By Randall Osborne

In a private offering to institutional investors, Alkermes Inc. raised $100 million from the sale of 2 million shares of convertible, exchangeable preferred stock at $50 per share.

Cambridge, Mass.-based Alkermes said the deal, expected to close March 4, grants the initial purchasers a 30-day option to buy up to 300,000 shares more to cover overallotments, which would add $15 million to the proceeds.

"Really, it's a strategic financing," said Richard Pops, CEO of Alkermes, a drug delivery company.

Pops said some of the proceeds will be used to further develop its drug delivery systems for proteins and small molecule compounds, but the company's focus will change somewhat.

"Now that we know they are going to be commercial, we'll have the resources to apply them to more proprietary products," Pops said. "There are more and more proteins of therapeutic interest, not all of which are being developed by large pharmaceutical companies. They need a delivery system to realize their potentials."

Dividends on the preferred stock will be cumulative at an annual rate of $3.25 per share, and will be convertible to common stock at a conversion price of about $29.625 per share, subject to adjustment in certain circumstances.

At the company's option, the preferred stock will be exchangeable into 6.5 percent convertible debentures, which will also be convertible into shares of common stock.

The stock and debentures, if issued, will be redeemable by the company at declining redemption prices, commencing in March 2001.

Alkermes is developing products based on three proprietary drug-delivery systems: ProLease; Cereport, previously known as receptor-mediated permeabilizer (RMP-7); and Medisorb.

In January, Alkermes signed a potential $30 million deal with Johnson & Johnson (J&J), of New Brunswick, N.J., to develop a sustained-release formulation of the blood booster erythropoietin using Alkermes' lead system, ProLease. (See BioWorld Today, Jan. 23, 1998, p. 1.)

Last October, the company sold commercialization rights to Cereport, designed to carry compounds across the blood-brain barrier, for up to $60 million to Palo Alto, Calif.-based Alza Corp. (See BioWorld Today, Oct. 7, 1997, p. 1.)

"We're starting our first Phase III trial in Cereport for primary brain tumors," Pops said.

Medisorb, on which J&J also has partnered with Alkermes, encapsulates small molecule compounds in polymers so the therapeutic solution is released gradually as the polymeric microspheres erode, significantly reducing the number of injections a patient receives. (See BioWorld Today, Oct. 28, 1996, p. 1.)

Pops said the company will use its infusion of money to continue pursuing new delivery methods.

"We built Alkermes through acquiring drug-delivery technologies, and now we can do more," he said.

Alkermes' stock (NASDAQ:ALKS) closed Friday at $23.187, down $0.312. *