By Jim Shrine

Geron Corp., capitalizing on recent discoveries in embryonic stem-cell technologies, sold $15 million in convertible debentures to institutional investors.

"It is nice to have an opportunity to raise money in this environment, in a way beneficial to both the investors and Geron, and to be able to pursue our programs aggressively, especially given their medical potential," said Ron Eastman, president and CEO of Menlo Park, Calif.-based Geron.

"Generally speaking, this gives us the flexibility and horsepower to capitalize on the discoveries we've been making," he added. "It also gives us the leverage to continue to negotiate from strength in our various discussions."

The debentures were purchased by investment funds managed by Brown Simpson Asset Management LLC, of New York, and Rose Glen Capital Management LC, of Bala Cynwyd, Pa. They are convertible at $10 per share, at the company's option, when the shares trade at a certain premium to the conversion price for five consecutive days. Investors have an option, for 18 months, to purchase up to $15 million more of common stock at an undisclosed premium to the conversion price.

The financing was disclosed late Thursday. Geron's stock (NASDAQ:GERN) closed Friday at $10.75 per share, unchanged.

Stem-Cell Breakthroughs Boosted Interest

Eastman said last month's publication in Science of research on human embryonic stem cells contributed to the success of the financing. In the publication, Geron collaborators at the University of Wisconsin-Madison reported they successfully derived and maintained in culture the unique cells, which are capable of forming all the different cell types and tissues in the body. (See BioWorld Today, Nov. 6, 1998, p. 1.)

The financing, with commitments from partners, gives Geron about $56 million in cash. The company, which reported about 11.2 million shares outstanding on Sept. 30, has been losing about $2.3 million per quarter this year.

Rose Glen was one of two investors that participated in a March private placement of convertible stock, which also totaled $15 million.

Another area of research at Geron involves telomeres and telomerase in cells. Telomeres shorten each time a cell divides until the cell finally becomes senescent. Cancer cells, however, maintain their ability to divide through the reactivation of the enzyme telomerase, thereby conferring a sort of cellular immortality.

Geron is collaborating on telomerase inhibitors for cancer indications with Pharmacia and Upjohn, of Kalamazoo, Mich., and with Kyowa Hakko Kogyo Co., of Tokyo, in deals worth up to $58 million and $30 million, respectively.

Eastman said telomerase inhibitors have been identified and candidates optimized, but the collaborators continue to look for others that may be better leads for the clinic.

Neither the program in telomerase expression, for age-related diseases such as macular degeneration and osteoporosis, nor the embryonic stem cell program is partnered. Discussions are under way with potential partners for both programs, Eastman said. *

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