Interneuron Pharmaceuticals Inc. completed one of the largestbiotechnology financings of the year with the sale of 3 million sharesat $39 apiece, grossing $117 million for the company that recentlyreceived FDA approval for a weight-loss drug.
Interneuron said Monday it will net about $109 million from theoffering, which was increased 500,000 shares. The financing isexpected to take the company to profitability, which should beachieved in 1998, said David Crossen, an analyst with MontgomerySecurities in San Francisco.
The Lexington, Mass., company plans to use proceeds from theoffering to establish sales forces for Redux (dexfenfluramine), whichwas approved for weight loss on April 29, 1996, and for a stroke drugin late-stage development; to accelerate clinical development of late-stage products; to manufacture Redux; and to support its threemajority-owned subsidiaries, said Thomas Farb, Interneuron's chieffinancial officer.
Investors, who have responded well to biotechnology companies withproducts late in clinical development, found Interneuron's story"refreshing" in light of the Redux approval and a number ofpromising candidates in the clinic. Farb said Interneuron hopes tohave another product approved in each of the next three years.
Crossen said each of those products addresses a potentially enormousmarket. "Interneuron is demonstrating an ability to pick up novelcompounds and capitalize on their development," he said.
Redux is indicated for treating those who are 30 percent heavier thantheir ideal weight and for those 20 percent overweight if other riskfactors are present. By that labeling alone there are 45 millionpotential users of the drug in the U.S. Interneuron licensed U.S. rightsto the drug in 1990 from Paris-based Les Laboratoires Servier, whichalready is marketing the product in 65 countries. Interneuron will getroyalties of 8 to 12 percent from marketing partner Wyeth-AyerstLaboratories, a Radnor, Pa.-based subsidiary of American HomeProducts Corp., of Madison, N.J. (See BioWorld Today, April 30,1996, p. 1.)
Sales of the product for the year starting at the beginning ofInterneuron's fiscal year in October 1996 are estimated by Crossen at$150 million. In five years sales will be about $900 million, heprojected.
Crossen said a second event driving interest in Interneuron isbucindolol, a third-generation beta blocker being developed byIntercardia Inc., of Research Triangle Park, N.C., for treatment ofheart failure. Interneuron owns 60 percent of Intercardia.
The pivotal study of bucindolol could be stopped anytime after Sept.30, 1996, when statistical significance is achieved. "The odds favor apositive outcome in terms of reduction of mortality," Crossen said.
A third product attracting investors, Crossen said, is citicoline, a drugbeing developed for stroke. One pivotal study showed statisticalsignificance from two doses. Farb said a primary use of financingproceeds will be to accelerate development of citicoline through asecond pivotal study comparing 500 mg of the drug against placebo.(See BioWorld Today, April 1, 1996, p. 1.)
Crossen said what's striking about the drug is not only the benefit interms of outcome and recovery but the 24-hour window in which thedrug can be given.
Farb said Interneuron, which has hired 30 people to help supportmarketing of Redux, will be selling citicoline itself. The companyhopes the drug will be on the market in 1998.
The fourth drug driving Interneuron is pagoclone, which hascompleted Phase I studies for anxiety. Farb said Interneuron will begoing directly into a pivotal Phase II/III trial toward the end of theyear.
"They've turned the corner," Crossen said. "The Redux path looksclear and promising; we have data on citicoline; for bucindolol, theodds favor a positive outcome. It starts to add up to a compellingstory."
In addition to its position in Intercardia, Interneuron holds stakes of80 percent in both Transcell Technologies Inc., of Princeton, N.J.,which focuses on drug delivery; and Progenitor Inc., of Columbus,Ohio, which focuses on gene therapy vectors and stem celltechnologies.
Interneuron now has about 40.5 million shares outstanding. With thefinancing the company and its subsidiaries have about $180 millionin cash and equivalents, less what it has spent this quarter. LehmanBrothers, of New York, and Vector Securities International Inc., ofDeerfield, Ill., underwrote the offering with Montgomery Securities.
The company's stock (NASDAQ:IPIC) lost $1.13 Tuesday to close at$38.38. n
-- Jim Shrine
(c) 1997 American Health Consultants. All rights reserved.