By Lisa Seachrist

Washington Editor

WASHINGTON — As a device company, Electropharmacology Inc. (EI) enjoyed an enviable level of success with an FDA-approved product.

But that success didn't provide the company with the financial wherewithal to develop its core technology into a novel drug-delivery device. In October 1997, the Pompano Beach, Fla.-based company had so little market capitalization that NASDAQ delisted it, leaving EI's stock hovering around $1 per share.

Now, a flurry of divestitures and acquisitions has transformed EI into a firm focused not only on drug delivery, but on novel cancer therapeutics and functional genomics as well.

Pending shareholder approval, EI will change its name to Gemini Health Technologies Inc., and embark as a developmental-stage biotechnology company.

"Once you get branded as a medical device company, it gets very hard to pursue your core technology," said CEO Arup Sen. "I didn't see any way of growing the technology without substantially changing our direction."

In making that change, Sen consolidated EI's core technology and acquired Gemini Biotech Ltd., of The Woodlands, Texas, and HealthTech Development Inc., of Dallas.

At the beginning of this year, EI was primarily a medical device company that sold and rented its SofPulse device to the nursing home and rehab market. SofPulse delivers a pulsed electromagnetic signal (PEMS) that reduces swelling and pain in superficial soft tissues. "We were mostly a rental company," Sen said. "We didn't really sell so many units."

While the SofPulse device brought in revenue, it was not enough cash to develop the proprietary PEMS technology into a drug delivery device. Sen told BioWorld Today that, because the electromagnetic pulses cause enhanced vascular flow in tissues, PEMS may one day offer physicians a means to direct drugs to specific tumors, completely non-invasively.

"If you have injected a drug in a lower dosage, and [you] increase the vascular flow with electromagnetic pulses, you end up with a higher deposition of drug in the area you want it," Sen said. "We have to work out the biology of this right now, but we think that this will eventually be an attractive adjunct to treatment, because it doesn't change the formulation; it only adds a non-invasive modality."

Ways Sought To Block Metastasis Protein

In order to develop the technology, Sen decided to license out the manufacture and marketing of SofPulse to ADM Tronics Unlimited, of Northvale, N.J., in return for 3 million shares of ADM stock and $150,000 in cash, with EI keeping 1.4 million shares and selling the rest to clear off its balance sheet.

"We needed to pay down the debt and get out of the device business," Sen said.

To boost its pipeline and core technologies, Sen acquired HealthTech, a virtual biotech company based in Dallas, finds molecules to block cancer metastasis. Because several lines of evidence link a tumor's ability to metastasize to a protein found in a rare mycoplasma, the company is searching for ways to block that protein.

"They already have some initial molecules designed," Sen said. "We expect to quickly follow up in clinical trials. It's important to note that, because this therapy is designed to prevent metastasis, there is no requirement that it be cytotoxic."

In addition to its cancer program, HealthTech research includes a functional genomics database identifying nutritionally related genes. EI acquired HealthTech in a stock swap that gave 6.17 million shares of EI common stock to HealthTech shareholders.

In its second acquisition, EI bought Gemini for 6 million shares of common stock, which will go to Gemini partners. EI also issued 1,872,000 shares of common stock to redeem all of EI's outstanding preferred shares and most of the long-term outstanding warrants.

"Before our acquisitions, we had 4 million shares of common stock outstanding, 4 million warrants of all sorts, and a quarter of a million shares of preferred stock issued," Sen said. "It was a confusing cap structure, to say the least."

Gemini's core technology consists of designing and synthesizing drugs and diagnostic agents created from "nucleobases," which are novel nucleotides and oligonucleotides. In addition, Gemini has a family of modified nucleoside analogs designed to combat cancer and rheumatoid arthritis.

Private Placement Expected

"Gemini's technology is in the late discovery stage and early preclinical stage," Sen said. "There are some lead compounds that we intend to move forward aggressively."

EI has between $300,000 and $400,000 in cash, which Sen said should "keep the company limping along for a few months."

In order to fund the newly acquired technologies for the next 18 months, Sen hopes to raise $3 million to $5 million in a private placement.

"Our current stock price really reflects that of a failed medical device company, rather than a developmental stage biotech company," Sen said. "We are hoping to show investors that this is a pretty interesting place for anyone looking into biotech."

EI's stock (OTC:EPHI) closed Friday at $1.01, down $0.05. *