Even companies that raise significant sums in the private capital markets and/or through public offerings can run into financial crises in today's economic environment - a reality illustrated by two extremes.

At one end is Cogentus Pharmaceuticals, which shut its doors after filing for Chapter 7 bankruptcy on Jan. 16, listing $2.2 million in assets but $17.2 million in liabilities. The Menlo Park, Calif., firm, which in December halted a 4,000-patient, Phase III trial for an antiplatelet compound that combined clopidogrel and omezaprole, had raised $62.5 million in a Series C round led by Keffi Group in late 2007 (¹ [See Deal]).

Despite a promising drug - CGT2168 aimed to eliminate gastrointestinal side effects associated with current therapies for acute coronary syndrome - Cogentus ran out of money. That apparently leaves Keffi and several other investors in the cold. Also wondering what happened is contract research organization Parexel, which is owed nearly $14 million by Cogentus and reported a 60 percent decrease in net income for the last quarter.

In better shape by far, but nonetheless restructuring after mutual termination of a co-development deal with Endo Pharmaceuticals is Alexza Pharmaceuticals (² [See Deal]). The specialty pharma, focused on applications of its Staccato handheld inhaler, appears to have money and prospects, but recently cut its workforce by one-third.

Alexza: It may not be fair to classify Alexza as "troubled" given the $78 million in cash, cash equivalents, and securities on its balance sheet. But it's fair to say the company is likely to join the ranks of struggling biotechs if it fails to execute perfectly on its business model in the coming months.

Certainly Wall Street's reaction to the stock bears that out. In the months after its inhaled version of alprazolam (AZ-002) failed in a Phase II proof-of-concept trial, the firm's stock price began falling, from the $5 per share range in early October to the $1.40 range in mid-December (³ Also see "Alexza’s Acute-Panic Drug Fails In Phase IIa" - Pink Sheet, 9 June, 2008.). Since then, Alexza's stock has regained value, trading in the $3 range.

On Jan. 29, the same day Alexza and Endo ceased their co-development of inhaled fentanyl for treatment of breakthrough pain, Alexza announced it would cut 52 staff and place its primary focus on AZ-004, its inhaled loxapine for acute agitation associated with schizophrenia and bipolar disorder. That product has produced positive results in two Phase III trials and Alexza plans to file an NDA during first-quarter 2010.

The firm said its restructuring would reduce expenses by $21.5 million this year, leaving it with resources sufficient to operate until next year's second quarter. Operating expenses for the first nine months of 2008 were $60.8 million, up year over year from $43.1 million in 2007.

Despite netting $47 million in its 2006 IPO and $66 million in a follow-on offering in 2007, Alexza has turned to private capital to fund operations as well. A private placement of 1.25 million shares with Bio*One Capital brought in nearly $10 million last year.

More notably, Alexza began a partnership with Symphony Capital that brought it $50 million and created Symphony Allegro, the development vehicle for the inhaled loxapine and alprazolam programs (⁴ [See Deal]). Alexza attributed its higher 2008 cash-burn primarily to those two programs.

The failure of inhaled alprazolam likely heightened Alexza's urgency to succeed with the loxapine program. Under the Symphony deal, Alexza has rights to buy back '004 until next year. CEO Thomas King said in December that the company hopes to find a partner for '004 and use money from such a deal to fund the buyback (⁵ Also see "Symphony's Project Financing Model Adapts" - In Vivo, 1 January, 2009.).

While it focuses on follow-on safety studies and NDA preparation for the antipsychotic, Alexza also launched a Phase IIb trial of inhaled loxapine for migraine headaches (AZ-104) last month. But Alexza said it won't commit any additional resources to inhaled fentanyl this year. Endo said it exited that program due to an ongoing strategic review of its R&D programs.

Synvista: Only two weeks after reporting enrollment progress in a Phase II trial for its lead compound, alagebrium, Synvista Therapeutics, nee Alteon, determined it was so cash-poor it would have to terminate all ongoing trials of its two clinical candidates. The Montvale, N.J., biotech now is focused solely on maximizing the value of two diagnostic tests in development.

A quick review of the company's financials shows why. With its stock trading at below $0.70, Synvista has a market cap of $1.76 million, down 11.7 percent over the previous week, according to Rodman & Renshaw's Feb. 2 Biotechnology Balance Sheet report. Synvista had $7.96 million cash on hand as of Sept. 30, 2008, with a quarterly cash burn of $2.93 million.

On Jan. 28, the company said it needs to sell or license its haptoglobin ( Haptochek ) and carboxy-methyllysine diagnostic tests quickly, or its ability to operate beyond this year's second quarter would be in doubt. Just a few weeks prior, Synvista announced it had completed enrollment in a Phase II study of alagebrium for diastolic heart failure and that it expected to complete enrollment this quarter in another Phase II trial studying the compound in chronic systolic heart failure.

But now, those two trials, along with a Phase II study of SYI-2074 in psoriasis, will be terminated as soon as possible, Synvista said. Meanwhile, the company awaits the outcome of FDA's review of Haptochek as a lab test to identify diabetes patients at high risk for cardiovascular complications. FDA accepted a 510(k) submission of the test for a 90-day review on Nov. 19.

Alseres: Also just hanging on is CNS-focused Alseres Pharmaceuticals, whose lead program - Altropane , a molecular imaging agent for early detection of Parkinson's disease - isn't slated for an NDA until 2011. During its quarterly earnings call last November, the company said it was pursuing partnering opportunities for Altropane and Cethrin , a Phase II recombinant protein for acute spinal cord injury.

Despite reporting only $1.4 million on hand as of last Sept. 30, and R&D expenses of $2.8 million the preceding quarter, the Hopkinton, Mass., firm has continued on. Rodman & Renshaw estimates it has about four months of operating cash now.

On Jan. 13, Alseres raised $1 million by selling 1 million shares of common stock to an individual investor, Robert Gipson. A former Alseres board member who invested $5 million in the firm in 2008, Gipson is general partner of Ingalls & Snyder Value Partners.

The latest deal appears highly dilutive, however. Not only did Alseres sell the shares below its current share price in the $1.30 range, but Gipson also received an additional 456,522 shares at no cost in exchange for cancellation of a November 2008 warrant issued to him last fall to buy more than 500,000 shares at $1.84 per share.

Bionovo: Focused on breast cancer and menopause, Bionovo's stock has traded at under $1 since last September, with current levels below $0.30. The Emeryville, Calif., biotech ended third-quarter 2008 with $17.3 million on hand, having spent $5.2 million during the quarter.

On Jan. 15, estimating it had sufficient funds for about another year, Bionovo cut its staff by 15 percent, deferred work on all preclinical programs, and said it would increase its efforts toward partnerships and strategic investments. The company reported no revenue for the first nine months of 2008, but in 2007 raised $24 million through a follow-on public offering and $15.7 million in a private placement with several funds (⁶ [See Deal]).

Bionovo believes it can reach a potential multi-billion dollar market opportunity with its lead program, Menerba , an oral selective estrogen receptor beta agonist in Phase II for menopausal hot flashes. The company hopes to move Menerba into Phase III in the second quarter after Phase II data demonstrated efficacy in night sweats and night awakenings.

The biotech also is bullish on BZL101, an oral glycolysis inhibitor for advanced breast cancer. The compound has moved into Phase II after a Phase Ib dose-finding study last year showed it to be safe and well tolerated, with early signs of clinical efficacy.

-Joseph Haas (j.haas@elsevier.com)

Troubled Biotechs: Alexza, Synvista, Alseres, Bionovo

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