By Debbie Strickland
Just six weeks after completing a $17.5 million private placement, SUGEN Inc. is seeking $43.1 million in the public equity markets.
The company's cash level at mid-year was $43 million, with a burn rate of $6 million to $7 million a quarter. If the new offering succeeds, SUGEN could end 1997 with more than $90 million in cash.
Founded in 1991, the Redwood City, Calif., company specializes in small molecule drugs targeting cellular signal transduction pathways. SUGEN has 15 programs in development and three drugs in clinical trials, including SU101 (leflunomide), a cancer drug expected to enter Phase III trials by the end of the year.
To push compounds through this packed pipeline, the offering calls for the sale of 2.5 million shares at an assumed price of $17.25 per share.
At that price, SUGEN would net $40.1 million, or $46.2 million if the underwriters' overallotment option of 375,000 shares is exercised in full. Combined with existing sources of funds, the proceeds are expected to finance operations "into 2000."
The underwriters are led by Hambrecht & Quist L.L.C., of San Francisco, Lehman Brothers, of New York, and UBS Securities L.L.C., of New York.
SUGEN's stock (NASDAQ:SUGN) closed Monday at $15.63, down $1.13.
The company is developing new classes of small molecule drugs that interact with members of the tyrosine kinase, serine-threonine kinase and tyrosine phosphatase families of signal transduction molecules and their signaling pathways. These pathways are involved in a number of human diseases, including cancer and diabetes, as well as immune and neurological disorders.
SUGEN has three independent clinical-stage programs, including the lead product, SU101, a platelet-derived growth factor receptor inhibitor, in Phase II for the treatment of malignant gliomas and other cancers. SU5271, an epidermal growth factor receptor inhibitor, is in Phase I studies for psoriasis, and SUGEN recently initiated a Phase I trial for SU5416, an Flk-1 angiogenesis inhibitor, for the treatment of solid tumors.
The company is analyzing data from a Phase II trial of SU101 as a treatment for refractory malignant glioma and plans to begin a Phase III trial in this indication by the end of the year. The drug, in combination with a standard chemotherapeutic, is in Phase II trials in newly diagnosed brain cancer patients.
A Phase II trial of SU101 in a third indication — hormone refractory prostate cancer — is slated to start by year end. To date, more than 140 patients have been treated with the drug in seven trials, including patients with brain, ovarian, prostate and non-small cell lung cancers.
In addition to its independent cancer programs, the company has corporate collaborations at the preclinical level with Zeneca Group P.L.C., of London, Astra Medica, of Frankfurt, Germany, and Allergan Inc., of Irvine, Calif.
SUGEN Aims To Sell Its Own Products
SUGEN's business plan calls for building a vertically integrated oncology business in North America, including sales and marketing. In Europe and Asia, the company is seeking marketing partners.
The company signed its first such deal — worth up to $32 million — in October 1996 with ASTA Medica, for European and South American marketing rights to the Pan-Her and Raf inhibitor programs.
Formerly known as Her-2, Pan-Her is a tyrosine kinase believed to play an important role in certain aggressive breast, ovarian, gastric and lung cancers. In a 200-patient study, high levels of Pan-Her in tumors correlated with reduced survival time.
Raf, serine-threonine kinase, is a downstream signaling molecule through which numerous signaling pathways have been found to converge. Raf is known to interact with the oncogene Ras, and is required in order for Ras to relay its signals. The Ras oncogene may be linked to 20 percent of all tumors, including about 90 percent of pancreatic tumors.
A second cancer collaboration — with Zeneca in a deal potentially worth more than $50 million — is attempting to identify therapies for five undisclosed cancer targets. By helping fund clinical development costs, the company retains profit participation rights in North America, while receiving milestones and royalties on sales worldwide.
SUGEN's non-oncology partnering platform centers on target validation and screening, with partners eventually pursuing commercialization in the U.S. and elsewhere. Following this model, the estimated $30 million Allergan collaboration focuses on angiogenesis inhibition in ophthalmic applications of the Flk-1/KDR TK antagonist program. *