By Lisa Seachrist

Washington Editor

Caught in an unpredictable market, Magainin Pharmaceuticals Inc. raised a somewhat disappointing $18 million in a public offering — significantly less than the estimates made when the company registered its offering in October.

Magainin, of Plymouth Meeting, Pa., sold 2.25 million shares of common stock at $8 per share to raise $18 million. The company was originally seeking $26.9 million by selling 2.5 million shares at an assumed price of $10.75.

The underwriters — Hambrecht & Quist LLC and Cowen & Co., both of New York, and BancAmerica Robertson Stephens, of San Francisco — have an overallotment option of 337,500 shares.

Magainin hasn't designated the proceeds to any particular project, but it intends to use the cash along with existing resources to fund the company through 1999. As of Sept. 30, the company had $25.1 million in cash and investments with a net loss of $8 million for the first nine months of 1997.

Magainin focuses on host defense drug discovery as well as asthma genomics. Host defense drug discovery isolates potential therapies from the natural host defense systems of animals. Cytolex and Squalamine are the company's lead drug candidates.

Their lead drug candidate for the treatment of diabetic foot ulcer, Cytolex — a 22-amino-acid synthetic peptide, is one of a new class of compounds known as magainins. Originally discovered in the skin of the African clawed frog, magainins kill bacteria by poking holes through their cell membranes.

In Phase III studies, a one percent topical cream of Cytolex proved statistically equivalent to the oral drug of choice for treating diabetic foot ulcers — ofloxacin — which is associated with insomnia.

The results of those studies served as the basis of a marketing deal in February with London-based SmithKline Beecham plc. Magainin gave SmithKline the North American marketing rights in return for royalties plus up-front and milestone payments worth up to $32.5 million.

Squalamine is the most developed drug candidate in the company's aminosterol program. Squalamine was found in the body tissues of the dogfish shark; it prevents the formation of new blood vessels believed to be crucial for tumor growth. The company has begun Phase I trials with Squalamine as treatment for solid tumors.

The company also has identified two genes associated with the pathogenesis of asthma — Asthma Associated Factor 1 and 2 — which they intend to use as targets for asthma and allergy drugs.

Magainin's stock (NASDAQ: MAGN) closed Wednesday at $7.75, down $0.50. *

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