Staff Writer

A little more than a week after closing its deal to acquire three Inex Pharmaceuticals Corp. cancer drugs, Hana Biosciences Inc. raised $40 million in gross proceeds through the sale of its stock to institutional investors.

South San Francisco-based Hana purchased the Inex compounds, which include Marqibo (sphingosomal vincristine) for hematological malignancies, for $42 million in a deal first announced in March. (See BioWorld Today, March 20, 2006.)

The financing consists of the sale of 4.7 million shares of common stock at $8.50 apiece, including the purchase by Hana's affiliated investors of 72,000 shares at $9.07 each, the closing price of Hana's common stock Tuesday. Shares (NASDAQ:HNAB) fell 87 cents Wednesday to close at $8.20.

"I think this raise removes the financing risk of moving into a launch phase of the company and into registrational trials for Marqibo," said Mark Ahn, Hana's president and CEO. "It allows us to move forward from a position of strength while we evaluate opportunities for commercialization either on our own or with potential alliance partners."

The funds will cover Hana's expenses "well into 2008," Ahn told BioWorld Today. Lehman Brothers Inc., of New York, served as the lead placement agent, while San Francisco-based Jefferies & Co. Inc. and New York-based Oppenheimer & Co. Inc. were the co-placement agents.

Hana holds exclusive, worldwide rights to five of its six products, with the exception being its lead candidate, Zensana (ondansetron oral spray) for chemotherapy-induced nausea and vomiting. For that drug, it has just U.S. and Canadian rights, in-licensed in October 2004 from NovaDel Pharma Inc., of Flemington, N.J. Hana recently completed pivotal trials of Zensana and expects to submit a new drug application to the FDA by the end of June.

Its second pipeline product, Marqibo, had a difficult road with Vancouver, British Columbia-based Inex. It received a non-approvable letter in January 2005 after an FDA panel voted against it. As a result, Inex, which had filed for approval based on single-arm Phase II data, lost its partner and cut its work force from 165 to 22 employees.

Nevertheless, Hana said it believes the drug is active and simply needs a well-designed and well-executed trial to reach the market. It plans to start a Phase III trial in acute lymphocytic leukemia by the end of this year, and another Phase III in non-Hodgkin's lymphoma soon afterward.

The company also is developing Talotrexin (PT-523), which was discovered at the Dana-Farber Cancer Institute and the National Cancer Institute. The product has completed a Phase I trial in solid tumors and is about to complete another Phase I trial in acute lymphocytic leukemia. It entered a non-small-cell lung cancer Phase II trial in late March.

It is the speedy advancement of its lead products that Ahn believes is the major driver of the company's stock over the last year. Hana came into being in July 2004 when Hudson Health Sciences and Email Real Estate.com completed a reverse merger that placed the company on the Over-the-Counter Bulletin Board. (See BioWorld Today, July 26, 2004.)

The stock was trading as low as $1.30 in May 2005 before it started climbing to reach a high of $12.30 in April this year, when it also achieved a Nasdaq National Market listing. (It had traded on the American Stock Exchange under the symbol "HBX" since autumn 2005.)

Ahn believes Hana has piqued the interest of investors because it has moved Zensana from a preclinical stage to pivotal studies in just more than a year, has advanced Talotrexin to Phase II and has in-licensed the Inex compounds.

"It's a maturing pipeline and I think folks have noted that we've now taken three drugs all the way from the lab to the clinic," he said.

Hana's oral radiation sensitizer, IPdR, which was discovered at Yale University, is undergoing a Phase I trial as a treatment for gastric, pancreatic, colorectal and liver cancers.

The company's two other pipeline products, acquired from Inex, still are in the preclinical stage. Sphingosomal topotecan for small-cell lung cancer should enter the clinic in the first quarter of 2007, while Hana has an open investigational new drug application before the FDA on sphingosomal vinorelbine for breast and non-small-cell lung cancers.

"That will go into the clinic late this summer," Ahn said.

In other financing news:

• BioDelivery Sciences International Inc., of Morrisville, N.C., said it closed a transaction with Clinical Development Capital LLC in which $7 million in funds committed by CDC in July 2005 were converted into BioDelivery shares at $3.50 each, a 40 percent premium to the May 16 closing price of $2.50. The money was earmarked to fund the clinical development of its BEMA fentanyl product. As a result of the transaction, about $2.8 million of funds have been converted into shares, and about $4.2 million in cash will be funded to BioDelivery at closing. Under the previous agreement with CDC, the funding was accounted for as a refundable deposit, while the new agreement converts it into equity.

• BioEnergy International LLC, of Norwell, Mass., closed a $10 million financing facility with Itera International Energy Corp., of Jacksonville, Fla. Proceeds will fund working capital and piling and foundation work for BioEnergy's 108 million gallon per year ethanol plant in East Carroll Parish, Louisiana. The company expects to begin full-scale construction and close the balance of the equity and debt financing for the project in the fourth quarter.

• BioNanomatrix LLC, of Philadelphia, received a two-year grant from the National Cancer Institute and also received investments from venture firms. New York-based 21 Ventures LLC is providing a bridge financing until a Series A financing closes later this year, and Ben Franklin Technology Partners of Southeastern Pennsylvania has made a seed investment in the company. BioNanomatrix is developing integrated systems that enable nanoscale single molecule identification and analysis of the entire genome.

• Medivation Inc., of San Francisco, entered agreements to sell 3 million shares at $4.75 each in a registered direct offering to raise gross proceeds of $14.25 million. The sale is being made under Medivation's shelf registration statement filed in May. Emerging Growth Equities Ltd. served as the placement agent. Medivation acquires pharmaceutical and medical device technologies in late preclinical development and develops them through proof-of-efficacy studies.