By Karen Pihl-Carey
Five months after filing a shelf registration of 3 million shares with the SEC, EntreMed Inc. priced 1 million of those shares in an offering that grossed about $22 million.
The proceeds will enable the Rockville, Md.-based company to expand its clinical trial programs for endostatin, 2-methoxyestradiol (2ME2) and angiostatin.
EntreMed filed for the shelf registration in January. It offered to sell 2 million shares in March in hopes of raising $119.7 million, but later canceled that offering when the company's stock dropped. (See BioWorld Today, March 31, 2000, p. 1; and April 14, 2000, p. 1.)
The company decided to offer 1 million shares at $22 per share, despite market conditions, in order to gain solid stockholders to decrease the volatility, said Mary Sundeen, senior director of corporate communications at EntreMed.
"This transaction allowed us to bring in some new institutional investors into the stock," Sundeen told BioWorld Today. "We're leaving the 2 million shares on the shelf. We would still like to have those for favorable market conditions."
Sundeen also said EntreMed hopes the offering will result in analyst coverage for the company.
The share price of $22 was a discount to the company's stock (NASDAQ:ENMD) price, which closed Wednesday at $22.875, down $3. EntreMed's stock was selling at close to $60 when it offered the 2 million shares in March.
Banc of America Securities LLC, of San Francisco, is underwriting the offering, which is expected to close on Monday. EntreMed expects net proceeds of about $20.58 million, not only to develop its products, but also to provide working capital for general corporate purposes.
"We had over one year [of cash] in the bank before this transaction, so this carries us well beyond that," Sundeen said.
As of March 31 the company had cash and cash equivalents of $29.3 million.
Aside from the public offering proceeds, the company also has raised $24.2 million through the exercise of Series 2 warrants issued in connection with a private offering in July 1999. And it raised another $4.2 million this year from the exercise of options and other warrants. Earlier this month it had 15.7 million shares outstanding.
EntreMed has nine products in development, but funds from the offering will go mostly toward the three products in the clinic, Sundeen said. EntreMed's endostatin protein entered Phase I trials last October and is nearing completion of those trials for solid tumors and lymphomas. The endostatin protein is a naturally occurring fragment of collagen 18a. The company expects to report data in November, Sundeen said.
The company's 2ME2 product, an orally active small-molecule inhibitor of angiogenesis, began a Phase I trial in March in patients with advanced breast cancer. And angiostatin, a naturally derived antiangiogenic protein, entered a Phase I trial in April for cancer.
The production of angiostatin will not be affected, Sundeen said, by the inventorship lawsuit filed recently by Abbott Laboratories, of Abbott Park, Ill., against Children's Hospital in Boston.
Sundeen said EntreMed's position is that the hospital's patent predates Abbott's patent and the hospital's cancer researcher, Judah Folkman, discovered the tumor-inhibiting properties of a small section of an angiostatin protein known as Kringle 5. Abbott claims in its suit filed in the U.S. District Court in Boston that one of its scientists, Donald Davidson, discovered the properties, making Abbott the rightful owner of the patent.
The suit names EntreMed as a defendant because it has licensed Kringle 5 from the hospital. Recombinant human angiostatin, however, uses kringles 1 through 3.
"It would not impact the forward development of our angiostatin molecule," Sundeen said. "It is not related. But if we decided to create a product using Kringle 5, the question is would we write our royalty check out to Abbott or to Children's Hospital. That's the crux of it."