By Mary Welch
Theratechnologies intends to raise between C$20 million (US$13.5 million) and C$25 million (US$16.9 million) publicly to help accelerate its clinical trials, and another C$10.8 million privately to finance and eventually spin off its affiliated company, Ecopia BioSciences.
The Montreal-based firm filed a preliminary short-form prospectus, and the public stock will be priced on Tuesday.
"Our stock is at about C$10 a share, so we're talking about 2 million to 2.5 million shares of stock," said Luc Tanguay, senior vice president and chief financial officer. The company has 22.9 shares outstanding.
"I'm sure the market in Canada is like the market in the United States: volatile," he said. "I think there is still room for current issues and your pricing will be OK if you have a good story behind the issue. We have a tradition with the public markets and the investors know us well. We strongly believe there is room for this kind of issue."
The syndicate of underwriters handling the offering is led by Toronto-based Yorkton Securities Inc. and BMO Nesbitt Burns Inc. Also involved are National Bank Financial Inc. and Desjardins Securities Inc., both of Quebec.
In the separate deal, Theratechnologies will make a private placement of common share purchase warrants totaling C$10.8 million with an institutional investor. The warrants entitle the holder to acquire, without additional payment, 1.2 million common shares of Ecopia BioSciences held by Theratechnologies, within 18 months of the listing date of Ecopia's shares on a recognized market, or 540,000 common shares of Theratechnologies, should Ecopia not be listed on or before May 5, 2004. The net proceeds of this offering will be used by Theratechnologies to purchase 1.2 million units of Ecopia so as to meet its obligation to deliver to an institutional investor 1.2 million common shares.
"This investor can exchange those warrants into one share of stock in our subsidiary, Ecopia, if Ecopia goes public within a certain period of time," Tanguay said. "If not, it can be exchanged for common stock of Theratechnologies. But since Ecopia will go public, that will not happen."
Tanguay added, "With this private offering, Ecopia will be very well capitalized and in a position to increase its capacity to develop a wide array of genomics products and accelerate the discovery and development of bioactive molecules from natural sources."
In fact, Theratechnologies' board of directors, along with Ecopia's board, has approved an agreement to spin Ecopia off as a public company this year. In addition, Theratechnologies will pay its shareholders, during fiscal year 2000, a dividend in the form of Ecopia's shares.
Started two and a half years ago, Ecopia is focused on finding new antibiotics using the genomics of microorganisms that naturally produce some of the most widely used antibiotics, anticancer agents, immunosuppressants and other therapeutics. The company has the largest database of microbial genes and biosynthetic pathways involved in making bioactive small molecules, he said.
"Instead of the trial-and-error way of taking bugs, expressing them and seeing if there is any activity, Ecopia looks at the DNA of bugs and compares them to its already-established database of bugs," Tanguay said. "Right now Ecopia is a toolbox for big pharma to help find new antibiotics. Eventually it wants to use its database to find antibiotics internally."
Theratechnologies will use the proceeds to advance the trials of its two lead products, growth hormone-releasing factor (ThGRF) and photodynamic treatment (PDT).
"It is our position to have 2.5 years of cash on hand," Tanguay said. "If we are to accelerate these trials and do three of them instead of just one for the ThGRF, then we would be under that 2.5-year position. With this financing we will be able to keep our financial position."
PDT is used to treat a variety of cancers that affect the bone, such as chronic myeloid leukemia, breast cancer, non-Hodgkin's lymphoma and multiple myeloma. It is in Phase II trials.
Due to start Phase II trials in the next few months is ThGRF I-44, a growth hormone-releasing factor analogue that may offer a solution in the treatment of muscle deconditioning observed in various wasting pathologies.
"When you are 50 years of age, your IGF-1 [insulin-like growth factor] is half of what it was at age 20," Tanguay said. "This is associated with the loss of muscular mass, lower bone density and a lowered ability to perform normal daily activities. In our Phase Ib trials, we were able to get the IGF-1 levels back to what a 20-year-old has in three days."
The company will be conducting trials in people over age 65, those with chronic obstructive pulmonary disease (such as asthma), and those with prolonged immobility, such as people who are hospitalized more than five days. In the pulmonary group, Theratechnologies does not intend to treat the disease; rather, it hopes by increasing the lung muscle it will make breathing easier, he said.
Theratechnologies' stock (TSE:TH) closed Wednesday at C$9.55, down C20 cents.