Drug delivery company Generex Biotechnology Corp. raised $13.5 million through a private placement and the exercise of issued warrants, as it continues to develop its oral insulin flagship product.
Generex's Oral-lyn is approved in Ecuador to treat patients with Type I and Type II diabetes and is in various stages of clinical development around the world. Generex began working on the product shortly after its founding in November 1995.
"If you have a look at our history, we have done a lot of things on our own," said Anna Gluskin, the company's chairman, president and CEO. "We developed the technology, and we're now taking the products to market."
The company has never licensed its products to pharmaceutical companies, but it realizes that late-stage development of drugs like Oral-lyn can be very expensive.
"We need to have a lot of funding in order to scale up the manufacturing component," Gluskin told BioWorld Today, adding that developing a commercial infrastructure takes money, too.
The private placement with four accredited investors brought Toronto-based Generex about $7 million in proceeds. The rest came from the investors' exercise of certain outstanding warrants for additional proceeds of $6.5 million.
In addition to building up manufacturing and commercial capabilities, proceeds will go toward the expansion of the product's label, hiring distribution forces and investing in education about the product, Gluskin said.
Generex intends to expand Oral-lyn to the European and Canadian markets first, later pursuing the U.S. market. Depending on the timeline for a regulatory filing in the U.S., the company may need to conduct another financing as early as the next quarter. "The U.S. is going to be very expensive just by virtue of the size of the market," Gluskin said. "We are getting ready for that."
She believes that having Oral-lyn approved in other countries will offer the FDA with more proof of the product's success and safety. The company's business model is taking established drugs, reformulating them and packaging them in a way that makes them better. "We do not develop anything that's completely brand new," Gluskin said. "We don't do drug discovery. We do drug delivery."
The strategy drastically reduces the risk factor of each product, she said. The company delivers drugs into the body through the buccal cavity. Its liquid formulations allow drugs normally administered by injection to be absorbed through the lining of the mouth using the company's RapidMist device. Oral drugs that enter the gastrointestinal tract are broken down like food before delivering their full therapeutic value, whereas drugs delivered through the buccal cavity "go right into the bloodstream and do not harm anything in its way," Gluskin said.
The delivery vehicle is a physical mixture of excipients and absorption enhancers that "have been in the public domain for over 20 years as chemicals and additives," she added.
If Oral-lyn gains approval throughout the world, the regulatory path for Generex's follow-on products might be easier. The company already has proof of concept of a buccal spray of morphine and fentanyl to treat breakthrough pain, as well as a buccal spray of low-molecular-weight heparin, which is used to treat deep-vein thrombosis and to prevent blood clots due to postsurgical complications. It also is developing Glucose RapidSpray, a mixture that targets the symptoms of low blood sugar.
At its Worcester, Mass.-based subsidiary, Antigen Express, Generex is developing vaccines for breast and prostate cancer, H5 avian influenza and HIV.
Between Worcester, Toronto, and other offices in North Carolina and Europe, the company has about 80 employees.
The four unnamed private placement investors bought 853,659 restricted shares of Generex common stock at $2.05 per share, and a five-year warrant to buy 640,245 shares at $2.45 per share. Generex granted the investors certain rights to buy up to 100 percent of stock, debt or convertible securities in any financing conducted by the company within the next 12 months.
Generex and the investors also accelerated the exercise periods of outstanding warrants to purchase shares of common stock to June 1, 2006. The warrants were to purchase 4.4 million shares with strike prices of $1.25 and $1.60 per share at the exercise dates of July 23 and Aug. 28. Generex is issuing each investor additional warrants exercisable for five years that allow the holder to buy up to 75 percent of the shares issuable upon the conversion in full of the outstanding warrants at $2.35 per share.
Gluskin noted that by helping the company launch its commercial activities, the financing will enable the company to post its first revenues this year. "That's money well spent," she said.
Generex's stock (NASDAQ:GNBT) fell 9 cents Friday to close at $1.87.
In other financing news:
• Agendia BV, of Amsterdam, the Netherlands, closed its third financing round with the Van Herk Group, of Rotterdam, and Gilde Healthcare, of Utrecht, both in the Netherlands. The company is the first worldwide to commercialize microarray-based diagnostics. MammaPrint, its prognostic breast cancer test, assesses the risk of breast cancer recurrence based on the activity of key genes, and its second microarray product, CupPrint, is a diagnostic test to identify the origin of a metastasis in a cancer type called "Cancer of Unknown Primary." The round will support the company as it expands activities in the European Union and determines a regulatory path in the U.S. Funds also will be used to accelerate development of microarray-based late-stage products into diagnostic tests for breast cancer and other cancer types. Other investors involved in the round were AXA Private Equity Venture Funds, Global Life Sciences Ventures and the Netherlands Cancer Institute.
• Enzon Pharmaceuticals Inc., of Bridgewater, N.J., said the lead initial purchaser in its private placement of $225 million in 4 percent convertible senior notes due 2013 exercised its right to buy an additional $50 million in notes. The notes are convertible into Enzon shares at $9.55 per share. Enzon intends to use the net proceeds from the exercise of the option to acquire its outstanding 4.5 percent convertible subordinated notes due 2008.
• ProMetic Life Sciences Inc., of Montreal, raised C$10.8 million (US$9.8 million) in a private placement of 29.6 million subordinate voting shares via a share purchase agreement with JP Morgan and Third Point LLC. Proceeds will be used for general corporate purposes, including accelerating the development of PBI-1402, an orally active drug for anemia in cancer patients undergoing chemotherapy.