By Randall Osborne

With a new drug application (NDA) filed for one product, and a second compound in Phase III trials, GelTex Pharmaceuticals Inc. raised $81 million in a public offering that topped the company's expectations in share numbers and price.

Waltham, Mass.-based GelTex registered with the Securities and Exchange Commission for the offering in February, intending to sell 2.5 million shares. Assuming $26.50 per share — the market price at the time the company filed its prospectus — the offering would have raised $66.3 million. (See BioWorld Today, Feb. 2, 1998, p. 1.)

Instead, the offering priced 3 million shares at $27 each for a total of $81 million.

Although follow-on offerings often are richer than initial public offerings, GelTex's offering stands out in the current market, which has been unreceptive to biotechnology companies in the U.S. and abroad. (See BioWorld Financial Watch, March 9, 1998.)

GelTex's financing comes a day after CuraGen Corp., of New Haven, Conn., defied the sluggish trend by completing its initial public offering, which raised $56 million.

But two big financings in a row still don't make a turnaround, said Eric Schmidt, an analyst with UBS Securities, of New York.

"The market will always pay for companies like GelTex, who are hitting their milestones, but I don't think the window's wide open, by any means," Schmidt said.

GelTex's first product, RenaGel for dialysis patients, is designed to control elevated phosphorous levels by binding in the intestine with dietary phosphate (mostly from proteins), thus preventing it from reaching the bloodstream. RenaGel and the phosphate are excreted.

Last June, Genzyme Corp., of Cambridge, Mass., made an equity investment in GelTex and agreed to pay $25 million in milestones. The companies formed RenaGel LLC, a joint venture with worldwide right excluding Japan and the Pacific Rim, which were covered under an earlier agreement with Chugai Pharmaceutical Co. Ltd., of Tokyo.

A second drug, CholestaGel, is in Phase III trials. The non-absorbed hydrogel binds and removes bile acids from the intestinal tract, thereby stimulating the liver to remove cholesterol from the bloodstream.

Phase III trials of CholestaGel are expected to wrap by the end of this year, with an NDA to be filed in mid-1999.

GelTex plans to seek approval of CholestaGel first as a monotherapy, and may later ask for marketing clearance for the drug in combination with HMG co-A reductase inhibitors, also called statins, which are the most widely prescribed class of systemic cholesterol-lowering drugs.

GelTex's and CuraGen's success may not signal an immediate change in climate, Schmidt said, but the biotechnology market is "likely to improve" this year.

"It's been a poor performer versus the pharmaceutical industry for two years, and [biotech] is doing the same things the pharmaceutical companies are doing now," Schmidt said.

He said the last flurry of intense biotech financing activity came in the spring of 1996.

"If we get five to 10 deals done in a month's span, then I might think things are hot again," Schmidt said.

GelTex said in its prospectus that proceeds from the offering would be used for Phase III clinical trials and other costs related to CholestaGel, for commercialization and other costs associated with RenaGel, and for general corporate purposes.

In its proposed offering, GelTex granted overallotment options for 375,000 shares, which would have increased the proceeds by $10 million.

With the larger offering, the underwriters — Cowen & Co., CIBC Oppenheimer Corp., and Hambrecht & Quist LLC, all of New York — have the option to buy 450,000 shares, worth more than $12 million.

At the end of last year, GelTex had $52.6 million cash, with a net loss of $24.4 million for 1997. GelTex has 16.6 million shares outstanding.

GelTex's stock (NASDAQ:GELX) closed Thursday at $27.25, down $0.25. *