West Coast Editor

Modigene Inc. raised $11.6 million through a complex merger deal steered by Phillip Frost, IVAX Corp.'s former chairman and CEO, and the Modigene's ongoing work with carboxyl terminal peptide technology is led by one of the lead developers of Merck Serono SA's $1.3 billion multiple sclerosis drug, Rebif.

In late February, the Nevada company LDG Inc. changed its name to Modigene Inc., and in May, Modigene Acquisition Corp., a wholly owned subsidiary of LDG, merged with Modigene Inc., a Delaware corporation, and its Israeli parent firm ModigeneTech Ltd.

As a result of the deal, LDG took over the business of Modigene Delaware and ModigeneTech, and will continue operations with them as wholly owned subsidiaries, under the publicly traded firm named Modigene Inc.

In the financing, Modigene issued about 6.4 million shares at $1.50 each, raising about $9.6 million. Frost and several others - all formerly with IVAX, which Teva Pharmaceuticals Ltd. took over last year - chipped in another $2 million.

The fund raising also included about 1.6 million warrants that expire in five years and bear an exercise price of $2.50.

Modigene's stock (OTC BB:MODG) closed Tuesday at $2.63, up $1.11, or 73 percent. The management from Delaware and board of directors have assumed control of the merged entity, with Frost as newly appointed board member, along with Jane Hsiao, one of the investors. Modigene officials could not be reached.

Abraham Havron, the company's CEO, not only had a hand in Rebif (interferon beta-1a), but developed the Israeli firm BioTechnology General Ltd.'s human growth hormone Bio-Tropin and the hepatitis B vaccine, Bio-Hep-B, as well as a recombinant insulin that was licensed to Organon, of Oss, the Netherlands (which is being acquired by Schering-Plough Corp., of Kenilworth, N.J., for about €11 billion in cash, or US$14.4 billion).

Researchers at Washington University in St. Louis discovered Modigene's CTP technology. CTP occurs naturally in humans, and when attached to a therapeutic protein, extends its efficacy.

Organon has bound the CTP to a follicle-stimulating hormone for fertility, and is testing the product in Phase III trials. Already the firm has shown a single injection of FSH-CTP provided the same clinical effect as seven daily shots with regular FSH.

The Washington license held by Modigene allows the use of CTP with all proteins except four endocrine proteins to which Organon has rights.

So far, Modigene has tested CTP-modified hGH and erythropoietin in animal models for growth failure and anemia, respectively. Experiments have shown interferon-beta-CTP has bioactivity similar to that of interferon-beta.

A longer-lasting growth hormone could help Modigene seize a chunk of the $2.2 billion market. CTP might create a better Aranesp (the EPO product from Amgen Inc.), which sold $4.1 billion last year. The approach could improve on therapies for MS, too, where the market size is about $3.8 billion.