By Charles Craig

With three drugs in clinical development and one of them scheduled for Phase III trials next spring, Shaman Pharmaceuticals Inc. is attempting to raise at least $12 million in a public offering of 2 million shares.

The South San Francisco company, which makes potential therapeutic compounds from extracts of tropical plants traditionally used for medicinal purposes, has completed Phase II studies with two drugs for watery diarrhea and genital herpes.

Shaman also has identified 10 plant-derived compounds showing preclinical activity against Types II diabetes and has collaborations with Ono Pharmaceuticals Inc., of Osaka, Japan, and Merck KGaA, of Darmstadt, Germany, for development of those drugs. The two pharmaceutical companies have agreed to pay Shaman $25 million and assume development costs during their multi-year alliances. Shaman also will get royalties and in the U.S. will share profits equally with Merck.

As of Sept. 30, 1996, Shaman said it had $20.4 million in cash and reported a net loss of $14.97 million for the first nine months of the year.

In July 1996, the company negotiated a three-part private placement that could generate at least $23 million over the next six years. It received $3.3 million in completing the first phase. (See BioWorld Today, July 31, 1996, p. 1.)

Adding proceeds from the proposed public offering to its cash and financial commitments, Shaman said it will have enough funds to support operations through the second quarter of 1998.

Shaman registered last week for the public offering, which is aimed primarily at institutional investors. Based on the $6 closing price of its stock (NASDAQ:SHMN) Friday, Shaman would raise $12 million in the offering. Following the stock sale the company will have 15.9 million shares outstanding. Shaman ended Monday at $5.937, down $0.063.

Underwriters for the offering are Hambrecht & Quist LLC, of New York.

Shaman uses an ethnobotanical approach to drug discovery. Its two most advanced products, Provir and Virend, are derived from the croton tree, found in Latin America. Traditional uses of the plant include treatments for respiratory diseases, gastrointestinal disorders and wound healing.

Provir, an oral compound, is targeted for secretory, or watery diarrhea, and Virend, a topical version, is under development for genital herpes.

Following a successful Phase II open-label trial of Provir, the drug will undergo evaluation in a 400-patient placebo-controlled study beginning next month. Based on that data, two Phase III trials are scheduled to get under way in May 1997 with results expected in the fall.

Another Phase II study of Provir for treatment of AIDS-related diarrhea also is expected to begin in the first quarter of 1997.

Watery diarrhea is caused by over secretion of chloride ions and a resulting build-up of water in the intestine, all of which is triggered by an infectious agent in epithelial cells. If left untreated the condition lasts up to seven days.

Current treatments involve the use of antibiotics for the infection or anti-motility drugs, which reduce gastrointestinal activity. An estimated 16 million people, most of them tourists and business people traveling outside their home countries, spend more than $1 billion a year fighting watery diarrhea.

Provir is designed to attack the underlying cause of the disorder by blocking the chloride secretion. In most cases, a patient’s own immune system can dispatch the infectious agent.

In the recently completed open-label Phase II trial of Provir, 89 percent of the 75 participants experienced normal bowel function within two days of treatment and more than 50 percent of those recovered in one day. In addition, during a 72-hour follow-up period, no recurrences were seen.

For Virend, a Phase II placebo-controlled trial, completed in September 1995, involved 45 AIDS patients with genital herpes. Data revealed 38 percent of those treated with Shaman’s drug experienced complete healing of lesions compared with 14 percent in the placebo group. The company initially expected to conduct Phase III trials next year, but will begin a study in the first quarter of 1997 to evaluate Virend in combination with oral acyclovir.

Shaman’s other drug in clinical development, nikkomycin Z, was licensed in 1995 from Bayer AG, of Leverkusen, Germany, and is a fungicidal targeted for endemic mycoses, which are systemic fungal infections. The drug, in Phase I trials in the U.K., is designed to inhibit an enzyme found in cell walls of fungi, causing the fungal cells to burst. The enzyme, chitin synthetase, is not found in mammalian cells.

In Shaman’s alliances on its Types II diabetes compounds, Ono has development rights for Japan, Taiwan and South Korea, and Merck has rights elsewhere in the world. In the Merck collaboration, Shaman is working with the German pharmaceutical company’s subsidiary, Lipha S.A., of Lyon, France.