National Editor

In a stock-swap buyout that will give AVI BioPharma Inc. $10 million in cash plus some antisense technology and three validated cancer targets, the firm entered an agreement to take over eXegenics Inc.

"I think we see [the cash] as a significant portion, absolutely," said Michael Hubbard, director of investor relations for Portland, Ore.-based AVI. "It would be disingenuous to say that's not important," although the antisense technology is "going to be very useful in our program as an adjunct" to AVI's existing platform, he said.

After its financing a few months ago, AVI had about $31 million in cash, Hubbard said, and "even accounting for burn [rate] since then, we'll probably be at about $38 million" when the eXegenics takeover is concluded.

The two-step deal involves first an exchange offer for all of Dallas-based eXegenics' common and preferred stock and then a merger in which AVI would acquire all shares not exchanged.

For each share of eXegenics' common stock, AVI is offering 0.103 of a share of its own common stock. AVI is offering 0.155 of a share of common stock for each share of eXegenics' preferred stock.

Based on the volume-weighted average prices of AVI common stock for the 30 trading days ending July 14, the deal values eXegenics common stock at 64 cents per share and eXegenics preferred stock at 96 cents per share, or approximately $11 million in total.

The exchange part of the transaction, expected to be completed in August, is subject to various conditions, including the tender of at least a majority of the shares of eXegenics capital stock in the exchange. September is the target date for finishing the merger.

Although AVI - focused on antisense and cancer vaccines - gets eXegenics' target validation antisense platform, called Oasis, along with the Quantum Core Technology for analyzing protein structure to discover small-molecule enzyme inhibitors, none of eXegenics' employees will be retained.

AVI's management won't change as a result of the deal, nor will its expenditures or burn rate, Hubbard said, noting that eXegenics' board has unanimously approved the takeover and recommended it to shareholders.

"I don't think they had enough cash and critical mass to move forward," he said. In June, eXegenics' board unanimously rejected an unsolicited tender offer by EI Acquisition Inc., a unit of Chicago-based Foundation Growth Investments LLC. EI had offered to buy all outstanding shares and Series A convertible preferred shares of eXegenics for 40 cents each, a transaction that would have been worth about $6.3 million.

AVI plans to conduct a Phase III trial with its Avicine cancer vaccine in pancreatic cancer patients, enrolling between 500 and 600 patients divided in two arms - one treated with Gemzar (gemcitabine, from Indianapolis-based Eli Lilly and Co.,), and the other with Avicine and Gemzar together. (See BioWorld Today, May 6, 2003.)

"Because of the expense, it's probably going to require a pharmaceutical partner," Hubbard said, but AVI hopes to start the trials late this year or early next.

Avicine, also being studied in colorectal cancer, is partnered with Dublin, Calif.-based SuperGen Inc., which has had money woes of its own lately.

SuperGen "has not really been much of a performer because of their situation, but they've also received some cash infusions recently," Hubbard said. "Those discussions are still alive, but that's only for the U.S., and we'll likely have a different partner outside [the country]."

SuperGen last month raised $21.25 million by completing a private placement of senior convertible notes, and completed a financing for the same amount earlier in the year. (See BioWorld Today, June 26, 2003, and Feb. 28, 2003.)

In April, AVI enjoyed a stock surge thanks to news of clinical trials testing its antisense drug, AVI 4020, in targeting West Nile virus. The company also said it would work with Bethesda, Md.-based National Institutes of Health against severe acute respiratory syndrome, which was the target of AVI's Neugene antisense drug.

Excitement over SARS had subsided "but it's starting up again," Hubbard told BioWorld Today, due to new cases in Texas and Toronto. He said the disease maybe a "seasonal thing, similar to influenza, [although] a lot of the dynamics are not known."

As for West Nile, AVI filed an investigational new drug application for AVI 4020 June 30 and expects to begin a Phase I/II trial in August, he said.

AVI's stock (NASDAQ:AVII) fell 23 cents Wednesday to close at $5.92. EXegenics' shares (NASDAQ:EXEG) dropped 4 cents to end the day at 57 cents.