By Randall Osborne

West Coast Editor

Axys Pharmaceuticals Inc.'s coffers will swell by up to $50 million as a result of a financing deal related to stock sales to Acqua Wellington North American Equities Fund Ltd., which said it would buy $10 million worth of shares right away.

Under the terms of the agreed-upon arrangement, Axys will sell to Acqua 1.639 million shares for $10 million, at $6.10 per share, which is a negotiated discount from Axys' volume-weighted average stock price July 20. Axys' stock (NASDAQ:AXPH) closed Friday at $6.75, up 59.37 cents, or nearly 10 percent.

Axys may sell up to $40 million more stock to Acqua over the next 15 months, at discounts to be determined before each sale. Axys will decide when and how much is sold, and will use the proceeds for its oncology program, as well as operating costs and general corporate purposes.

Mark Lucky, controller for South San Francisco-based Axys, said the company will take down a certain amount every month, not to exceed $10 million in a given month.

"It gives us a couple years worth of cash, and it's a less expensive way to raise some money," Lucky said. "We're building our war chest, so we have a little more flexibility downstream."

After the first $10 million piece of the deal, Axys will have 36.93 million shares outstanding. The company now has $40 million in cash and receivables, with a burn rate of about $25 million per year.

In March, the company raised $31.5 million in a private offering. The next month it gained a 43 percent, or $60 million, equity interest in Discovery Partners International (DPI). Axys Advanced Technologies Inc., which is Axys' combinatorial chemistry business, merged with a subsidiary of DPI, which went on to file for its initial public offering, aiming to raise $115 million. (See BioWorld Today, May 11, 2000, p. 1; and April 13, 2000, p. 1.)

Axys suffered a setback in May, when Bayer AG quit development of Axys' asthma drug, BAY 44-3428, because of toxicity problems. But the tryptase inhibitor program from which the drug emerged will continue, Axys said. (See BioWorld Today, May 25, 2000, p. 1.)

"Some of the folks here went back to Germany and met with Bayer," Lucky said. "To make a long story short, there's an ongoing relationship, and Bayer's looking at other ways they can make use of the compound."

Another compound in the program has potential application for ulcerative colitis, which Bayer also is exploring, Lucky said.