By Jim Shrine
Celgene Corp. completed its second $15 million financing this year as it placed convertible notes on very similar terms to the deal it closed in January.
John Hancock Mutual Life Insurance Co., of Boston, and affiliates purchased $15 million in notes that can be converted into common stock at $19 per share, starting in one year. In January the life insurance company purchased $15 million in notes that can be converted into common Celgene shares at $18 apiece.
The company's stock (NASDAQ:CELG) closed Monday at $17, up 31.25 cents per share. Celgene has about 16.8 million shares outstanding and reported cash of $14.8 million on March 31, with a net loss of $6.6 million in the first quarter.
Celgene, of Warren, N.J., handled the financing itself. The company's primary focus is on development of Thalomid (thalidomide), which is approved for treating erythema nodosum leprosum and is being tested in about 60 trials in numerous indications.
"This was an opportune time to enhance liquidity and strengthen the balance sheet, which are key financial objectives of the company," said Bob Hugin, Celgene's chief financial officer. "Sales continue to be strong. Liquidity is not an issue but at the same time we want to further enhance the balance sheet."
Specific terms of the financing were not disclosed, but Hugin said they were very similar to the deal in January that entailed a 9 percent interest rate. The main difference is the convert price of $19 instead of $18, he said. (See BioWorld Today, Jan. 22, 1999, p. 1.)
Sol Barer, Celgene's president and chief operating officer, said the 60 trials in oncology and immunology indications cause much less of a cash drain than the numbers would suggest. The National Cancer Institute is collaborating with Celgene in a number of trials in oncology, and various institutions and individuals are running others.
"Even though we have so many clinical trials," he said, "the overwhelming majority of them are supported by third parties. Our contribution is drug substance."
Barer said Celgene intends to initiate pivotal trials in at least one oncology and one immunology indication by the end of the year. Multiple myeloma is the lead hematological malignancy indication, while the target in solid tumors has not been finalized, he said. A protocol for a Phase III trial in Crohn's disease is being developed, Barer said.
Thalomid sales in the first quarter were $3.5 million, an increase of 59 percent from the preceding quarter. Analysts are projecting second-quarter sales of $5 million to $5.5 million, Hugin said - an estimate he called "reasonable."
Barer said, "Analysts have us breaking even in the last quarter this year. We tend to be a little more conservative than that, and look to the first quarter of next year."