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TEXAS BIOTECHNOLOGY SEEKING $15.8 MIL. TO FUND THROMBIN INHIBITOR TRIALS

Executive Summary

TEXAS BIOTECHNOLOGY SEEKING $15.8 MIL. TO FUND THROMBIN INHIBITOR TRIALS and two other cardiovascular R&D programs via an initial public offering for the Houston-based start-up. A Nov. 12 preliminary prospectus estimates net proceeds of $15.8 mil. based on an offering price of $7.25 per unit, with each unit consisting of one share of common stock and a warrant to purchase one share of common stock at 125% of the IPO price. Texas Biotech anticipates using approximately $6.1 mil. of the proceeds to conduct Phase III studies of argatroban, a potential heparin replacement product that the company sublicensed from Genentech in May 1993. Approximately $5.8 mil. of the proceeds will be used to fund ongoing R&D of treatments for restenosis, atherosclerosis and reperfusion injury. The balance of the money raised will go toward capital expenditures. The argatroban Phase III trial is slated to begin in mid-1994, the prospectus states. The sublicensing agreement with Genentech requires an NDA filing for the non-protein, synthetic thrombin blocker by June 30, 1995, unless Texas Biotech can demonstrate there is a good reason to delay the filing. Argatroban was originally licensed to Genentech by Mitsubishi; it is approved in Japan for use in treatment of chronic arterial obstruction and had 1992 sales of $35.6 mil. Texas Biotech is initially developing argatroban for the prevention of immediate restenosis after angioplasty. A study presented at a November 1992 American Heart Association conference showed a 0% reocclusion rate for argatroban compared to a 15% rate of reocclusion for heparin ("The Pink Sheet" Nov. 30, 1992, T&G-16). The company believes that its primary competitors in the intravenous heparin replacement market -- Biogen's hirudin and Ciba-Geigy's Hirulog -- have similar pharmacologic profiles but may be at a disadvantage in terms of pricing. "In order to cover costs, it is unlikely that these compounds will be priced reasonably enough to enjoy widespread usage in a variety of indications," whereas "argatroban's lower production costs will allow pricing that will encourage usage as a replacement for heparin in most conditions," the prospectus suggests. Both hirudin and Hirulog are in Phase III clinicals. The agreement with Genentech gives Texas Biotech an exclusive license to use and sell the product in the U.S. and Canada for specific cardiovascular indications; Mitsubishi will supply the product and Genentech may negotiate a comarketing agreement. Texas Biotech issued Genentech 285,714 shares of common stock in exchange for the sublicense and will issue an equal amount after filing of an NDA and FDA approval. Since its establishment in August 1989, Texas Biotech has raised $21.3 mil. through private placements. Prior to the offering, Isaac and David Blech were the primary shareholders with a combined stake of 18%; their share will drop to 14.1% if the offering is completed. D. Blech & Company is the underwriter. David Blech is a founder and director of the company.
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