Alzheimer's treatment: Pharma raising $4.3M for drug trial

Alzheimer’s disease drug development company Curaxis Pharmaceutical (OTC:CURX.PK) expects to raise up to $4.3 million from a private stock sale whose proceeds could jump start clinical trials on a lead drug candidate starved of financial support for the last four years.

No date has been set for a sale but an offering would mark the first financial steps taken by Curaxis, which is developing a new treatment for Alzheimer’s disease, since a June overhaul of the company resulted in a change of nearly every member of the company’s management team and board of directors.

Curaxis, which had operated from Durham, North Carolina but is now based in Raleigh, last December filed documents with the Securities and Exchange Commission in preparation for a stock sale. The SEC declared that registration statement effective in January. In a July 26 amendment to that filing, Curaxis said it expects to sell more than 12 million shares of Curaxis stock for 35 cents per share. At that price, Curaxis expects to fetch $4.3 million in gross proceeds assuming all of the 12.2 million shares registered are sold.

The stock would be sold in a private placement to Southridge, a Connecticut firm that provides capital to public companies. Curaxis and Southridge reached a deal last year that could provide Curaxis with up to $25 million in equity financing. The agreement permits Southridge to periodically buy Curaxis stock over a three-year period starting when the registration statement becomes effective. For Curaxis to secure additional financing through the Southridge agreement, the company will need to register additional stock. Curaxis said in the filing that proceeds from the stock sale would be used for clinical development of lead Alzheimer’s drug candidate Memryte.

Any promise that Curaxis has shown with Memryte has been stymied by financial obstacles confronting the company. Started as Voyager Pharmaceutical under then CEO Patrick Smith, the company took a hormonal approach to addressing Alzheimer’s disease. The company’s research is based on the idea that many diseases of aging may be caused by age-related changes in the function of the hypothalamic-pituitary-gonadal (HPG) axis, a hormonal feedback loop that controls development, reproduction and aging. Voyager has discovered hormonal similar hormonal signaling mechanisms at the cellular level in the brain tissue from Alzheimer’s patients and in tumors that it believes will lead to new treatments for Alzheimer’s disease and some cancers. Smith makes the scientific and investment case for Memryte in this video:

Smith considered taking Voyager public in 2005 but withdrew those plans due to market conditions. Memryte advanced to a phase 3 trial in 2006 which was stopped due to financial constraints. Short of funds, Voyager halted its clinical program and R&D efforts altogether in 2007.

Voyager emerged as a publicly-traded company last year, but only through a reverse merger with automobile e-commerce firm Auto Search Cars. The new company was called Curaxis. Afterward, Curaxis inked the private placement agreement with Southridge.

Curaxis needs cash to resume clinical work on Memryte. In the company’s report of first quarter financial results, Curaxis disclosed that its cash position “has deteriorated significantly over the last three years.” The company said it has been unable to pay many vendors and is in default of several credit agreements.

Meanwhile, the company estimated it will cost at least $48 million over the next four years to complete clinical development on Memryte. Some of those costs could be mitigated. In its latest filing, Curaxis said it will seek collaboration agreements with pharmaceutical and biotechnology companies to help develop Memryte. But with old data demonstrating so far that the hormonal compound shows statistical significance only in women, Curaxis will likely need to conduct additional work in order to make Memryte attractive to a drug partner.