Pharmos Corp. is adding about $4 million to its balance sheet byacquiring Oculon Corp., a privately held ophthalmic drugdevelopment company.
Pharmos said Tuesday that it will issue between 5.5 and 6 millioncommon shares to Oculon shareholders, a deal worth about $3.5million based on Pharmos' (NASDAQ:PARS) closing price of 59cents Tuesday. The stock rose 6 cents on the news.
Pharmos has 17 million shares outstanding on a fully diluted basis.Oculon shareholders would own about 26 percent of Pharmos ifissued 6 million shares. Oculon shareholders still must approve thedeal.
Pharmos will complete the filing of a new drug application forLotemax, for ophthalmic inflammation, this week, Colin Neill, thecompany's acting chief financial officer, told BioWorld. Pharmos,which is moving from New York to Alachua, Fla., reported $1.8million in cash on Dec. 31, and raised $1.2 million in February.
"The Oculon deal gives us some breathing room," Neill said. "Itstrengthens our balance sheet, and we continue to talk to [potential]corporate partners. We're aware that this is somewhat dilutive. Weexpect the next announcement [involving a partner] not to bedilutive."
Oculon, of Cambridge, Mass., has raised nearly $33 million since itsfounding in 1987. Clinical development of OC-2 for inhibition ofcataracts was discontinued in November. It has two preclinicalprograms. One involves development of an anti-cataract drug basedon a small molecule created using medicinal chemistry. The other isin the sickle cell disease. Neither is very close to the clinic.
"We're doing this in response to the needs of our investors," RichardWoodrich, Oculon's president and chief operating officer, toldBioWorld. "We have a company with long-term technology andmoney, but the difficulty will be getting to a financeable event beforethe money runs out."
Oculon has 17 employees, all in Cambridge. Pharmos, one of thebiotechnology companies severely affected by the collapse ofinvestment firm D. Blech & Co. last September, has since reduced itsstaff from 100 to about 42 employees. Neill said many Oculonemployees will not be kept in the consolidation.
Oculon shareholders will have the right to nominate one member toPharmos' board, which would increase it to seven members, Neillsaid.
"Our plans are to evaluate their technology," Neill said. "Most of thestand-alone Oculon operations will be shut. We will not be assumingsignificant ongoing liabilities from Oculon.
"The cash is very attractive," Neill said about Pharmos' interest inthe acquisition. "But they do have technology that has potentialophthalmic applications. Another point is Oculon has somesophisticated stockholders. They've evaluated this and decided it's agood deal for both companies."
Neill said Pharmos hopes to get approval of Lotemax (loteprednoletabonate) in a year. The drug is a patented steroid that has beentested against uveitis, conjunctivitis and allergies. Neill saiddiscussions are under way with potential partners.
Neill said that Pharmos' cut back its focus in addition to its workforce to reduce spending. Another program that will continue to bedeveloped is HU-211, which is in Phase I trials. Potential indicationsinclude glaucoma, head trauma and stroke. n
-- Jim Shrine
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