By Matthew Willett

Generex Biotechnology Corp. sold about an 11 percent stake in itself to a group of private investors for a total of $23 million, proceeds that will be used for clinical development of large-molecule oral delivery technology.

Capital Research and Management Co.'s SmallCap World Fund mutual fund led the investors, which purchased $11 shares with no re-sets that came with a five-year warrant for the purchase of additional shares at $13.20 per share.

The Shemano Group, of San Francisco, acted as placement agent for the financing.

The Toronto-based drug delivery company's stock (NASDAQ:GNBT) dropped 12.5 cents Thursday, closing at $13.

Founded in 1995, Generex focuses its discovery efforts on developing buccal drug delivery systems, which use the inner cheek wall for large-molecule drugs historically administered by injection.

Mark Perri, Generex's chief financial officer and chairman, said the company will use the funds, which boost the cash position for Generex up to more than $30 million, to fund formulations of morphine, heparin and estrogen for buccal delivery.

"It'll help us fund proof-of-concept work for our next indications," Perri said. "This should give us at least two years working capital in those indications."

By then, he said, those indications should have progressed to Phase II clinical trials.

Generex has already seen success from its technology platform. The company formulated an oral insulin spray system for use with its RapidMist oral delivery device, and it is currently in Phase II clinical trials with the oral insulin system.

"In buccal delivery we've done insulin to date, and it's in Phase II. We expect to get some more results in on that Phase II trial soon, and we're in a deal with Eli Lilly for that," he said.

The company joined with Eli Lilly and Co., of Indianapolis, last month for development of the buccal delivery of insulin using RapidMist, and will receive milestones and royalties in exchange for giving over product marketing rights to Lilly, which will fund clinical development.

Perri said the stake in the company doesn't change its ownership, which is currently about 20 percent institutional investors. "Management still owns about 30 percent," he said.

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