BioWorld International Correspondent

LONDON - Xenova Group plc is raising £21.1 million (US$36.3 million) in a UK placing and open offer, and a U.S. private placement, enabling the company to fund Phase III trials of TransMID, the glioma treatment it acquired when it took over KS BioMedix plc in September.

CEO David Oxlade told BioWorld International investors had been very supportive of the fund raising. "Given the difficulties and market cap reduction we had in the summer, it is a very positive sign.

"In particular the interest from the U.S. is an important point," he said. "Many people are saying U.S. funds are looking at Europe as a source of undervalued companies." Oxlade said there was a good reception to Xenova's road show in the U.S., and the placement involves several U.S. accredited investors that specialize in the biotech sector.

Xenova is issuing 187.7 million shares and 56.3 million warrants at a price of £1.125 per unit, with each unit comprising 10 shares and three warrants. That is equivalent to a discount of 10 percent.

About £11 million of the new money will be spent on the first of two Phase III trials of TransMID. Slough-based Xenova is awaiting final FDA approval of the trial, which would commence immediately in 50 centers in Europe and the U.S. If positive, Xenova would then seek a North American partner to fund the second Phase II trial. Oxlade said it is also possible TransMID could get accelerated approval from the FDA, if the first trial is positive.

A further £5 million will be invested in Xenova's other priority programs. The company expects to advance one of its DNA-targeting compounds into Phase II in the middle of 2004, triggering a milestone from partner Millennium Pharmaceuticals Inc., of Cambridge, Mass. The other priority products are XR303, currently in Phase I/II studies in pancreatic cancer, and TA-CD and TA-NIC, vaccines for cocaine and nicotine addiction, respectively.

Oxlade said Xenova's cash burn going forward will be around £10 million per annum, excluding the cost of the TransMID Phase III trial. At that rate the company currently has two years of money.

There is still no news from Xenova partner QLT Inc., of Vancouver, British Columbia, on the review of the Phase III data for tariquidar, an adjuvant treatment designed to prevent multidrug resistance to cancer chemotherapy. The trials were stopped in May on the advice of a safety panel, a move that halved Xenova's share price.

"I know the markets were expecting some sort of outcome by now," Oxlade said. "It has taken longer because data are still coming in. I would expect a conclusion in the next couple of months."