PARIS - NicOx SA, a drug development company specializing in therapeutic compounds that release nitric oxide (NO), is planning to make an initial public offering on France's Nouveau Marchi in June or October of this year, with the aim of raising US$60 million to US$80 million to fund its research program.

In two private funding rounds - the first in January 1996, when the company was founded, and the second in December 1997 - NicOx raised US$2.5 million and US$7 million, respectively. It had US$6.5 million remaining at the end of 1998.

Based in the south of France and headed by CEO Michele Garufi, NicOx currently employs 20 people and has a burn rate that will rise to US$5 million this year from US$3.5 million in 1998. The planned IPO will entail selling some 30 percent to 40 percent of the company's equity, giving it a value of US$150 million to US$170 million. While the amount of cash he is hoping to raise seems large in terms of NicOx's current research and development spending, Garufi said the company's financial appetite is commensurate with the value of its proprietary technology, the low risk of its business strategy and the profit potential of the markets it is targeting. It already has two products in clinical trials for four indications and has entered into strategic collaborations with two pharmaceutical companies, Bayer AG, of Leverkusen, Germany, and Astra AB, of Sodertalje, Sweden, for the development of several others.

NicOx's technology involves the grafting of an NO-releasing moiety onto a conventional drug to enhance its efficacy/safety profile. It is sufficiently innovative for the resulting NO compound to be patentable as a new chemical entity, and NicOx has been granted composition-of-matter patents on three lead compounds in Europe and the U.S. In addition, it has filed more than 90 patent applications worldwide for all compounds in its research pipeline.

Because these compounds have already proved their therapeutic efficacy in their conventional formulations, there is little risk involved in enhancing them, Garufi said. Trials have confirmed that transforming a conventional drug into an NO-releasing one brings two major benefits: it amplifies the pharmacological response, and it reduces the side effects. At present, NicOx is focusing on the development of NO-releasing versions of non-steroidal anti-inflammatories (NSAIDs) for a variety of pathologies, but it is also looking ahead to developing completely new NO-releasing drugs. It has formulated a three-phase development strategy: NO-NSAIDs for the treatment of inflammation, pain and thrombosis, using off-patent NSAIDs with proven efficacy; new applications of NO-NSAIDs for pathologies such as urinary incontinence, osteoporosis and Alz heimer's; and new NO-releasing drugs to treat conditions such as asthma and respiratory disease, inflammatory bowel disorder, cardiovascular disease and ulcer.

NicOx has already validated its technology in NO-NSAIDs for inflammation - a US$10 billion-plus market worldwide in which gastric toxicity is a major problem. "You need a multi-mediated, multi-targeted approach to inflammation and pain," Garufi told BioWorld International, and NicOx claims that its NO-NSAID, HCT 1026, provides just that. The drug, the company's lead product, has successfully completed two Phase I trials that demonstrated both efficacy and absence of ulcerogenicity.

NicOx, which is not looking for a partner for HCT 1026, is also developing the product for urinary incontinence and osteoporosis. In urinary incontinence, for which the market is also estimated to be worth US$10 billion a year worldwide, initial data on bladder function in animal models demonstrated better activity for HCT 1026 relative to the parent compound. A Phase II trial on humans suffering from urge incontinence is due to begin in France in the second quarter of this year. With regard to osteoporosis, initial pharmacology data showed better inhibition of bone resorption with HCT 1026 than with the parent compound. A Phase II trial in humans is to be carried out in the U.K., starting in the fourth quarter of this year.

Garufi expects the company's first product to reach the market in 2004, and says it will probably not be HCT 1026 but a product developed by one of NicOx's partners. Its agreement with Bayer AG, signed in February 1998, gives the German company a worldwide license for NO-aspirin and derivatives (exclusive for all countries except Japan) in the primary indications of pain and thrombosis. NicOx's lead compound in this area is NCX 4016, and Bayer, which is responsible for its clinical development, is now engaged in Phase I trials. NicOx will receive milestone payments as well as royalties on sales of NCX 4016, which for analgesia alone could amount to as much as US$600 million a year, the company said.

The licensing and co-development agreement NicOx signed with Astra in September 1998 is very similar to its deal with Bayer. It gives Astra an exclusive license for selected NO-NSAIDs for the treatment of pain and inflammation in all countries (but semi-exclusive for Japan). Astra is responsible for the clinical development of two lead compounds and will pay NicOx milestone payments as well as royalties.

NicOx expects Astra to launch its first NO-NSAID in 2005, and says it could capture 20 percent of the world inflammation market within five years, meaning annual sales of US$2 billion. NicOx's lead compound in the management of acute pain is expected to reach the market in 2006, and to achieve annual sales of US$800 million within three years.

Garufi said the company will start to turn a profit as soon as the first product reaches the market. NicOx has been funded to date by five venture capitalists: Apax Partners, European Medical Ventures, HealthCap AB, Paribas Investissement Diveloppement and Sofinnova Partners. Now that the company is receiving research and development funding from its two partners, it is almost breaking even. It lost just FFr1.2 million (US$220,000) in 1998, thanks in part to a substantial up-front payment from Astra, as compared to losses of FFr9 million in 1997 and FFr6 million in 1996.

Garufi said NicOx has enormous profit potential. "We will have products going into markets worth US$1 billion to US$2 billion a year and will be receiving double-digit royalties," he said.

The large injection of capital NicOx is seeking through an IPO will enable it to plan its development for the next several years and take its products to an advanced stage of development before licensing them out, Garufi explained. "We aim to take products through Phases II and III of clinical development, so they will be more valuable," he said.

Alzheimer's disease is one of the main pathologies NicOx is targeting in the medium term. It is testing two NO-NSAIDs in this indication - HCT 1026 and NCX 530 (which could similarly be tested in urinary incontinence as well) - and plans to select one as its lead compound for Alz heimer's, with a view to starting clinical trials in 2000. Animal studies conducted in the U.S. have shown HCT 1026 significantly counteracts endotoxin-induced neuroinflammation.

The company also is studying the usefulness of NO-steroids in treating respiratory diseases. The scope for targeting nitric oxide at specific sites is expected to yield an improved safety/activity profile, and first research data on NO-steroids showed much higher anti-inflammatory and bronco-dilating activity than with current steroidal drugs.