By Karen Pihl-Carey

Gene Logic Inc. expects to offer 3.5 million shares of common stock in a public offering that could raise the company net proceeds of $97.2 million.

The company presented its plans Thursday at the Chase H&Q Healthcare Conference in San Francisco.

In an SEC filing, the company said it hopes to offer the shares at a price of $29.50 each, which was the closing price on Tuesday. The Gaithersburg, Md.-based company's stock (NASDAQ:GLGC) closed Thursday at $25.75, down $4.187.

The company and certain stockholders also will grant underwriters an option to purchase up to an additional 525,000 shares to cover overallotments. If this option is exercised in full, Gene Logic estimates total net proceeds would be $109 million. The company expects selling stockholders to use a portion of the net proceeds they receive to repay loans to Gene Logic.

Underwriters for the offering include ING Barings Furman Selz LLC in New York, Chase H&Q in San Francisco, BancBoston Robertson Stephens Inc. in New York and Dain Rauscher Wessels in Minneapolis.

"Essentially, we're looking to raise in excess of $100 million, based upon 3.5 million shares," said Robert Burrows, director of corporate communications at Gene Logic. "Proceeds will be used to ramp up our sales and marketing efforts."

More specifically, net proceeds from the offering will go toward funding product and technology development to expand database product marketing efforts, including a scale-up of the company's laboratory, database and business development operations. It also will provide working capital and help cover general corporate costs, including possible acquisitions, although the company has no current agreements or commitments for any such acquisitions.

As of Sept. 30, the company had cash and cash equivalents of about $17 million, Burrows told BioWorld Today. Following the offering, the company will have 23.5 million shares of common stock outstanding.

Gene Logic markets two types of gene expression database products to pharmaceutical, healthcare and life science industries. The company has 13 customers for its custom databases and related software products, and two customers for its GeneExpress reference database suite, which completed development in November. One is a large pharmaceutical company that is not being disclosed; the other is Therapeutic Genomics Inc., a company developing cancer drugs. Gene Logic will receive annual subscription fees from both companies.

The custom gene expression databases are targeted to specific therapeutic areas, such as heart failure, kidney disease, osteoporosis, psychiatric disorders and other illnesses. Customers are using in drug discovery programs 24 genes identified by Gene Logic, entitling the company to milestone payments and royalties on sales of resulting products.

The company generates its gene expression data from tissues collected through its biorepository network using GeneChip microarrays produced by Affymetrix Inc., of Santa Clara, Calif., and Gene Logic's own patented gene expression technology, Restriction Enzyme Analysis of Differentially Expressed Sequences, or READS. At the end of 1999, the GeneExpress database contained profiles on more than 1,000 tissue samples representing more than 30 million gene expression data points.

"We clearly spent $15 [million] to $20 million on GeneExpress last year," Burrows said. "We're looking to do the same this year."

The company can improve its technologies by repackaging data into different versions for customers requiring different levels of information, it said in the SEC filing. And because the information is distributed over the Internet, Gene Logic also can establish a portal to create multiple e-commerce promotional and transactional revenue opportunities.

Among Gene Logic's 14 collaborators are Japan Tobacco Inc., of Tokyo; Merck & Co. Inc., of Whitehouse Station, N.J.; PE Biosystems, of Foster City, Calif.; and Wyeth-Ayerst Laboratories, of Radnor, Pa.

In December, Incyte Pharmaceuticals Inc., of Palo Alto, Calif., filed a patent infringement suit against Gene Logic, alleging infringement of patents that cover microarray and gene expression technologies used in the creation of gene expression databases. Gene Logic said its methods fall outside the scope of the claims of the patents.