By Karen Young

Orphan Medical Inc. raised $14.1 million through a private placement to be used for the launch of Xyrem, which is awaiting FDA approval for the treatment of cataplexy in those with narcolepsy.

The money was raised through a private placement of about 1.7 million shares of common stock at $8.25 per share, a negotiated price, to Alta Bio Pharma Partners LP, of San Francisco, and funds were managed by current investors OrbiMed Advisors LLC, of New York, and Medical Strategy, of Dohlau, Germany. Thomas Weisel Partners LLC, of San Francisco, acted as Orphan¿s agent and financial adviser in the transaction.

Orphan¿s stock (NASDAQ: ORPH) rose 94 cents on Monday, or 9.5 percent, to close at $10.79.

¿This is just another important step to allow us to be in a better financial position, which will help us prepare for the anticipated launch of Xyrem, as well as continue addressing other product opportunities as well,¿ said David Folkens, senior marketing communications specialist for Orphan Medical, of Minneapolis.

Orphan had about $9 million available to it on Sept. 30, including $3 million in credit, Folkens said, noting that the company has experienced a burn rate of about $1.5 million per quarter.

The new funds will allow Orphan to add personnel to prepare for the substantial expense of a marketing launch.

¿We are consistently looking at other product opportunities, but there is nothing I can say is coming up immediately ¿ it¿s just that this will just allow that flexibility if there¿s something that fits for us,¿ Folkens said.

Orphan expects to have FDA approval of Xyrem (sodium oxybate) oral solution by April for the sudden loss of muscle control called cataplexy. The FDA issued an approvable letter to Orphan on July 2. (See BioWorld Today, March 5, 2001; July 5, 2001; and June 7, 2001.)

The company responded to the FDA on Oct. 9 on one issue the agency raised, and the FDA cleared the company¿s contract manufacturer to produce certain classes of drugs, including Xyrem.

The development of Xyrem has sparked some controversy because of its use of gamma hydroxybutyrate, or GHB, a controlled substance that can be lethal if improperly used. It also has been called the ¿date-rape drug.¿

¿The mechanism in narcolepsy is unknown,¿ said William Houghton, chief medical officer at Orphan. ¿We know that it influences the transmitter substances in the brain and has a direct effect on cerebral metabolism, which results in a change in sleep architecture.

¿It may be this combination of events by which narcolepsy mechanisms are changed,¿ Houghton said.