Raising gross proceeds of $40 million, Geron Corp. entered an agreement with institutional investors that should help the company fund trials of its cancer vaccine and bring a telomerase inhibitor into the clinic next year.

The Menlo Park, Calif.-based company agreed to sell about 6.5 million shares to two unnamed institutional investors at $6.10 per share. The company also issued to investors warrants with a 60-day exercise period to purchase about 2 million shares, also at $6.10 apiece, as well as longer-term warrants that are exercisable after 180 days for the purchase of 2.3 million shares at a premium.

"This strengthens the balance sheet and it will be used to support our late-stage preclinical projects and the trials under way," said David Greenwood, the company's executive vice president and chief financial officer.

With the financing, the company has a cash position of about $130 million, which will cover Geron's expenses through 2007.

"It's at least three years of capital," Greenwood told BioWorld Today.

Geron is funding Phase I/II trials at Duke University Medical Center with its cancer vaccine. Results from the initial study showed improved cellular immune responses in subjects that received a modified version of the hTERT antigen that enabled the generation of anti-telomerase CD4+ helper T cells, as well as telomerase-specific CD8+ killer T cells. Greenwood said the company is initiating four additional trials with the vaccine at Duke.

In March, Geron entered a $44.8 million deal with Durham, N.C.-based Merix Bioscience Inc. to use certain technology in cancer vaccines that have telomerase as an antigen. The ongoing Phase I/II cancer trials at Duke, which also is located in Durham, combines Geron's telomerase technology with Merix's approach, which deploys dendritic-cell biology. (See BioWorld Today, March 11, 2004.)

"That is enabling technology that came out of Duke and it was initially licensed to Merix," Greenwood said. "So we acquired those rights."

In addition to moving forward its cancer vaccine program, Geron intends to use proceeds to file in the first half of 2005 an investigational new drug application and begin clinical trials of a second cancer product, a telomerase inhibitor called GRN163L. New data indicate that the product can have a relatively rapid effect on tumor cells in culture, making them less able to grow at low density, as well as inhibiting tumor-cell invasion and migration through an extracellular matrix. In essence, the drug may play a role in reducing the metastatic potential of cancer cells.

Geron also is working in the area of spinal cord injury using cells derived from human embryonic stem cells (hESCs), and it is funding preclinical studies with cardiomyocytes and islets and other cell types derived from hESCs.

"Within 18 months, we want to have the spinal cord therapy project filed with the agency" and ready to move into the clinic, Greenwood said.

Also within that time frame, the company expects to collect the results from the Phase I/II cancer vaccine trials at Duke.

The financing is part of a $150 million shelf registration statement filed by the company in May. Geron arranged the financing directly with the investors.

In other news, Geron said studies on the ability of the company's telomerase and hESC technologies to produce immortalized cells for research, biologics production and therapeutic applications were published in the November 2004 issue of Stem Cells.

Scientists from Geron and the Roslin Institute demonstrated that fibroblast-like cells could be differentiated from hESCs, and that those cells could be immortalized with telomerase. The immortalized cells then could be used to produce conditioned medium to support feeder-free growth of undifferentiated hESCs, which are unspecialized stem cells that can be grown in large quantities and differentiated into a variety of cell types.

The method of culturing hESCs in a medium conditioned by mouse embryonic fibroblasts reduces the risk of exposure of hESCs to mouse xenogenic pathogens.

Geron is one California company that might benefit from Proposition 71, designed to provide $3 billion worth of stem cell research over the next decade. The company's stock jumped 16 percent in late October, closing at $7.75, following an endorsement of Prop. 71 by California Gov. Arnold Schwarzenegger.

On Thursday, the stock (NASDAQ:GERN) dropped 34 cents, to close at $6.96.