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This article was originally published in The Gray Sheet

Executive Summary

ELAN RIGHTS OFFERING COULD RAISE UP TO $78 MIL. FOR PANODERM and other drug delivery system projects. The company is returning to the fundraising technique it used in 1990 when it set up the Drug Research Corporation as a funding vehicle for the early stage development of its ETDAS (Electro-Transport Drug Administration System) and IPDAS (Intestinal Protective Drug Absorption System) technologies. This time, Elan is proposing the sale of 3.9 mil. units of Advanced Therapeutic Systems to raise additional cash for development and commercialization of ETDAS and two other proprietary technologies. ETDAS technology facilitates the controlled administration of drugs under the influence of low-powered electrical stimulus. Elan's Panoderm and Panoject delivery devices both incorporate ETDAS technology. A spokesperson said that Panoderm, a watch-like device used for transdermal delivery of peptides, narcotics and cardiovascular drugs, has completed Phase II trials and will soon advance to Phase III. In its second quarter report for fiscal year 1993 (year ending March 31), Elan said it expects to file for approval of Panoject "in the current fiscal year." The other two drug delivery projects that ATS would fund are still in the early stages of development. BEODAS (Biodegradable Enhanced Oral Drug Administration System) provides a method of entrapping drug substances for enhanced oral release that may apply to a range of products, including peptide and hormone products, the company reports. MIDAS (Microparticle Injectable Drug Administration System) technology applies to long-acting injections; by adjusting the release characteristic of a drug, the technology may allow for pulsating drug delivery to correspond with natural hormone cycles. Elan is evaluating a range of products for MIDAS technology, focusing particularly on hormones and hormone replacement systems. Elan/ATS filed a registration statement June 2 with the Securities and Exchange Commission for the proposed sale of the units at an expected subscription price of $20 apiece. Each unit will consist of one share of common stock of ATS and one five-year warrant to acquire an Elan American depository share. Holders of Elan American depository shares and Elan ordinary shares will receive one right for each share owned as of the record date for distribution of the rights. Eight rights will be required to subscribe to one unit, Elan said. Rights holders will be entitled to subscribe to any additional units that may be available as a result of rights expiring without exercise. The offering will be withdrawn if the aggregate gross proceeds of subscriptions fall short of $45 mil. In addition to the net proceeds from the offering, ATS will receive an additional $25 mil. from Elan upon its consummation. The funds will be used to make payments to Elan under an R&D agreement. Elan and ATS each will have certain licensing rights with respect to the products being developed, and Elan will have the option to acquire all of the common stock of ATS during a specified time period in the future.

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