Washington Editor

Financial maneuvering last week by Xenogen Corp. has helped the firm secure fiscal footing that could move its business into the black.

On Friday, the Alameda, Calif.-based business raised $15 million through a stock and warrant sale, just four days after securing $18 million in loans. The added funding will supplement its cash reserves of $12.8 million as of June 30.

"These funds, together with our new credit agreement, will enable us to function so we don't have to slow down any of our growth," Xenogen President Pamela Contag told BioWorld Today.

Xenogen, which has developed molecular imaging technology that provides predictive data for drug development, as well as for life science researchers exploring broader biological functions, is moving forward aggressively these days. Several new product releases are scheduled for next month, including a 3-dimensional imaging system to provide tomographic analysis of bioluminescent reporters in mice, in addition to related reagents and a tomographic software package.

According to BioWorld Snapshots, Xenogen is the 26th company to bring in public or private financing this month, though more broadly in terms of year-to-date public offerings and private venture deals, this year's number of transactions remains slightly behind last year's pace.

But Contag, who co-founded the business a decade ago, said she was pleased that the amount raised was equal to what had been sought. Proceeds will be used for working capital and general corporate purposes, including next month's planned product launches.

Xenogen's definitive agreements on the stock and warrant sale call for the issuance of about 5.2 million common shares at $2.91 apiece, a slight premium to Thursday's closing price. The placement's 30 percent warrant coverage has an exercise price of $3.29 per share, a 15 percent premium to that same closing price. The securities are being sold to unnamed institutional and venture investors, and the parties expect to close the transaction shortly.

Xenogen's borrowed money comes from two lines of credit that are available for two years and are secured by all the company's assets, except intellectual property and certain financed equipment. One loan, secured through the Silicon Valley Bank, restructured an original credit facility with the same lender, and all borrowings outstanding under the original loan were rolled into the new credit. In connection with the other loan, Xenogen issued Partners for Growth warrants to purchase up to 180,000 common shares, with some warrant shares subject to forfeiture in certain events.

"Essentially, this allows us a nice cushion of working capital," Contag said.

Near-term profitability at the company, which has a wholly owned Xenogen Biosciences subsidiary that provides genetically modified custom mouse models, is evidenced by its latest quarterly financial report. Its revenue grew 30 percent to $9.7 million in the period ended June 30, while its net loss narrowed to $3.7 million. Contributing to the improved numbers were increased sales in all areas of the company's business, including its VivoVision Systems that use real-time biophotonic imaging technology to explore genes, proteins, pathogens and tumor cells in living animals through the use of inserted bioluminescent genes that make fireflies glow.

Prior to the latest financial transactions, Xenogen had about 14.8 million shares outstanding. A year ago, the company went public with a $29.4 million initial public offering, selling 4.2 million shares at $7 apiece.

"It's been four quarters since our IPO," Contag said, "and we've met our projected numbers each time. We're pretty confident that we'll continue to grow at a nice rate."

On Friday, its stock (NASDAQ:XGEN) gained 12 cents to close at $3.07.

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