By Brady Huggett

Valentis Inc. raised $29 million through a private offering of 5 percent convertible redeemable preferred stock, to help advance product candidates.

Perseus-Soros Biopharmaceutical Fund LP, of New York, led the offering, and Delta Opportunity Fund, also of New York, participated.

"We are really pleased with the quality of investors we were able to attract," said Bennet Weintraub, Valentis' chief financial officer and vice president, finance. "It reaffirms our belief of the advantages of nonviral delivery of pharmaceuticals. It allows us to continue to advance the products we have in the clinic now and to move new products into clinical studies."

The preferred stock will be convertible into shares of Valentis' common stock at a fixed conversion price of $9. Dividends on the preferred stock will accrue at the rate of 5 percent per annum, at Valentis' sole discretion. Valentis is offering approximately 1 million warrants with the deal, Weintraub said, exercisable for four years from the closing date of the financing and priced at $10.25. First Security Van Kasper, of San Francisco, acted as financial adviser for the offering.

Valentis' stock (NASDAQ:VLTS) moved down 59.3 cents Monday to close at $8.562.

Weintraub said Valentis has approximately $58 million in cash after the financing and it has a burn rate of about $25 million a year, giving it at least two years of funding on hand.

Valentis, of Burlingame, Calif., creates novel therapeutics and improved versions of existing marketed biopharmaceuticals. Its core technologies include multiple gene delivery and gene expression systems and PEGylation technologies designed to improve the safety, efficacy and dosing characteristics of genes, proteins, peptides, peptidomimetics, antibodies, replicating and nonreplicating viruses and liposomes. It is focused on several areas, including cardiovascular disorders, oncology, hematology and immunology.

Valentis has product candidates in cancer, cardiovascular disease, lung disease, rheumatology, immunology, PEGylation programs and others. In the cancer area, it has in clinical trials interleukin-2 and IL-12 products. It has a VEGF angiogenesis product for cardiovascular disease in Phase II trials that should be finished by the first half of next year, with data announced in the third quarter of 2001, Weintraub said. An IL-2 plus chemotherapy for head and neck cancer combination trial is in Phase II and is the furthest along, he said.

"Data will be available in the third quarter of next year for that," Weintraub said. "That is partnered with [Roche Holdings], so it will be their decision to take that into Phase III."

The PEGylation programs are all preclinical, as is the GeneSwitch program, but next year Weintraub said Valentis should have more products in the clinic.

"Currently we have seven ongoing clinical trials with three more scheduled next year," he said.

With the $19 million Valentis raised in the spring, Weintraub said Valentis has had a good run.

"It was great to be able to do the financing in such a tough market," Weintraub said. "We did a financing in April for $19 million, so added to this we've been able to bring in $50 million this year."