Incyte Pharmaceuticals Inc. announced Monday that it has filedwith the Securities and Exchange Commission for an initialpublic offering of 2 million shares of its common stock at aproposed price range of $7 to $9 per share. All of the shareswill be sold by the company.
D. Blech & Co. Inc. of New York is managing the offering, whichwas filed on Oct. 7. Incyte said the net proceeds would be usedfor research and development, including expansion of thecompany's gene sequencing program, preclinical and clinicaltesting, and general corporate purposes.
If the offering is completed, the company will have 6.1 millionshares outstanding and 6.3 million fully diluted. The threeprimary stockholders in the company are Schroder VentureAdvisers of New York and The Phoenix Partners of Seattle, bothof which now own 20.8 percent of the company and would own14 percent after the offering; and David Blech, whoseownership would go from 14.7 percent to 10 percent.
In addition, Genentech Inc. (NYSE:GNE) now owns 9.8 percent ofthe company and would own 7.8 percent afterward. At anassumed initial public offering price of $8 per share, Genentechwould purchase 100,000 shares of common stock in thisoffering.
Incyte's prospectus noted that all of Incyte's revenues to datewere received from Genentech through a 1991 collaborativeagreement to develop and commercialize abactericidal/permeability increasing protein (BPI) and certainrelated proteins.
In March, Incyte exercised its right to terminate the agreementbecause Genentech placed the project on hold. "As a result, thecompany has no current source of contract or other revenue,"the prospectus stated.
Incyte of Palo Alto, Calif., has three lead proteins in preclinicaldevelopment: BPI for treatment of endotoxin-related disorders;Protease Nexin-1 (PN-1), an inhibitor of the proteases involvedin connective tissue degeneration and inflammation; andGalaptin 14-1, for treatment of certain autoimmune disordersand transplant rejection.
Incyte's board members include Jon Saxe, who was presidentand chief executive officer of Synergen Inc. (NASDAQ: SYGN)from October 1989 to April 1993, when he stepped down afterdisappointing Phase III clinical trial results were reported withSynergen's sepsis drug interleukin-1 receptor antagonist.
Incyte was founded in 1991 through the acquisition of assetsand technology from Invitron Corp. Incyte is using high-throughput, computer-aided gene sequencing to identify genesand their corresponding proteins with potential therapeuticapplications. Before beginning its gene sequencing program, thecompany identified specific white blood cell proteins that mighthave pharmaceutical use, including BPI.
Incyte holds three U.S. patents covering methods ofpurification, pharmaceutical formulations and the use of BPIand related molecules for the treatment of endotoxin-relateddisorders. A section in the prospectus denoting patent andcompetitive risks related to BPI stated that Xoma Corp.(NASDAQ:XOMA) is in Phase I clinicals with a BPI product forthe treatment of Gram-negative sepsis and other clinicalapplications.
Incyte also noted that New York University has a U.S. patentwith respect to DNA encoding BPI and certain recombinantmethods of BPI production, and said it believes NYU has filedadditional patent applications with respect to BPI and certainfragments of BPI.
As a result, the prospectus said, Incyte's "rights with respect toBPI are unclear and there can be no assurance that thecompany will not (i) be required to permit others to compete inthe commercialization of this product, (ii) be required to pay aroyalty or license fee to others in order to develop this product,and/or (iii) be prohibited entirely from exploiting this product."
Overall, "the company's success will depend on its ability toobtain patents, protect trade secrets and operate withoutinfringing upon the proprietary rights of others," theprospectus states.
Citing controversy over the patenting of partial gene sequences,the document noted that the U.S. Patent and Trademark Officeinitially rejected an application on certain partial genes filed bythe National Institutes of Health. It also noted that thecongressional Office of Technology Assessment is conducting astudy on the patenting of partial genes that is to be completedin the first half of 1994.
-- Brenda Sandburg News Editor
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