BioWorld International Correspondent

MediGene AG added almost €15.6 million (US$21.5 million) to its balance sheet via a private placement with Santo Holding (Germany) GmbH, an investment vehicle representing Thomas Strüngmann, one of Germany's wealthiest life-science investors, who also is joining the company's board.

Martinsried, Germany-based MediGene plans to use the cash to finance development of its clinical pipeline and to build a European sales force for products that are nearing approval, company spokesman Georg Dönges told BioWorld International. "We've quite a lot of different things cooking here," he said.

MediGene issued 3,084,282 new shares to Santo, priced at €5.05 per share, a small discount to the company's closing share price of €5.21 Friday, immediately before the deal was disclosed.

On completion of the transaction, Santo will have a 9.09 percent stake in MediGene and will become its largest shareholder.

The approach came from Strüngmann, Dönges said, and his involvement with the company will send a positive signal to other investors. "He knows the business very well. He was successful in building up various companies. Also, he has a lot of contacts."

In 2005, Thomas Strüngmann and his brother Andreas Strüngmann gained a cash fortune of €5.65 billion when they sold generic drug maker Hexal AG, of Holzkirchen, Germany, along with a majority stake in its U.S. affiliate, Eon Labs, Inc., of Laurelton, N.Y., to Basel, Switzerland-based Novartis AG.

Last year, the Strüngmann brothers were involved in establishing Wuppertal, Germany-based AiCuris GmbH & Co. KG as a spinout of the anti-infectives business of Leverkusen, Germany-based Bayer HealthCare AG.

MediGene reported €46.6 million in cash and equivalents at June 30. Prior to the Santo deal, it had forecast reserves of €25 million by year-end. It reported a net loss of €12.8 million for the first half of the year, on sales of €12.5 million. For the full year, it is forecasting €35 million in revenues and a net loss of €35 million.

The company derives most of its sales from the prostate cancer treatment Eligard (leuprolide acetate), the European rights to which it licensed from Vancouver-based QLT Inc. Its partner, Tokyo-based Astellas Pharma Inc., is responsible for sales and marketing in the region.

MediGene plans to build a dermatology sales force to market Oracea, a low-dose, oral formulation of the tetracycline antibiotic doxycycline, which is approved in the U.S. for treating inflammatory lesions associated with rosacea, a chronic skin condition that usually affects the face. It acquired European rights to the product last year from Newtown, Penn.-based CollaGenex Pharmaceuticals Inc.

CollaGenex is responsible for steering the product through the European drug approval process, but its first attempt, under the European Union's decentralized procedure, failed in July, because representatives from the nine countries involved in a vote on the application failed to arrive at a unanimous decision.

The application now will be decided by a majority vote by the 29-member Committee for Medicinal Products for Human Use. "We'll know more early next year," Dönges said.

The same sales force also would market, if approved, Polyphenon E ointment, a genital warts treatment based on a formulation of catechines extracted from green tea leaves. The company is seeking regulatory approval initially in Germany, Austria and Spain, and hopes to have a decision during the first half of 2008.

The same product already has gained FDA approval. Fairfield, N.J.-based Bradley Pharmaceuticals Inc. is responsible for marketing the product in the U.S., and a launch is imminent. "We're very confident this will happen before the end of this year," Dönges said.

MediGene has several clinical stage projects further back in the pipeline, including Endo-TAG 1, which is undergoing Phase II clinical trials in breast cancer and in pancreatic cancer.

RhuDex, a rheumatoid arthritis treatment, is undergoing a Phase IIa clinical trial, and the oncolytic virus NV1020 is undergoing a Phase I/II clinical trial in metastatic liver cancer. Another oncolytic virus, G207, is undergoing a Phase I clinical trial in patients with malignant brain tumors.

Shares in MediGene (FRANKFURT:MDG) closed Monday at €4.85, down almost 7 percent.