Pain patch gets its pep from pepper

San Carlos-based company hopes to make a hot product

By David Morrill, BUSINESS WRITER

Article Last Updated: 02/09/2007 05:22:14 AM PST

Biopharmaceutical company NeurogesX Inc. hopes its novel pain therapy, which harvests the same molecules found in chili peppers as a way to desensitize nerve endings, will attract the interest of shareholders.

The San Carlos-based company — which currently has no revenues — filed Thursday for a $69 million initial public offering. Experts say NeurogesX's treatment, if approved, could make a splash in the chronic pain market that is thin on treatments. NeurogesX is conducting late-stage trials on the treatment.

Instead of pills, the company is studying a patch system to treat neuropathic chronic pain, or direct damage to the nerves, experienced by those who have shingles, HIV and diabetes. Using molecules found in chili peppers called capsaicin — the ingredient that makes peppers hot — the patch treatment desensitizes nerve endings that display the hyperactivity that causes the pain.

The chronic pain market has long been dominated by drugs called opioids that are derived from opium plants. However, doctors have been hesitant toprescribe opioids for chronic pain because of opium's addictive qualities.

"The pain market is pretty thin and in need of something new," said John McCamant, editor of the Berkeley-based Medical Technology Stock Letter, a newsletter on biotechnology investing. "The need to find something that works is there, so it sounds like an interesting opportunity for NeurogesX."

Avigen Inc. of Alameda is one of the public companies focused in pain therapy that could be a competitor to NeurogesX.

Morgan Stanley & Co. will act as lead manager for the offering, with Pacific Growth Equities, Lazard Capital Markets and Susquehanna Financial Group serving as co-managers. NeurogesX has filed with the Nasdaq Global Market to list its shares under the ticker symbol "NGSX."

In its prospectus, the company said its goal is to "become a leading biopharmaceutical company in the development and commercialization of novel pain management therapies."

Its strategy includes the development and commercialization of the patch product, creating a sales and marketing organization to target pain specialists, and protecting its intellectual property.

In the nine-month period ending Sept. 30, the company reported an unaudited net loss of $17.3 million in 2006, compared with a loss of $8.6 million for the same period in 2005.

Posted 2-26-07