NeoTherapeutics Inc., which is developing small molecules that passthrough the blood-brain barrier, completed a $19 million initialpublic offering, the first in the industry since early August.
The Newport Beach, Calif., company sold 2.5 million units at $7.60apiece. Each unit consists of one share of common stock and a five-year warrant to purchase a common share at $11.40. UnderwritersPaulson Investment Co. Inc., of Portland, Ore., and First ColonialSecurities Group Inc., of Marlton, N.J., have an option to purchaseanother 375,000 units.
The initial public offering (IPO) was the first completed by abiotechnology company since Aug. 7, when Amarillo BiosciencesInc., of Amarillo, Texas, raised $10 million through the sale of 2million shares. The NeoTherapeutics deal became effective lastweek. Another 11 biotechnology companies have IPO filingspending.
NeoTherapeutics' IPO was one of only two public offeringscompleted in September. BioCryst Pharmaceuticals Inc., ofBirmingham, Ala., raised $20 million in a follow-on offering. The$39 million raised publicly was the lowest monthly total in more thana year. In August, another down month, $159 million was raised. InSeptember 1995, during an upswing in the industry, $654 million wasraised publicly.
NeoTherapeutics is developing small synthetic molecules that mimicneurotrophic factors or stimulate the production of neurotrophicfactors within the brain. Using combinatorial chemistry technologythe company said it synthesized small molecules that act on specificreceptors in the central nervous system.
The company said it intends to file an investigational new drug (IND)application this year seeking approval to begin human tests of its leadcompound, AIT-082. Preclinical tests showed the drug appeared toselectively increase production of certain neurotrophins in the area ofthe brain implicated in memory loss. Those neurotrophins regulatenerve cell growth and function.
The National Institute on Aging, a National Institutes of Healthaffiliate, has funded part of the preclinical studies of AIT-082 andwill fund two Phase I studies. Potential indications are Alzheimer'sdisease, spinal cord injury, amyotrophic lateral sclerosis, memoryimpairment and stroke.
AIT-082 incorporates the chemical structure features ofhypoxanthine, the only purine that passes the blood-brain barrier, andprocainamide, a drug marketed for cardiac arryhthmias that hasmemory-enhancing activity. The drug is active in both oral andinjectable formulations.
NeoTherapeutics said it showed that AIT-082, when administered toneurons in tissue culture, can augment the activity of nerve growthfactor (NGF) and induce the same effects as NGF. It also has beenshown to cause production in tissue culture of NGF, neurotrophin-3and fibroblast growth factor, but not brain-derived neurotrophicfactor.
The company said AIT-082 appears to act, after passing through theblood-brain barrier, by activating genes that lead to the production ofdifferent neurotrophins.
NeoTherapeutics said it expects to begin Phase I studies shortly afterapproval of the IND, and those studies should take three to sixmonths. It plans to fund two Phase II trials and market the drug in theU.S. itself.
The company has at least five other compounds in earlier stages ofdevelopment, including AIT-034, a chemical analogue of AIT-082.That compound, which enhances memory in animals that don'trespond to AIT-082, does not induce production of NGF. Thereforeits mechanism of action appears to be different. Other compounds indevelopment interact with the GABA receptor, calcium channelproteins and protein kinase C.
Chairman and CEO Alvin Glasky started the company, based on hisown work, in June 1987. He contributed $3 million in cash of the$5.3 million NeoTherapeutics had raised before the IPO. No venturefunding was involved. The net loss since inception was about $5.3million.
For 18 years before forming the company Glasky was president andchairman of Newport Pharmaceuticals International Inc., a publicpharmaceutical company. Currently he is a research professor atOlive View/University of California Los Angeles Medical Center,where NeoTherapeutics has adjunct laboratories.
Before the IPO Glasky owned about 50 percent of the company andhe, family and friends owned about 80 percent. Now Glasky ownsabout 25 percent of the company while he, his relatives and friendscontrol about 40 percent of NeoTherapeutics.
NeoTherapeutics units have gained slightly since last week'soffering. The stock (NASDAQ:NEOT) closed Wednesday at $5.63and the warrants (NASDAQ:NEOTW) at $2.06. n
-- Jim Shrine
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