Mission Viejo-based Aeolus Pharmaceu-ticals Inc. has raised $26.7 million and plans to use the money to help cover expenses as it works on developing its lead biodefense drug compound.
Aeolus filed papers with the Securities and Exchange Commission last week that “relates to the offer and sale from time to time” of up to 88.7 million shares of its common stock.
Chief Executive John McManus said that the S-1 filing, similar to a shelf registration by larger companies, was triggered by a financing deal that Aeolus completed in February.
“The financing’s really been done,” McManus said. “It’s not a sale of stock by the company to investors. The S-1 allows the investors the right, if they choose, to be able to resell their stock.”
Aeolus develops cancer and biodefense drugs, and has yet to produce a commercial product. The company currently has a five-year, $118 million research and development contract with the Biomedical Advanced Research and Development Authority, a division of the U.S. Department of Health and Human Services, covering its AEOL 10150 compound.
The company moved to raise the additional money to cover about $100,000 of monthly expenses that aren’t reimbursed under its federal government contract, McManus said.
• Headquarters: Mission Viejo
• Business: Drug maker
• Founded: 1994
• Ticker symbol: AOLS (OTC)
• Market value: About $17 million
• Notable: Raised $26.7 million to meet expenses during development of drug under contract with federal government
Development
Aeolus is developing AEOL 10150 for the effects of radiation exposure on the lungs in the event of a nuclear bomb or problem with a nuclear power plant. The company also is looking to develop AEOL 10150 as an agent against exposure to various chemical weapons such as mustard and chlorine gases.
“It’s what they call a ‘broad spectrum medical countermeasure,’ ” McManus said. “The government likes those.”
Aeolus’ objective on the federal contract is to get AEOL 10150 approved by the Food and Drug Administration or obtain emergency-use authorization by the Biomedical Advanced Research and Development Agency.
An emergency-use designation would allow federal authorities to create a strategic stockpile of the drug, according to McManus.
“We could, under the emergency-use authorization, get a procurement as early as the second half of next year,” he said.
Aeolus and the federal agency have committed to getting the drug developed and approved by the FDA in addition to an emergency-use designation, McManus said.
“We’d continue, and the $118 million contract would allow us to continue to do that,” he said. “The procurement would be a separate contract.”
Losses
Aeolus started in 1994 and has had a history of operating losses.
It said in the filing that it had an accumulated deficit of $176.7 million as of March 31.
The company had a market value of about $17 million as of last week.
Aeolus is “always open to the possibility” of being sold or merging with another company but is not “anxious” or “in need of a sale” at this point, according to McManus.
“Given the fact that we have this contract with the government and we have such a small need for cash, and we think that the procurement opportunity is so large … we believe that if we were to get that procurement, the company would be worth an extraordinary amount of money,” McManus said.
Aeolus, which moved from North Carolina to Orange County in 2005, has seven workers and employs another 30 or so consultants and subcontractors in its development programs.
Its pipeline also includes AEOL 11207, which is being developed for epilepsy and Parkinson’s disease, with the latter project’s research being funded by the Michael J. Fox Foundation. Aeolus also is looking at AEOL 10150 as a potential treatment for various types of cancers, including prostate, brain and lung cancers.
