DepoTech Corp. has completed an $11 million private placement withventure capital investors and a separate agreement with ChironCorporation that will apply DepoTech's sustained-release drug deliverytechnology to the development and commercialization of selectedcancer therapeutics and other proprietary products.The financing was led by Norwest Venture Capital. Brinson Partners ofChicago also participated as a new investor. All of DepoTech's currentinvestors participating in this round included Brentwood Associates,Burr, Egan, Deleage & Co., DSV Partners, Sanderling, SorrentoVentures, and Walden Ventures.This was the third round of financing for DepoTech, of LaJolla, Calif.It included a $2.5 million equity investment by Chiron(NASDAQ:CHIR), which now holds about 6 percent of DepoTech'sstock. According to Edward Erickson, DepoTech's president and chiefexecutive officer, the proceeds of the offering will be used to extendthe company's manufacturing process and expand its research anddevelopment activities.Under the agreement, Emeryville, Calif.-based Chiron Therapeutics, aunit of Chiron, gains exclusive marketing rights in the U.S., Canada,and Europe, to DepoTech's cancer therapeutic, DTC 101. Chiron alsohas an option to market three additional sustained-releasechemotherapeutics being developed by DepoTech, and will collaboratewith DepoTech in the development of additional products. Ericksonnoted that the agreement with Chiron does not include any whole fieldsof interest, and refers only to a very specific list of products, leavingDepoTech free to enter other collaborations.DepoTech's sustained release DepoFoam technology consists of aunique, injectable material composed of microscopic particles that canbe used to encapsulate a wide variety of medically importantcompounds with high efficiency. When injected into the body, thelipid-based formulation provides sustained release of the encapsulateddrug. As a result, the company says, a drug's effectiveness may beincreased and the frequency of dosing reduced.Erickson said that in its collaborations, DepoTech will retainmanufacturing rights wherever it makes sense to do so. "Obviously,Chiron will continue to manufacture its proprietary products. They willprovide them to us in bulk form; we will encapsulate the drug, dispenseit, and ship it back to them as a sustained-release formulation. In thecase of other generic products, we will obtain them from the licensedsupplier in the same way," Erickson said.Now in Phase III clinical trials for neoplastic meningitis, DTC 101encapsulates Ara-C (cytarabine). The trials are being conducted in 120patients at major cancer centers in the U.S. In Phase I/II clinical trialsinvolving nine patients whose primary cancers had metastasized to themeninges, DTC 101 cleared malignant cells from the cerebrospinalfluid of seven. DepoTech said the half-life of ara-C in the cerebrospinalfluid increased more than 40-fold compared to the unencapsulatedchemotherapeutic. The product has been granted orphan drug statusand has patent protection.Antibiotic Has Broad Potential UseIn addition to DTC 101, DepoTech also has a sustained-releasepreparation based on a generic antibiotic in preclinical trials calledDTC 201, a DepoFoam formulation of amikacin. The company hopesto file an investigational new drug application later this year, Ericksonsaid, adding that the generic antibiotic can be used for a wide range ofindications and for prophylactic purposes such as orthopedic implantsand various types of trauma. "It will have a larger market than DTC101," he predicted. "We also have other sustained-release products inthe pipeline, including some proprietary formulations."Erickson noted that DepoTech's encapsulated products are required toundergo FDA review even when they are based on generic products."They are new pharmaceutical products and they will have patentprotection," he said.Founded in 1989, DepoTech raised $7.3 million in December 1992through the sale of Series B preferred stock. In the current round, 1.7million shares were offered at $6.25 a share. The company now has 7.5million fully diluted shares outstanding.DepoTech also recently signed a $1.75 million venture lease line withPhoenix Capital Growth, Inc. that will be used primarily to fund capitalrequirements.
-- Philippa Maister
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