Hollis-Eden Pharmaceuticals Inc. said it grossed $10 million through the private placement of convertible debentures.
The debentures, which mature Feb. 25, 2006, bear an annual interest rate of 7.5 percent. They are convertible into Hollis-Eden common shares at $5.70 apiece - a premium to the average price of the San Diego-based firm's common stock over a period prior to the closing. Its stock (NASDAQ:HEPH) fell 70 cents Wednesday to close at $5.29.
The company reported $16.4 million in cash, cash equivalents and short-term investments for the period ended Sept. 30, down from $30.5 million for the year ended Dec. 31, 2001. Hollis-Eden said it lost $4.5 million in the quarter ended Sept. 30.
The conversion price is subject to limited anti-dilution adjustments under certain circumstances, and under other unspecified circumstances Hollis-Eden can require its debenture holders to convert the debentures into common stock.
Investors also were issued warrants to purchase an aggregate of 350,880 common shares for $6.17 each, and additional warrants to purchase an equal number of common shares for $6.71 apiece.
SG Cowen Securities Corp. acted as the transaction's placement agent.
Hollis-Eden is developing a class of drugs known as Immune Regulating Hormones (IRHs), designed to direct, through controlling gene expression, the production of cytokines and enzymes that re-regulate immune and metabolic functions toward homeostasis.
Among its investigational drugs is HE2000, being studied in clinical trials in a number of infectious diseases. In addition, Hollis-Eden recently entered into a Cooperative Research and Development Agreement with the U.S. Department of Defense to jointly develop another IRH, HE2100, as a drug that may be used to protect from radiation injury due to a nuclear accident or event. Another IRH, HE2200, is being developed to improve vaccine responses in the elderly and for lowering cholesterol in conditions of hypercholesterolemia.