Preparing for Phase III trials, Cypress Bioscience Inc. raised about $10.3 million as pivotal trial fuel.

The San Diego-based company entered agreements to sell about 4 million shares and warrants to buy up to about 1 million more. Each unit is a combination of one common stock share and 25 percent of one warrant, priced at about $2.56 - the sum of the closing stock price on March 24 plus 3.125 cents, the imputed value of 25 percent of a warrant.

Each warrant has an exercise price of $3.84, or 150 percent of $2.56. The financing is expected to close April 3. Following the financing, Cypress would have about 17.2 million shares outstanding. Its stock (NASDAQ:CYPB) fell 6 cents Thursday to close at $2.45.

The funds will be used "primarily to advance our current product, milnacipran," said Sabrina Johnson, chief financial officer at Cypress. "We just completed a Phase II trial and the next stage is to move it into Phase III [in fibromyalgia syndrome]."

As of Dec. 31, Cypress had cash and short-term investments of $12.2 million. It posted a net loss for the fourth quarter of $1.7 million, but for the year it lost only about $1 million, thanks to $6.4 million in revenue related to a licensing agreement with Fresenius AG, of Bad Homburg, Germany, signed in March 1999. The deal originally was valued at up to $60 million and centered on the Prosorba column, a device designed to treat rheumatoid arthritis. The deal was restructured in 2001 and provided Cypress with an $8 million up-front payment, $6.4 million of which was recognized in the first quarter of 2002. However, Cypress will not see any additional revenue from the agreement, if at all, until Jan. 30, 2008. (See BioWorld Today, March 9, 1999.)

Add all that to expense of planned Phase III work with milnacipran and Cypress has a need for funds. How long the $10.3 million will last depends on "how aggressive we are with our Phase III program," Johnson told BioWorld Today.

"You need two Phase III trials, positive, for the FDA," she said. "So it depends on if we start just one, or two at once, or two staggered. If we're not that aggressive, the money could last us well into 2004. If we're more aggressive, then to the beginning of 2004."

Johnson said it is "most likely" Cypress would start just the first Phase III, and then discuss internally the timing of the second. Milnacipran, a selective serotonin reuptake inhibitor, was in-licensed in August 2001 from Pierre Fabre Medicament, the pharmaceutical division of bioMerieux Pierre Fabre, of Paris. The deal provides Cypress with an exclusive license to develop and sell products with milnacipran as an active ingredient for the treatment of fibromyalgia syndrome and related chronic pain syndromes in the U.S. and Canada.

The company needs "to have an end-of-Phase II meeting with the FDA, which we will have soon," Johnson said, to determine when a pivotal trial might begin.

"We could start as early as summer or as late as fall," she said.

The drug is Cypress's sole product, Johnson said, and a pharmaceutical partner is certainly desired. And while there is nothing beneath milnacipran in the pipeline now, that doesn't mean there won't be.

"We are in business development mode and are looking at other opportunities that are similar to milnacipran," she said.