Genelabs Technologies Inc. priced its public offering Friday, raising $27.4 million, selling more shares than originally intended.

The Redwood City, Calif.-based company's chief financial officer, Matthew Loar, described the financing as significant for the company. Its existing cash, he said, only covered expenses into the second half of November.

"It's well over a year's worth of cash for us," Loar said. He kept his comments minimal, due to an SEC-imposed quiet period, but did say the funds would go toward general corporate purposes, including development of its drug "Prestara for lupus, as well as discovery for a new therapeutic for hepatitis C."

Genelabs priced the public offering of 20 million shares at $1.37 per share. The price represents a discount of about 3.5 percent from the Oct. 16 closing stock price of $1.42.

The company's stock (NASDAQ:GNLB) climbed 8 cents Friday to close at $1.50.

The financing structure was changed to a firm commitment underwriting, similar to a private placement, in which the securities are sold to the underwriter directly and then distributed to investors, meaning the underwriter assumes any credit risk.

Natexis Bleichroeder Inc., of New York, served as the sole underwriter. The company granted Natexis an overallotment option of 3 million shares.

Genelabs originally filed to offer 15 million shares on a best-efforts basis, but increased the size of the offering and changed the structure due to market conditions.

In May, Genelabs raised gross proceeds of $8.1 million in a private placement, enabling the company to call back its 74 employees from a temporary furlough. Cash reserves had dwindled to about $1 million before the placement was completed. The company has a burn rate of about $1.5 million per month. (See BioWorld Today, May 6, 2003.)

It also sold 1.7 million shares and warrants to one institutional investor in August, raising $2.7 million.

The company received an FDA approvable letter in August 2002 for its lead product, Prestara (prasterone), for systemic lupus erythematosus. The FDA stipulated the need for a confirmatory trial, which is currently under way. The company has said it expects enrollment to be completed this quarter. (See BioWorld Today, Sept. 3, 2002.)

Corona, Calif.-based Watson Pharmaceuticals Inc. licensed North American rights to Prestara. The deal could bring up to $45 million in milestone payments to Genelabs if the product is approved. (See BioWorld Today, Nov. 14, 2000.)

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