By Mary Welch

Staff Writer

Rather than dilute its stock further, Vion Pharmaceuticals Inc. cut its public offering by 1.3 million shares and settled on raising $11 million by selling 2.2 million shares at $5 each. In July, the New Haven, Conn.-based firm said it intended to raise more than $19 million by offering 3.6 million shares.

Vion, of New Haven, Conn., expects to net about $9.6 million.

"We decided the additional dilution was not needed," said Tom Klein, the company's vice president finance and chief financial officer. "It was not a matter of market demand, as you can tell that by the stock's price. After popping down, it's rebounded and is at about $5.40."

The stock (NASDAQ:VION) closed Wednesday at $5.687, up 43.75 cents. When Vion first announced the offering, the stock (NASDAQ:VION) dropped about 3 cents per share to close at $5.344. (See BioWorld Today, July 29, 1999, p. 1.)

In addition, the underwriters have a 30-day option to purchase up to 330,000 shares to cover overallotments. New York-based Brean Murray & Co. Inc. managed the offering.

Vion now has about 17.7 million shares outstanding.

The money will be used for general corporate purposes but largely will be aimed toward funding the company's three clinical trials, including one Phase III.

"We are spending more money as we have more products in the clinic and less in development," Klein said. "Although we do have products in development, we are going through the phase of becoming a more clinically based company and less of a developmental one. It eats up your cash."

With this infusion, Vion has enough funding to go through September 2000, Klein said.

The company is developing its core technology, Tumor Amplified Protein Expression Therapy (TAPET), which is a way to deliver toxic anticancer agents to tumor sites with little effect on normal tissues.

The company just received approval to enter Phase I tests with TAPET at the Taussig Cancer Clinic in Cleveland.

In addition to TAPET, Vion is developing Promycin, a therapy that targets the oxygen-starved tumor cells at the center of the tumor that are difficult to destroy. Promycin is in Phase III trials as an adjunct to radiation therapy in patients with head and neck cancer. Vion is collaborating with Boehringer Ingelheim International GmbH, of Ingelheim, Germany, on Promycin. The companies expect to file for marketing approval in 2002, Klein said.

Vion's third clinical candidate is Tirapine, a drug that blocks a critical step in DNA synthesis as a way to prevent replication of tumor cells. It is in Phase I trials. In preclinical development are Sulfonyl Hydrazine Prodrugs, which enter the body as inert compounds and are converted into potent alkylating agents.