Washington Editor

Vanda Pharmaceuticals Inc. and Targacept Inc. have gone public.

Rockville, Md.-based Vanda brought in $57.5 million in gross proceeds after pricing its initial public of 5.75 million common shares at $10 apiece, and Winston-Salem, N.C.-based Targacept grossed $45 million after pricing 5 million common shares at $9 each in its IPO.

Vanda, a company focused on small-molecule drugs for treating central nervous system disorders, granted the underwriters a 30-day, 862,500-share overallotment option. Following the transaction, the company had 21.6 million shares outstanding, not including those set aside for the overallotment option.

The company filed for its IPO in late December. (See BioWorld Today, Jan. 3, 2006.)

On Wednesday, the stock (NASDAQ:VNDA) began trading, and fell 32 cents to close at $9.68.

In a prospectus filed with the SEC, Vanda said it primarily would direct its new proceeds to fund research and development and clinical trials, with the remainder to go toward general corporate purposes. The company has three products in clinical development, with its lead candidate, iloperidone, in a 600-patient Phase III trial that began in November.

That study is testing an oral formulation of the antipsychotic at twice-daily doses of 12 mg for four weeks to demonstrate statistically significant efficacy over placebo. The trial is expected to conclude during the first half of next year, and assuming positive results, the company would then file a new drug application.

Vanda has worldwide rights to iloperidone by way of a sublicense agreement with Novartis AG, of Basel, Switzerland. The compound has been tested in more than 2,000 patients, and has shown reduced side effects compared to standard antipsychotic therapies.

A second product in its pipeline is VEC-162, an oral small-molecule melatonin agonist entering Phase III for insomnia and about to begin Phase II for depression. The company's third product, VSF-173, is expected to start a Phase II study during the second half of this year for excessive daytime sleepiness. Rights to VEC-162 are licensed from Bristol-Myers Squibb Co., of New York, and VSF-173 is licensed from Novartis.

J.P. Morgan Securities Inc. and Banc of America Securities LLC, both of New York, were joint book-running managers for the offering, for which fellow New York firm Thomas Weisel Partners LLC was co-manager.

Targacept IPO To Fund CNS Drugs

In Targacept's offering, the underwriters have a 30-day, 750,000-share overallotment option. Following the transaction, the company had 19.1 million shares outstanding, not including those set aside for the overallotment.

On Wednesday, the stock (NASDAQ:TRGT) began trading and also dropped, a 34-cent fall to $8.66.

The offering was registered three months ago, for a nearly $60 million IPO, following a previous filing to raise an estimated $86 million in 2004. Those plans were withdrawn a year ago due to unfavorable market conditions. (See BioWorld Today, May 18, 2004, and Jan. 18, 2006.)

But now the deal is done, and capital from the offering is expected to fund further development of the company's portfolio of products that target neuronal nicotinic receptors. In a filing with the SEC, completing Phase I and II trials of the postoperative pain product TC-2696 was identified for IPO funding, as were studies to support an investigational new drug application for TC-2216, a compound with potential for treating depression, anxiety disorders, smoking cessation and obesity. Also in preclinical development is TC-5214 for depression.

Another investigational drug, TC-1734, is the subject of a potential $300 million deal with London-based AstraZeneca plc. Targacept's lead small molecule, it could be developed for Alzheimer's disease, cognitive deficits in schizophrenia and potentially other conditions marked by cognitive impairment such as attention deficit hyperactivity disorder, age-associated memory impairment, and mild cognitive impairment. (See BioWorld Today, Dec. 29, 2005.)

AstraZeneca plans to begin two Phase II trials of TC-1734 in the first half of next year, one in mild to moderate Alzheimer's disease and one in cognitive deficits in schizophrenia.

Targacept also has a single approved product, Inversine (mecamylamine hydrochloride), which is labeled for the management of moderately severe to severe essential hypertension. The drug is prescribed mostly for neuropsychiatric disorders such as Tourette's syndrome, autism and bipolar disorder, however.

Underwriters included Deutsche Bank Securities Inc., of New York, as book-running manager and Pacific Growth Equities LLC, of San Francisco, as co-lead, as well as two additional New York firms: CIBC World Markets Corp. and Lazard Freres & Co. LLC.

In other financing news:

• Novagali Pharma SA, of Evry, France, raised €26 million in a Series C financing that involved new and existing investors. The funds are earmarked for Phase III studies of the ophthalmic-focused firm's lead products, as well as new product development. In its late-stage pipeline is Cationorm (Nova23006/33), a dry-eye treatment for which Novagali is preparing U.S. and European registration, as well as a cyclosporine A cationic emulsion called Nova22007 in Phase III and Nova21027 in Phase II for glaucoma. AGF Private Equity and Bernard Chauvin joined previous investors 1.2.3. Multinova, Auriga Partners, CDC Entreprises Innovation, Credit Agricole Private Equity, Edmond de Rothschild Investment Partners, FCJE managed by CDC Enterprises - FP Gestion and Siparex Ventures. Since privately held Novagali's inception in 2000, it has raised €44 million in total capital.

• Palatin Technologies Inc., of Cranbury, N.J., raised gross proceeds of about $27 million through a stock and warrants sale. The definitive purchase agreement calls for the sale of 11 million units, each consisting of one common share and a warrant to purchase 0.30 shares, at a purchase price of $2.44 per unit. The five-year warrants have an exercise price of $2.88 per share. Palatin, whose lead product bremelanotide is in Phase II trials for male and female sexual dysfunction, intends to use proceeds for general corporate purposes. The lead investor in the offering was Vivo Ventures, with participation from Palo Alto Investors, ProMed Management, Efficacy Biotech, Greenway Capital, RA Capital Associates and Great Point Partners. MDB Capital Group LLC served as sole placement agent.

• Acusphere Inc., of Watertown, Mass., closed a $40.2 million registered direct offering of about 5.8 million units, each unit consisting of one common share and one warrant to purchase 0.3 shares at an exercise price of $7.97 per share, for a purchase price of about $6.97 per unit. Cowen & Co. LLC was exclusive placement agent in the deal. (See BioWorld Today, April 10, 2006.)

• Oscient Pharmaceuticals Corp., of Waltham, Mass., closed a $35.9 million private placement of common stock and warrants. The company said the financing provides capital to advance its commercialization of Factive and Testim, begin Ramoplanin's Phase III program and secure additional marketed products through licensing, acquisition or co-promotion. In the transaction, for which JMP Securities and Thomas Weisel Partners acted as placement agents, about 18 million new shares were issued to new and existing institutional shareholders. Investors also received five-year warrants to purchase about 9 million more shares at an exercise price of $2.22 per share. (See BioWorld Today, April 10, 2006.)