By Charles Craig

CollaGenex Pharmaceuticals Inc., with its first drug under review by the FDA, registered for a public offering of 1 million shares to raise funds for marketing the periodontal disease treatment if approved for sale in the U.S.

The Newtown, Pa., company's new drug application for Periostat, filed in August 1996, is supported by three successful Phase III trials demonstrating the treatment's ability to reduce and reverse the effects of periodontitis, a disease in which gums detach from teeth.

The disease is characterized by a build-up of bacteria around gums that causes inflammation resulting in release of collagenase, an enzyme that breaks down the connective tissue holding the gums to teeth. Current treatments involve scaling and planing to remove bacteria from teeth below the gum line and surgery to remove detached tissue.

Periostat contains doxycycline, an FDA-approved antibiotic, in dosage levels that do not kill bacteria, but do inhibit production of collagenase. The drug would be used in combination with traditional mechanical methods of cleaning away bacteria.

CollaGenex's equity financing comes less than a year after the company went public in June 1996, raising $20 million through the sale of 2 million shares at $10 per share.

Based on the $15 closing price of CollaGenex's stock (NASDAQ:CGPI) Thursday, the day before the company registered for the follow-on offering, it would generate $15 million. CollaGenex shares ended Monday at $14.25, down $0.75.

Following the offering, the company will have 8.5 million shares outstanding. In addition to the 1 million shares offered by CollaGenex, an undisclosed stockholder granted Baltimore-based underwriters Alex. Brown & Sons Inc. options to purchase 150,000 shares to cover overallotments.

CollaGenex ended 1996 with $18.2 million in cash and reported a net loss of $5.9 million last year. *