A group of institutional investors got behind Orchid BioSciences Inc.'s new business plan through a $16 million private financing, proceeds the company plans to spend on ongoing operations.

More specifically, Princeton, N.J.-based Orchid said it would apply the financing to support growth in its genoprofiling business in forensic, paternity and public health testing services, for general corporate purposes and to support its push to profitability in the fourth quarter.

"We have really tried to clean up a lot of the balance sheet issues and our P&L so that going forward, people are concentrating on the fact that we have really focused on this core business of forensics, paternity and what we call public health, which is right now the animal testing business," Andrew Savadelis, Orchid's chief financial officer, told BioWorld Today. "We feel that we have really gotten this company focused on these very strong core businesses where we are clearly market leaders."

The company sold 1,600 shares of newly issued convertible preferred stock, each convertible into about 22,222 common shares. Each preferred share, which cost $10,000, includes a warrant to purchase about 6,667 common shares. The preferred shares are convertible into common stock at a per-share conversion price of 45 cents, and the warrants will be exercisable at 45 cents apiece.

Orchid's stock (NASDAQ:ORCH) gained 2 cents Wednesday to close at 40 cents.

The financing included BayStar Capital, of San Francisco; SDS Capital Partners, of Greenwich, Conn.; and other unnamed institutional investors. Orchid also issued 75 shares of convertible preferred stock, as well as associated warrants, to an undisclosed placement agent. Because of legal issues surrounding the still-unregistered stock, Orchid said it could provide no further details regarding the financing.

Nasdaq granted Orchid an exception to its shareholder approval requirements in connection with the private financing. Last week the market also extended the listing of Orchid's common stock through June 24, an additional 90-day period during which the company plans to possibly reverse-split its stock to regain compliance with the $1 minimum bid price requirement. In January, Nasdaq informed Orchid that it had fallen from compliance.

An April 15 shareholder meeting looms large for stockholder approval of the proposed reverse stock split, estimated to range between 1-for-3 and 1-for-7. Orchid reported about 55 million shares outstanding for the period ended Dec. 31.

At the end of the year, the company recorded about $50.4 million in revenue, up from about $30.6 million in revenue at the end of 2001. But its 2002 inclusive losses totaled about $71 million, though after adjustments equaled about $33 million.

"To a certain extent, try to look at our loss from the perspective of an operating company going forward," Savadelis said. "What should investors really look at now that we're trying to get the company set in the right direction and clean up a lot of issues from the past? Taking into effect that we fixed all those issues between the third and fourth quarter, the loss from continuing operations was more like $8 million for the fourth quarter on $13 million in revenue."

Savadelis joined Orchid early last fall as part of a management shakeup at the company, which also included the appointment of a new chairman, George Poste. The company has since worked to strengthen its bottom line in a number of areas, laying off a portion of its staff and slowing its burn rate over the last quarter of 2002. Many of the layoffs were associated with Orchid's December divestiture of one of its units, along with cuts in the firm's corporate staff.

Orchid unloaded its single nucleotide polymorphism genotyping instruments and related consumables in a sale to Fullerton, Calif.-based Beckman Coulter Inc., in exchange for an undisclosed cash payment and certain debt assumption. Beckman Coulter assumed certain obligations to third parties related to Orchid's reagents and instrument leases. (See BioWorld Today, Dec. 26, 2002.)

"I was brought in to help turn the company around, which as far as I'm concerned we are well on our way to doing and operating pretty much on our plan," Savadelis said. "I'm looking very much forward to getting the balance sheet cleaned up and moving forward in 2003."

The company retained rights to use SNP-IT technology in the diagnostics market, as well as in all of its genoprofiling service businesses, though Orchid said it planned to divest its Stamford, Conn.-based diagnostic unit as well. Savadelis said such talks continue with undisclosed parties.

Orchid, which closed 2002 with just under $10 million in cash and cash equivalents, plans to continue to lower its quarterly cash burn as the year progresses. And in addition to money-saving efforts, the company brought fresh funding on board in advance of the latest private financing. At the end of last year, Detroit-based Comerica Inc. granted a $10 million revolving line of credit based on accounts receivable.