By Randall Osborne

Isis Pharmaceuticals, soon to complete Phase III trials of its lead drug for AIDS-related eye disease, has completed a $25 million private debt financing with an institutional investor.

Terms of the financing provide for a 10-year maturity on the debt, with interest payments accruing during the first five years and payable quarterly in cash at 14 percent per annum thereafter.

In connection with the financing, Carlsbad, Calif.-based Isis has issued seven-year warrants to purchase 500,000 shares of stock, exercisable at $25 per share.

The company's stock (NASDAQ:ISIP) closed Monday at $15, down $2.

Lynne Parshall, vice president and chief financial officer for Isis, said the latest infusion of money came from "an investor who knows the company well and has a significant equity position."

Isis' lead product is fomivirsen, an antisense drug to treat AIDS-related cytomegalovirus (CMV) retinitis. The company plans to file a new drug application for fomivirsen with the FDA early next year.

In July, Isis signed an agreement with CIBA Vision, of Atlanta, under which CIBA Vision will pay $20 million in a precommercial fee and milestones through the time of regulatory approval in the U.S. and Europe.

Under the terms of the deal, Isis will manufacture and sell fomivirsen to CIBA Vision, a division of Basel, Switzerland-based Novartis A.G., and the companies will split the profits. (See BioWorld Today, July 16, 1997, p. 1.)

So far, Isis has received $5 million of the money agreed upon as part of the CIBA Vision pact, Parshall said.

Funds from the private financing will be used for research and development of fomivirsen and other drugs, she added. "Given where we are in studies, we're hopeful that we're going to have good news in Phase III, so we were reluctant to raise a lot of money at the current [stock] price."

Isis specializes in antisense drugs, which function at the genetic level to interrupt the production of proteins that cause disease. Fomivirsen, which is delivered directly into the vitreous humor of the eye once per week for three weeks and then every other week for maintenance, cannot restore damaged tissue, but may protect unharmed retinal areas.

Another Isis compound, ISIS 2302, for treating Crohn's disease, is in a Phase IIb trial. "There will be an interim look at that study next year in the second or third quarter, and we'll make a decision on whether to expand the study or do another one," Parshall said. ISIS 2302 also is being tested in Phase II clinical trials for renal transplant rejection, rheumatoid arthritis, psoriasis and ulcerative colitis. (See BioWorld Today, April 22, 1997, p. 1.)

Several other antisense drugs developed by Isis as treatments for cancer are in Phase I and Phase II trials. Among them is ISIS 3521/CGP64128A, in Phase II trials as part of the company's collaboration with Novartis A.G. The drug is being studied for melanoma and ovarian, prostate, breast, brain, colon and lung cancers.

"We've had some nice, positive antitumor data," Parshall said.

Antisense Directly Targets Disease Genes

Developing antisense drugs is a "seductively simple" process, she noted. One strand of DNA transcribes enzymes to assemble messenger RNA, which in turn orders the cells to create specific proteins. Isis, in designing its drugs, uses antisense molecules that counter "bad" genes (such as those involved in the growth of cancer), preventing them from completing their tumor-growing instructions to cells.

"The thing that has plagued the [antisense] industry most is the failure to dedicate critical mass" to the complexities of the science involved, Parshall said. "For various reasons, each of the other companies working in that area got diverted."

Hybridon Inc., of Cambridge, Mass., gave up development of its lead antisense product, GEM91 (gene expression modulator) for advanced HIV infection in July, after data from a Phase II clinical trial failed to confirm a decrease in cellular viremia shown in an earlier trial.

Then, in September, Hybridon's collaborator, Basel, Switzerland-based Hoffman-La Roche Ltd., pulled out of the five-year partnership, which had been established to identify lead compounds in hepatitis C and human papillomavirus. (See BioWorld Today, Sept. 5, 1997, p. 1.)

Hybridon does "extremely high-quality work, but they've always run on a shoestring," Parshall said. She attributed the success of Isis to its study of all the problems in devising antisense drugs.

"We know what the second- and third-generation drugs are going to look like," she said. "It's hard to say we're smarter than everybody else, although I'd like to say that. What I can say is that we're more focused."

As of Sept. 30, Isis had $68 million in cash, with a net loss of $20.2 million for the first nine months of 1997. *