were able to get the IND filed with the FDA and to be in the position we are now,” Johnson said, noting that the Phase II trials would begin right away.
Johnson emphasized that FMS is Cypress’s strategic focus now. Once, its focus was on its Prosorba column to treat rheumatoid arthritis.
In January 2001, Cypress restructured its original deal with Fresenius AG, of Bad Homburg, Germany, to allow Fresenius to take over all Prosorba column sales, marketing and clinical efforts worldwide. There was an up-front payment made to Cypress that included minimal royalty payments for the first five years, Johnson said. She said that there is still an opportunity to receive certain future payments based on meeting certain sales targets. If those targets are not reached, no payments will be made to Cypress, which retains the patent and the trademark for the product. (See BioWorld Today, March 9, 1999, and March 18, 1999.)