By Lisa Seachrist
With a rolling new drug application at the FDA under way for its lead lupus product, GL701, Genelabs Technologies Inc. entered into a $29 million equity financing facility agreement with Acqua Wellington North American Equities Fund Ltd.
The agreement will allow Genelabs to raise funds over the next 18 months on an as-needed basis while the company steers GL701 toward ultimate approval.
"The financing provides great flexibility for the company," said Richard Waldron, vice president and chief financial officer for Redwood City, Calif.-based Genelabs. "And, it doesn't preclude us from other financings in the meantime. You always have to be prepared for the successes and the failures in business."
Under the terms of the agreement, Acqua Wellington initially will invest $4 million through the purchase of 1 million shares of Genelabs common stock at $4 per share. This purchase is scheduled to take place this week. Acqua Wellington will then purchase additional shares at Genelabs' discretion.
In other words, for the next 18 months Genelabs will have the right to tell Acqua Wellington to purchase a certain dollar value of stock over the following 18-trading day period and set a minimum price for the shares. The default minimum price for the deal is $4 per share; however, Genelabs can set a higher minimum price.
On each day of the 18-trading day period, Acqua Wellington will be required to purchase one-eighteenth of the amount of stock for the trading price minus a 6 percent discount. If Genelabs' stock falls below the minimum value Genelabs sets, Acqua Wellington isn't required to purchase stock that day.
"The deal is a little complicated in structure," Waldron said. "But it does constitute an obligation on their part to purchase stock. And if we don't wish to draw down anything, we don't have to."
The company will use the cash to prepare for the potential launch of GL701, which could be approved as soon as the second quarter of 2001. GL701 is a formulation of prasterone, the generic designation for dehydroepiandrosterone (DHEA). It is a naturally occurring hormone produced by the adrenal glands and is an anabolic steroid. Patients with systemic lupus erythmatosus (SLE) typically have low levels of DHEA.
Clinical studies of the drug have shown GL701 can stabilize or improve the symptoms and clinical outcomes of SLE patients. SLE is an autoimmune disease affecting approximately 1 million people worldwide, mostly women. It causes severe fatigue, arthritis, facial rash, and unusual sensitivity to sunlight. It can lead to serious inflammation of the lungs, heart and brain, as well as kidney failure.
Should GL701 garner FDA approval, it will be the first new treatment for SLE in 40 years.
Genelabs' stock (NASDAQ:GNLB) closed Tuesday at $5, up 50 cents