Avigen Inc. raised about $27.6 million in a public offering to fund development of its programs in neurological disorders, its focus since exiting the gene therapy business a few years ago.

The Alameda, Calif., company sold 3.974 million shares at $6.94 per share. Underwriters Pacific Growth Equities LLC and UBS Investment Bank have an overallotment option to purchase 596,000 additional shares.

Avigen's stock (NASDAQ:AVGN) fell 4 cents Thursday to close at $6.90.

"We were quite well financed already, but there was an interest among investors of taking a position in Avigen," said Michael Coffee, chief business officer at Avigen. "On the strength of our recent developments, as well as the market environment, it was telling us it could be the right time to do a financing.

"We were able to do an attractive transaction, one we did not need to do," Coffee told BioWorld Today.

Shares are being sold from an existing shelf registration statement, the last of the funds available from that filing.

Proceeds will support the company's lead programs, AV650, being developed for spasticity and neuromuscular spasm, and AV411, being developed for neuropathic pain. Both already are approved in certain markets outside the U.S. Avigen also is developing AV513 for treating bleeding disorders, including hemophilia.

Last month Avigen got approval from the FDA to begin Phase II development of AV650 (tolperisone), a centrally acting small molecule. The trial will assess safety, tolerability and initial efficacy, as well as AV650's lack of sedation, in spinal cord injury patients suffering from spasticity.

Coffee said the placebo-controlled, randomized, multicenter trial in the U.S. is expected to start enrolling patients around mid-year. The trial is expected to include up to 100 patients.

Tolperisone already is marketed in Europe and Japan. Avigen in January 2006 licensed North American rights to the product from SDI Diagnostics International Ltd., a division of Vienna, Austria-based Sanochemia Pharmazeutika AG. Avigen paid $3 million up front in the deal that includes potential milestone and royalty payments.

AV411 (ibudilast), a small-molecule glial attenuator, is in a Phase IIa trial in Australia for neuropathic pain. Data from that study are expected later this year.

Coffee said Avigen plans to file an investigational new drug application by mid-year to begin testing of AV411 in the U.S., in a Phase II trial.

The compound has been marketed in Japan for 15 years for treating bronchial asthma, since it initially was developed as a non-selective phosphodiesterase inhibitor. It also recently was approved there to treat dizziness secondary to chronic cerebral stroke. Avigen said AV411 has been found to suppress the production of pro-inflammatory cytokines, that it may enhance the production of the anti-inflammatory cytokine interleukin-10, and may up-regulate release of neurotrophic factors.

Avigen said it intends to commercialize both products itself in North America, while partnering them for international markets.

The preclinical compound AV513 is a botanical drug believed to reduce natural anti-coagulation at local sites of bleeding, and thereby allow more normal hemostasis, or clotting. While not in the company's core area, Avigen is exploring plans to file an IND for that compound in the first quarter of 2008, Coffee said.

Avigen reported cash and marketable securities of $55.7 million on March 31, along with about $10.4 million in restricted securities. Following the offering, it now has about 29.1 million shares outstanding.

The company spent more than 10 years since its incorporation in 1992 focused on gene therapy, based primarily on delivery by adeno-associated virus. In 2003, Avigen began to pursue the development of non-gene therapy products, and in December 2005, entered a deal to sell its AAV technology to Genzyme Corp., of Cambridge, Mass. Avigen got $12 million up front in that deal, and could receive development milestones, sublicensing fees and royalty payments on resulting products.