By Karen Pihl-Carey

Avigen Inc. raised $40 million in a private placement that will help the company advance its gene therapy products derived from the adeno-associated virus (AAV) to treat hepatitis A, hepatitis B and other illnesses.

"We're very pleased," said Thomas Paulson, vice president of finance and chief financial officer of Avigen, of Alameda, Calif. "We were able to secure numerous investors that were in our previous placements and, also, several new, large and prestigious U.S. and European investors [from Switzerland and France] came into this deal.

"It certainly means we have the additional staying power to move our research forward in an accelerated manner now."

The investors purchased about 2 million shares at an average price of $20 per share in a series of closings over the last few weeks. Prices were based on the stock's closing price for each particular day, ranging from $16.19 to $25.56. For every five shares purchased, an investor received a five-year warrant to purchase one share of common stock at a 25 percent premium to the respective closing price. The premium prices ranged from $20.23 to $31.95.

Avigen now has about 14.5 million shares outstanding. The company's stock (NASDAQ:AVGN) closed Tuesday at $32.25, up $6.25, or 24 percent.

On Sept. 30, Avigen had cash and cash equivalents of about $12.7 million. The added $40 million private placement should last the company between two-and-a-half to three years depending on how Avigen's programs unfold, Paulson said.

"I think this is ratification of our technology, that the AAV vector system is becoming more and more recognized as the vector of choice, if you will, for situations in which the illness requires long-term expression of a gene in producing large amounts of protein," Paulson told BioWorld Today.

The financing is the company's second this year. Avigen raised $13 million in a similar private placement in April. (See BioWorld Today, May 5, 1999, p. 1.)

"This brings to $53 million what we raised this year," Paulson said. "We had $13 million in April. It's an identical transaction back in April."

Avigen filed an investigational new drug (IND) application in November 1998 for Coagulin-B to treat hemophilia B using the AAV vector delivery system.

"We're in a Phase I/II right now at Children's Hospital in Philadelphia and Stanford Medical Center," Paulson said.

The trial is testing safety and dose escalation in nine patients receiving low, medium and high doses. The company will give an update of the trial in December at the American Society of Hematology meeting in New Orleans.

Earlier this month, Avigen said a single administration of the vector carrying the gene for factor VIII produced physiological levels of biologically active clotting factor in the plasma of animals, bringing Avigen closer to developing a treatment for hemophilia A.

Paulson said the company expects to file an IND for a hemophilia A treatment in the second half of 2000.

Avigen also is researching AAV vector-based gene therapy in anemia, Gaucher's disease, Parkinson's disease, brain tumors, liver cancer and prostate cancer.

For the quarter ended Sept. 30, Avigen reported a net loss of $2.4 million, compared to a net loss of $2.2 million for the same quarter in 1998.