As it finishes closing out a Phase III trial halted in August of its Celacade technology in peripheral arterial disease, Vasogen Inc. is bringing in $40 million through a private placement of convertible senior notes to fund its ongoing development of the product, as well as support early-stage drug development activities.

The Toronto-based company, which develops products and technologies aimed at treating chronic inflammation associated with cardiovascular and neurological diseases, also plans to use proceeds for general corporate purposes.

"I think it's going to position the company as very strong financially," said David Elsley, president and CEO of Vasogen, which is preparing to "report very exciting Phase III trials."

Through its wholly owned Irish subsidiary, Vasogen Ireland Ltd., the company agreed to place the notes with several institutional investors. The notes have a maturity date of two years from issuance, and that could be extended to five years upon certain events, and bear an annual interest rate of 6.45 percent. Notes will be convertible into Vasogen shares, at a conversion price of $3.

"This was the most efficient financing vehicle for us, given that the conversion price was at a premium to the current market price," Elsley said. "It was the most attractive from a capital structure and an efficiency point of view."

The principal amount can be repaid by Vasogen Ireland in any combination of cash or common shares of its parent company.

Elsley said Vasogen is operating on an average burn rate of $4.5 million to $5 million per month. The financing plus the funds already in the company's coffers total more than $100 million, and "will take us well into the future."

Shares of Vasogen (NASDAQ:VSGN) closed Friday at $2.34, down 35 cents.

The company's stock, which was trading around the $5 mark throughout the summer, was sent tumbling in late August when Vasogen said it was closing its Phase III SIMPADICO trial of Celacade in peripheral arterial disease (PAD) patients a little ahead of schedule.

That decision was based on a recommendation from the external safety and efficacy monitoring committee, which cited an "absence of a sufficiently strong efficacy signal" based on available data. Following that announcement, Vasogen's shares tumbled more than 40 percent Aug. 30, to close at $2.38. (See BioWorld Today, Aug. 31, 2005.)

But the good news, Elsley said, is that the company will have enough data for analysis. The SIMPADICO trial, which enrolled 553 patients with moderate to severe PAD, measured, as the primary endpoint, the change in maximal walking distance after six months of treatment. At the time the trial began closing, all patients had completed the primary endpoint analysis, and many of them also finished an additional six months of treatment required by study protocol.

And, despite the monitoring board's recommendation, the company still hopes for promising data.

"That trial is still fully blinded," Elsley told BioWorld Today, adding that the results will be "fully analyzed to report full data by the end of the year."

The company is expecting results from its ongoing Phase III ACCLAIM trial of Celacade next year. That trial, designed to evaluate the treatment in patients with heart failure due to ischemic heart disease or cardiomyopathy, was not affected by the monitoring board's SIMPADICO recommendation. ACCLAIM, which is enrolling 2,400 patients, will test Celacade against a primary endpoint based on mortality and cardiovascular-related hospitalization.

The Celacade technology is designed to deliver oxidative stress to a sample of the patient's own cells. During a monthly outpatient procedure, a small blood sample is collected into the Celacade disposable cartridge, where it is exposed to oxidative stress before being re-administered to the patient through an intramuscular injection.

In addition to Celacade, the company recently began clinical trials of its first product to treat neurological inflammation. VP025, in development to regulate chronic inflammation of the central nervous system associated with diseases such as Alzheimer's and Parkinson's, was found to be safe and well tolerated in a Phase I trial involving 24 healthy volunteers in July. A Phase II study is set to begin during the first half of next year in Alzheimer's disease patients.

Vasogen last raised money in a January public offering, in which it sold 9 million shares at $4.70 each to bring in $42 million. The company, which plans to present its third-quarter earnings Wednesday, posted a net loss of C$25.1 million (US$21.4 million), or C31 cents per share, for the second quarter. As of May 31, Vasogen had cash, cash equivalents and marketable securities totaling C$86.5 million.