Connetics Raises $11M To Develop Products In Rheumatology, Dermatology

By Frances Bishopp

To fund its five late-stage clinical trials and subsequent progress of products to the marketplace, Connetics Corp. has raised approximately $11 million through a self-managed private placement.

The financing consists of the company's sale of 1.81 million shares of common stock for aggregate proceeds of $10.95 million. Connetics' stock (NASDAQ:CNCT) closed Tuesday at $6.750, down $0.375.

For every two shares of common stock issued, the company issued a four-year warrant to purchase an additional share of common stock at a 150 percent premium to the purchase price.

Participants in the private placement included current investors: The Sprout Group, of Menlo Park, Calif., Domain Partners, of Princeton, N.J., Biotechnology Investments Ltd., of Guernsey, U.K., New York Life Insurance Co., of New York, and certain advisors of the company.

"This financing strengthens our cash position and takes the risk out of our clinical trials from a financial standpoint," Cynthia Butitta, chief financial officer and vice president of finance and administration for Connetics, told BioWorld Today. "We will have the cash to complete all of these trials and hopefully with success will file new drug applications in the first quarter of 1998."

Connetics Corp., of Palo Alto, Calif., formerly Connective Therapeutics Inc., develops and markets products in rheumatology and dermatology. Both involve connective tissues, the main field of expertise for one of the company's founders, Edward Amento, the chief scientific officer and former head of Genentech's rheumatology research program.

The company pursues "a short time to market" strategy by in-licensing promising or approved drugs from other companies. Butitta said Connetics ideally tries to acquire products that are approved or either have completed or are ready to begin Phase II trials.

Last week, the company completed patient enrollment for three clinical trials: a Phase II trial for gamma interferon for keloids, a Phase III trial for Betamethasone mousse for scalp psoriasis, and a Phase I/II trial for a therapeutic vaccine for multiple sclerosis. Data is expected from these trials in the fourth quarter of 1997 and the company said it expects to file two new product applications in early 1998.

Gamma interferon is a protein involved in the regulation of the immune system. In March 1997, Connetics also completed patient enrollment in the Phase III clinical trial of gamma interferon for severe atopic dermatitis, a chronic inflammatory skin disease.

Connetics bought the rights to Betamethasone, a mousse formulation of betamethasone 17-alpha-valerate, from Soltec Research Ltd., of Melbourne, Australia, in June 1996. Betamethasone valerate is sold in the U.S. for dermatitis.

In January 1997, Connetics, then Connective Therapeu-
tics, entered into an equity line-of-credit agreement with a group of investors affiliated with the Palladin Group, of New York, that provided the company with access to funds up to $25 million through sales of its common stock.

The equity line will be available for a three-year period beginning in the fourth quarter of 1997. The decision to draw funds and the time of any drawdown will be at the company's discretion.

Connetics reports cash on hand, as of March 31, 1997, of approximately $15 million. *