By Randall Osborne

West Coast Editor

With Novavax Inc.'s estrogen replacement therapy still officially unpartnered, King Pharmaceuticals Inc. is joining forces with the company in the form of a $25 million convertible debenture investment in the company.

Under the terms of the debenture financing, the note is convertible into Novavax stock at $10, an 18 percent premium to the 20-day trading average before closing, and it carries a 4 percent coupon payable semi-annually in cash and stock.

Novavax got $20 million from Bristol, Tenn.-based King on Tuesday, and is in line for $5 million more when the company files its new drug application for the transdermal estrogen therapy, called Estrasorb, which is expected to happen in the first half of next year.

King, which has collaborated with Novavax on various projects in the past, also has a license to use Novavax's cell line to develop - and maybe commercialize - recombinant human papillomavirus (HPV) virus-like particle (VLP) vaccines.

"We'll do the bulk antigen, and they dilute it and put it in the right formulation," said Robin Robinson, director of molecular vaccines for Columbia, Md.-based Novavax.

Dennis Genge, vice president and chief financial officer of Novavax, said commercializing the vaccines with King "could happen, and it could happen in a variety of ways. Profits would either be shared through sales and revenue and/or royalties."

As for Estrasorb, it's "still too early to tell" whether King or another partner will come aboard, Genge told BioWorld Today. Results from a Phase III trial with Estrasorb are due in February. Meanwhile, the King investment is the first significant such outlay by a pharmaceutical firm in Novavax.

Some of the money made available by King has been used to complete Novavax's acquisition of St. Louis-based Fielding Pharmaceutical Co., with its 60-person sales force in obstetrics and gynecology, disclosed in October. Novavax agreed to pay $31.5 million - $13 million in cash and the rest in stock.

"We needed this financing in order to complete the Fielding acquisition," Genge said. "That was kind of the key, and the $13 million to Fielding was done [Wednesday]. It was almost a simultaneous closing."

The remainder of the money from King will go for general operating purposes.

Novavax and King are working on the manufacture of HPV-16 VLP vaccines, being tested by the National Cancer Institute (NCI) in clinical trials. In September, Novavax received a contract from the NCI to manufacture the HPV-16 L1 VLP vaccine for large-scale clinical efficacy trials. The product for the NCI trials will be manufactured by King, using personnel from both firms.

The vaccines could prevent or treat HPV-induced cervical cancer, caused by a strain of HPV that leads to about half of all cases, and is carried by about 18 percent of women in the U.S. and 8 percent of men. Robinson said 90 percent of HPV-infected women have no problem with it, but 15,000 to 20,000 per year die.

With Estrasorb, a Phase III trial is under way in 200 women, half of whom are receiving placebo and half 7.5 mg daily of Estrasorb for 12 weeks. The study is designed to measure Estrasorb's ability to deliver 17 beta estradiol through the skin when applied as a topical lotion, with a clinical endpoint of reducing hot flashes in menopausal women. At the start of the year, Novavax raised $11.25 million in a private placement to advance the trials. (See BioWorld Today, Feb. 3, 2000.)

Novavax is focused on women's health, using lipid vesicle encapsulation technologies, including one called Novasome, which deploys lipid vesicles and micellar nanoparticles. Novasome is the delivery vehicle for Estrasorb, and also is being investigated as a vaccine adjuvant, Robinson said.

He explained the VLP vaccine approach to HPV:

"We've taken the proteins that the virus uses to make its shell, with no nucleic acid in it, so it can't be infectious," he said. "That virus-like particle is seen by the body like it was a regular virus, and makes an immune response."

A similar approach is being explored preclinically against anogenital warts, Robinson told BioWorld Today.

Novavax's stock (AMEX:NOX) closed Wednesday at $9.12, up 2 cents.