AEterna Laboratories Inc. entered a bought-deal agreement to sell C$35.6 million (US$26.2 million) worth of subordinate voting shares.

The Quebec City, Quebec-based company is selling 4.5 million shares at C$7.90 apiece to a syndicate of underwriters, which also received an option to purchase up to an additional 1 million shares. The per-share price reflected a 7 percent discount to the stock's C$8.50 closing price a day earlier on the Toronto Stock Exchange.

"This is quite a vote of confidence, so we are very pleased with that," AEterna President and CEO Gilles Gagnon told BioWorld Today. "This is quite a favorable discount, a very good arrangement with the bank."

The addition of the newly issued shares, each of which carries one voting right, will increase the company's outstanding shares to 45.2 million. Its stock (TSX:AEL) lost C57 cents Tuesday to close at C$7.93.

AEterna, which expects to close the transaction on or about July 24, said it would use the funds primarily to continue developing its Phase III-stage anti-angiogenic product, Neovastat. The oncology drug is in studies in renal cell carcinoma and non-small-cell lung cancer.

"On a short-term basis, we expect to disclose results from the kidney cancer trial before the end of 2003," Gagnon said, adding that AEterna plans to announce U.S. partnering plans for the drug at that point as well. "In the long term, we expect to conduct the large lung cancer study over the next two years in order to get results by the beginning of 2006."

The company has partnered most overseas rights to the drug, including in Europe, Korea, Australia, New Zealand, Canada and Mexico.

"We have coverage through four partners in 50 percent of the worldwide market," Gagnon said. "As part of our business model, once a compound has reached a later development stage, we partner with pharmaceutical companies so they can absorb the costs."

Recently released data reinforce its anti-angiogenic properties, with one study showing that Neovastat induces a significant decrease of hemoglobin in neoplastic tissues of animals and another study demonstrating that Neovastat modulates the expression of genes in endothelial cells in vitro. AEterna also has tested the compound in clinical studies in age-related macular degeneration and psoriasis.

The company also expects to apply funding from the stock sale to broaden clinical and commercial opportunities for other products in its pipeline. The proceeds also will be used to further its growth strategy through alliances and acquisitions, as well as for general corporate purposes.

"We have several other products in our pipeline, mostly from our affiliated company in Germany," Gagnon said. "Additionally, as part of our growth strategy, we intend to remain active in M&A activities."

He said AEterna, which primarily focuses on oncology and endocrinology, would further concentrate on the former through efforts to acquire additional anticancer technology, such as immunotherapies.

At the end of last year, the company reported plans to acquire Frankfurt, Germany-based Zentaris AG - an acquisition that included a 100,000-compound library. When the €50 million purchase closed four months later, AEterna entered a convertible term loan facility for C$25 million. (See BioWorld Today, Jan. 2, 2003, and April 2, 2003.)

Beyond Neovastat, AEterna's pipeline includes a number of other clinical candidates.

Phase II-level products include D-63153, a drug being developed in partnership with Deerfield, Ill.-based Baxter Healthcare Corp. for prostate cancer. Another partnered drug, Cetrorelix, is being studied for uterus myoma, benign prostatic hyperplasia and endometriosis with Solvay SA, of Brussels, Belgium. Perifosene, a signal transduction inhibitor, is being evaluated in six cancer indications with New York-based Access Oncology Inc.

An unpartnered compound, RC-3095, is in clinical studies for several tumor types. Outside its core focus, AEterna is studying miltefosine in Phase III for visceral leishmaniasis (black fever). The company sells one product, Cetrotide, a drug used for in vitro fertilization in partnership with Serono SA, of Geneva.

"We benefit from a very extensive and comprehensive pipeline," Gagnon said. "We have a unique opportunity to launch several compounds over the next several years, should we get conclusive results."

Through the first-quarter period ended March 31, AEterna reported C$52.4 million in cash and short-term investments.

The syndicate of underwriters, led by Toronto-based RBC Capital Markets, also included National Bank Financial Inc., of Toronto; Paradigm Capital Inc., of Toronto; Desjardins Securities Inc., of Montreal; and Loewen, Ondaatje, McCutcheon Ltd., of Toronto.