By Mary Welch

Aeterna Laboratories Inc. raised C$14 million (U.S.$9.29 million) in a bought deal of 1,056,604 subordinate voting shares at C$13.25 each, with the proceeds targeted for the early market entry of Ae941/Neovastat.

The underwriters, led by Toronto-based Yorkton Securities Inc., have the option to purchase another 158,491 shares to cover overallotments. Also involved as underwriters are HSBC Securities Inc., of Toronto; Canaccord Capital, of Vancouver, British Columbia; BLC Securities Inc., of Montreal; and Desjardins Securities Inc., of Quebec. Prior to the financing, the Quebec-based company had 28.2 million shares outstanding.

"This is what we were looking to raise," said Janet Craig, Aeterna's director of corporate communications and investor relations. "We weren't looking to raise a bunch of money because this was a Canadian offering."

AE-941, an angiogenesis inhibitor extracted from shark cartilage, is in clinical trials for three major indications: oncology, dermatology and ophthalmology. It is in Phase III trials for non-small-cell lung cancer and renal cell carcinoma. In addition, the company anticipates starting two more Phase III trials in oncology this year. "We haven't disclosed what indications," she said. "But it is in the oncology field."

Neovastat, another name for AE-941, is a novel orally bioavailable antiangiogenic product that has a unique multiple mechanism of action. It blocks two of the regulators of angiogenesis, matrix metalloproteinase (MMP) and vascular endothelial growth factor (VEGF). Most tumors secrete VEGF, which binds to specific receptor sites on the wall of blood vessels and triggers the growth of new blood vessels. Recent studies confirmed that Neovastat contains active components that specifically block the receptors where VEGF binds, the company said.

Studies have also shown that Neovastat regulates the VEGF-induced proliferation of endothelial cells that is believed essential in the growth of new blood vessels. In addition, Neovastat has been shown to inhibit MMPs, which are involved in breaking down the surrounding tissue and creating an opening for the formation of new blood vessels, the company said.

"We are in the top five in the race to the finish for an antiangiogenic compound," Craig said. "We believe we'll be in the top three in this area. That's the reason for this financing - to be able to do shorter, faster trials."

This month Aeterna started enrolling patients in both Phase III trials. The pivotal trial in progressive renal cell carcinoma will involve 270 patients across 50 sites in North America and Europe and should take about two years. The pivotal trial for non-small-cell lung cancer will involve 760 patients at 70 sites and is expected to last two to three years.

"We should start getting results at the end of 2002," Craig said.

Aeterna, which just listed on Nasdaq earlier this month, plans a U.S. financing in the near future. "We are looking to the U.S. over the next several months for a larger financing that will be used to make an acquisition in oncology," she added.

In addition, the company is in active negotiations with potential partners for AE-941/Neovastat.

Aeterna's stock (NASDAQ:AELA) closed Thursday at $8.25, down 75 cents.