West Coast Editor

About two weeks after its shelf registration became effective, Vion Pharmaceuticals Inc. has agreed to sell up to 10 million shares in a direct offering at $3.25 each to institutional investors, with net proceeds of about $30 million after placement fees and other expenses are paid.

"This extends our runway at least into 2007, depending on how aggressive we get with expanding our trials and how we use the money," said Howard Johnson, president and chief financial officer of New Haven, Conn.-based Vion.

The company's stock (NASDAQ:VION) closed Wednesday at $3.40, down 29 cents.

At the Phase II stage, cancer-focused Vion has the sulfonylhydrazine alkylating agent Cloretazine for brain cancer and acute myeloid leukemia and Triapine, an inhibitor of DNA synthesis, combined with gemcitabine for pancreatic cancer and non-small-cell lung cancer.

In December, Vion said the pancreatic cancer study showed an objective response rate of 11 percent, median progression-free survival of 4.7 months and median survival of 7.1 months. The company promised further data at the American Society of Clinical Oncology 2005 Gastrointestinal Cancers Symposium later this week.

Vion said last fall that Cloretazine, which the FDA has granted orphan drug status, would enter Phase III trials against AML this quarter, and Johnson confirmed that plans are on track. The study will be a randomized comparison of the combination of Cloretazine and Ara-C vs. Ara-C alone in 200 to 300 AML patients in first relapse, with enrollment expected to take 18 to 24 months.

At the preclinical stage, Vion is testing KS119, a hypoxia-selective compound from the sulfonylhydrazine class, and heterocyclic hydrazones. In the works are second-generation Tumor Amplified Protein Expression Therapy vectors, which are modified Salmonella bacteria for delivery of cancer agents directly to tumors.

Proceeds from the stock sale will be used "not only for conducting the Phase III trial [with Cloretazine] in AML but expanding trials in other indications," Johnson told BioWorld Today, adding that those indications have not been disclosed.

"We have some interest, clearly, in the drug in the hematologic community," he said, noting that the company has done two Phase I trials in solid tumors and two in the hematologic area.

"We feel good about our compound because it has a novel mechanism of action, and the toxicity profile so far has made it look like it could be combined with other agents," Johnson said.

CIBC World Markets Corp. in New York and Leerink Swann & Co. in Boston are acting as the exclusive placement agents for the offering.

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