By Roger Cheng
NEW YORK — Shares of Pharmos Corp. (NasdaqSC:PARS – News) surged Tuesday and hit a 52-week high after regulators awarded its traumatic brain-injury drug fast-track status.
Pharmos’s dexanabinol, which treats secondary neuroprotective brain damage following injury, won fast-track status from the Food and Drug Administration (News – Websites). The designation is given to drugs that treat serious and life-threatening conditions for which no other approved treatments exist.
Primary brain damage, which stems from something such as a violent impact, precipitates the secondary injury, said Pharmos spokeswoman Gale Smith. The secondary damage involves a neurotoxic cascade which causes molecular deterioration, leading to ailments such as memory loss and ultimately a coma.
Aside from the neurotoxic cascade, the injury includes inflammation, which pressures the brain, she said. Dexanabinol works on three different levels to control the inflammation and neurotoxic cascade, she said.
The company estimates the U.S. market for patients with traumatic brain injury to be more than $500 million. The international market potential may exceed $1 billion.
While dexanabinol’s critical Phase III trial began in early 2001, Pharmos is on the cusp of the advanced trials for Phase III, which test efficacy, Ms. Smith said. The company expects Phase III trials to wrap up in the second half of 2004.
Around 12:15 p.m. on the Nasdaq Stock Market (News – Websites), shares of Pharmos were up 67 cents, or 33%, to $2.68 after hitting an intraday high of $2.95. The previous 52-week high of $2.65 was set on June 11.
Along with the FDA news, Pharmos also completed a $21 million convertible debt offering to shore up its cash reserve and prepare itself for potential acquisitions. The offering also cleared up a possible violation of Nasdaq’s corporate governance rules.
Nasdaq has a problem with the company’s March and May equity offerings, said Chief Financial Officer Bob Cook. The offerings represented more than 20% of existing shares, and the exchange felt the company should have gotten shareholder approval. The current deal is structured so, when grouped together with the prior offerings, it meets Nasdaq’s regulations.
“While we didn’t agree with (Nasdaq’s claim), we worked out a way to drop the issue,” Mr. Cook said. “This issue has gone.”
He noted the issue never became a formal inquiry, and added the company didn’t have to pay any penalties.
A spokesman for Nasdaq couldn’t immediately be reached for comment.
The deal followed two prior offerings that have raised enough cash to take the company through 2004, said Mr. Cook. The company’s projected 2003 operating expense is about $15 million, and the company hasn’t provided guidance for its expense estimate in 2004.
While Pharmos has enough cash to run through the trial and FDA new-drug application for dexanabinol, Mr. Cook wouldn’t rule out any future offerings. He also noted the company would be receiving about $10 million in royalty payments from partner Bausch & Lomb Inc. (NYSE:BOL – News) .
As part of the current deal, $16 million of the $21 million raised will be reserved for acquisitions only. Mr. Cook said the company doesn’t have any immediate plans on the horizon.
Source: Dow Jones Business News.