Washington Editor

Genetronics Biomedical Corp. intends to use the about $15.7 million raised in two preferred stock financings to carry it through to profitability.

The company expects to turn a profit once its flagship drug-device technology, an electroporation therapy in Phase III studies, hits the market. Brook Riggins, Genetronics' vice president of finance and communications, said Genetronics raised about $8.2 million in a Series A cumulative convertible preferred stock deal and another $7.5 million in a similar Series B deal. Genetronics has about 51 million outstanding shares.

Funds from the Series A were released to the company while the Series B money was placed in escrow to be released upon an undisclosed milestone, Riggins said.

Terms of the deal differed slightly. The Series A preferred stock is convertible into Genetronics common stock at 60 cents per share and the Series B stock is convertible at 70 cents per share. Genetronics also agreed to pay holders of this stock an annual coupon of 6 percent in shares or cash, and each holder received a 40 percent warrant coverage at an exercise price of 75 cents per share.

Riggins told BioWorld Today the transaction is the culmination of an 18-month restructuring plan that reduced the company work force from 90 employees to 20 and slashed the monthly burn rate from $850,000 to just under $400,000. He wouldn't release the company's cash position to date, saying the figure will be released in the second-quarter financial statement. However, as of March 31, the company had about $1.5 million in working capital. (See BioWorld Today, Oct. 29, 2001.)

As part of the restructuring, Genetronics in January sold its BTX division, which focused on selling electroporation and electrofusion equipment, to Harvard Biosciences Inc., of Holliston, Mass., for $3.7 million in cash and a royalty on net sales of BTX products above certain sales targets.

Proceeds from the sale were reinvested into the company's drug and gene delivery division currently focused on a Phase III study of electroporation technology in cancer patients.

Riggins described the technology as a drug-device combination in which a cancer drug is delivered to a tumor through tiny pores made from an electric pulse produced by a generator with disposable electrodes. In the trial, Genetronics is delivering the generic cancer drug bleomycin for head and neck cancer.

Genetronics has collaborations with several companies testing the technology in areas other than cancer. For example, Chiron Corp, of Emeryville, Calif., is using it to test an HIV DNA vaccine, and Boehringer Ingelheim GmbH, of Ingelheim, Germany, is using it to test the delivery of nucleic acids into arterial walls for the treatment of peripheral vascular disease.

Participants in San-Diego-based Genetronics' funding were New York-based companies SCO Capital Partners LLC, SDS Merchant Fund LP, Baystar Capital II LP, Xmark Funds, ProMed Partners LP, PharmaBio Development and the strategic investment unit of Quintiles Transnational Corp.

SCO Securities LLC acted as the placement agency.

Genetronics stock (AMEX:GEB) fell 3 cents Wednesday to close at 74 cents.