By Mary Welch
Geron Corp. entered into an agreement to sell $25 million in zero-coupon convertible debentures to an existing institutional investor.
"We have done this type of financing twice before, and it works," said David Greenwood, Geron's chief financial officer and senior vice president of corporate development. "We accepted less than what was actually offered to us because we felt this amount was what was appropriate for the corporation to raise at this price point."
The debentures are convertible by the investor into Geron common stock at a fixed price of $29.95 per share. The debentures are convertible at the company's option after the one-year anniversary of the effectiveness of the registration statement, when Geron common stock has traded at a certain premium to the fixed conversion price for 20 consecutive trading days.
In addition, the investor will receive warrants to purchase up to 834,836 shares of Geron common stock at a significant premium to the conversion price. The warrants expire 18 months after the effectiveness of the registration statement.
Prior to this financing, Menlo Park, Calif.-based Geron had 21.5 million shares outstanding. With this financing round, the company has $98 million in cash and committed funding. The deal represents about 3.9 percent of the company.
The money will be used to further the development of the company's activities: telomerase drug discovery, stem cell and nuclear transfer development programs.
"These are our core technologies that Geron is pursuing and will continue to move forward," Greenwood said.
Geron's first core technology is telomerase expression. Telomeres are structures at the ends of chromosomes that act as a molecular clock of cellular aging - when telomeres reach a critical short length, the cell stops dividing and becomes old. Telomerase is an enzyme that restores telomere length and rewinds the molecular clock, thereby extending a cell's ability to multiply or replicate.
By activating telomerase, the life span of normal cells that have prematurely aged in the body may be expanded. Conversely, by inhibiting telomerase using small molecules, cancer cells in which telomerase is turned on abnormally can be killed. Cancer cells almost uniformly have inappropriate telomerase activity.
So far, Geron has identified compounds that demonstrate potential for inhibiting telomerase in humans; however, a lead compound for preclinical development has not yet been selected.
Geron recently entered into a collaboration with Rockville, Md.-based Celera Genomics to identify and assign function to genes important in early human development and to utilize the information to develop small-molecule therapeutics.
Human pluripotent stem cells, or hPSCs, can develop or differentiate into all cells and tissues in the body. hPSCs are a potential source for the manufacture of replacement cells and tissues for applications in regenerative medicine such as chronic liver, heart and nervous system diseases, the company said.
In 1998, Geron and collaborators at the University of Wisconsin in Madison and at John Hopkins University successfully derived and maintained in culture human embryonic stem cells, which are the source of every cell in the body. (See BioWorld Today, Nov. 6, 1998, p. 1.)
The company's third technology platform is its nuclear transfer, which was obtained by the acquisition of the Roslin Institute in Scotland, makers of Dolly the cloned sheep. Nuclear transfer is a method for generating human cells or whole animals from genetic material derived solely from the nucleus of a single cell obtained from a single individual.
In March, Geron raised $9 million in a private placement and then days later registered to sell 3 million shares of stock. At the time of the announcement, the company's stock was at $58.50, which would have yielded $175.5 million. However, after the market took a dip, the offering was withdrawn. (See BioWorld Today, March 14, 2000, p. 1.)
Geron's stock (NASDAQ:GERN) closed Thursday at $30.687, down $2.75.