Genelabs Technologies Inc. is getting back to work after raising gross proceeds of $8.1 million through the sale of an equal number of common shares to institutional and accredited investors.
Just prior to the private placement, cash reserves at the Redwood City, Calif.-based company had dwindled to about $1 million, according to its Form 10-K filing. On April 15, Genelabs placed the majority of its 74-person work force on temporary furlough.
"All 74 are here today," Matthew Loar, Genelabs' chief financial officer, told BioWorld Today, adding that the company's burn rate would remain at about $1.5 million per month going forward. "These funds will allow us to execute on our business plan."
Genelabs also issued warrants for the investors to purchase an additional 2.43 million common shares at an exercise price of $1.50 apiece. The company, which reported a net loss of about $16 million in 2002, had about 53 million shares outstanding before the sale. New York-based SG Cowen Securities Corp. acted as the transaction's placement agent.
Genelabs' stock (NASDAQ:GNLB) fell 2 cents Monday to close at $1.48. The per-share price of $1 in the offering was proposed by the lead investor.
Recently reported data on Prestara (prasterone) indicated that the investigational drug improved or stabilized overall disease activity and symptoms without deterioration in women with active systemic lupus erythematosus. In the primary data set for analysis, Prestara patients with an SLE Disease Activity Index score greater than 2 at baseline showed a 59 percent rate of response compared to 45 percent for placebo (p=0.017). Additional analyses showed that Prestara patients showed better response rates compared to placebo as well. The drug, which is called Anastar in Europe, prevented bone loss in patients receiving prednisone, a glucocorticoid drug.
While the data were positive, the drug's late-stage development has taken longer than anyone at Genelabs would have liked, with a non-approvable letter from the FDA in 2001 a definite trough in the cycle. Prestara's profile began to climb again last August, when the FDA sent the company an approvable letter stipulating the need for the confirmatory trial. (See BioWorld Today, Sept. 3, 2002.)
"Within that letter, they asked us to conduct an additional Phase III trial that confirms some of the beneficial effects that we had seen previously, specifically in bone mineral density in lupus patients," Loar said. "We are in the process of enrolling additional patients, and these funds were definitely necessary for us to continue to accrue additional patients and retain the existing patients."
The multicenter, randomized, placebo-controlled, double-blind study is designed to evaluate about 110 women receiving glucocorticoids and treated with Prestara for six months. The product's active ingredient contains prasterone, a synthetic form of the human hormone dehydroepiandrosterone that is found in low levels in lupus patients. (See BioWorld Today, Nov. 18, 2002.)
Genelabs licensed North American rights for the product to Corona, Calif.-based Watson Pharmaceuticals Inc., a deal that could bring up to $45 million in milestone payments to Genelabs if approved, plus royalties, and Loar said Genelabs continues discussions with companies for European and Japanese rights.
He said Genelabs also is looking to partner some of its drug discovery technologies and sell its Singapore-based diagnostics subsidiary in order to generate more working capital. The company laid off 20 employees in February.
Beyond Prestara, Genelabs has a vaccine licensed to London-based GlaxoSmithKline plc that remains in a Phase II trial for hepatitis E virus. Internally, the company also has lead compounds against hepatitis C.
Genelabs also features unpartnered preclinical candidates in the antifungal arena. Recent data showed that its GL48656 compound was fungicidal in vitro against various species of pathogenic fungi, and in a mouse model of systemic aspergillosis, the compound produced a significant increase in survival at doses as low as 1 mg/kg compared to untreated controls.