By Brady Huggett

Regeneron Pharmaceuticals Inc. privately placed $200 million in seven-year convertible notes, thickening its wallet for clinical expenses and in support of its lead product, Axokine.

Regeneron, of Tarrytown, N.Y., separately released the news of the offering and then the confirmation of the placement Friday. The notes will accrue interest at 5.5 percent annually and have a conversion price of $30.25. Purchasers of the stock have an option to buy another $50 million in principal amount of notes.

Regeneron¿s stock (NASDAQ:REGN) closed Friday at $23.24, down $3.77, or about 14 percent.

¿We have a full pipeline,¿ said Murray Goldberg, senior vice president, finance and administration, and chief financial officer at Regeneron. ¿So the bulk of the funds will go to support those expenditures and programs. Axokine is our most advanced product and we are enrolling for a 4,000-patient Phase III trial now. That will be quite extensive and we have another product in Phase I and another about to enter Phase I in the next few months.¿

Goldberg said, assuming the conversion of all the placed notes, the company would have about 50.5 million shares outstanding. The company has not yet released its third-quarter earnings, but it had about $290 million in cash and securities on June 30. The company reported a net loss of $27.9 million for the first six months of the year. Goldberg said the company¿s burn rate is expected to ¿increase significantly¿ as it pays for trials and initiates others.

¿We expect the second half to be higher than the first half,¿ Goldberg said.

Axokine, its product to combat obesity, is in the enrollment phase of a pivotal Phase III trial that is expected to accrue about 2,000 patients. The product is a second-generation ciliary neurotrophic factor that is designed to affect the hypothalamus, thus controlling appetite. The large-scale trial will form the data backbone for Regeneron¿s new drug application hopes, with a second trial and several ancillary trials expected to enroll the remaining 2,000 patients. (See BioWorld Today, Aug. 1, 2001.)

¿What we have said is that it would take us six or seven months to enroll,¿ said Charles Poole, vice president, investor relations at Regeneron. ¿So January [2002 is the expected enrollment completion date] and we are confident we can meet that milestone.¿

The raised funds also will help Regeneron expand its manufacturing capabilities, something that may be needed if Axokine gets marketing approval.

¿We have two facilities [now], and this would begin to give us commercial-scale capacity,¿ Goldberg said. ¿The expansion is to give us preclinical and clinical material and the ability to make some additional commercial quantities.¿

Regeneron¿s product IL-1 Trap is in Phase I trials now to treat rheumatoid arthritis. It is a designed as a blocker of interleukin-1 activity. The company expects to announce preliminary results around the end of the year and should initiate a Phase II study in early 2002, Poole said.

Regeneron also has a VEGF Trap product that it expects to move into Phase I cancer trials later this year. Also, Goldberg said, Regeneron expects to move its product, IL-13 Trap, into the clinic early next year.

Regeneron owns ¿100 percent¿ of its pipeline, Goldberg said, so the $200 million frees the company to push ahead however it wants.

¿We now have the flexibility to make decisions on how to grow our business and grow our pipeline,¿ Goldberg said. ¿We can continue to move [our products] ahead on our own and do it at a rate that makes sense in terms of the clinical development. And we can expand our manufacturing capability so it does not become a bottleneck for us.¿

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