By Randall Osborne

After losing a partner late last year and failing in its bid to remain listed on NASDAQ, Hybridon Inc. began a private placement of up to $40 million, hoping the complex financing deal can turn the antisense company's recent misfortunes into an advantage.

Hybridon, of Cambridge, Mass., was delisted from NASDAQ on Dec. 2 despite a hearing that led company officials to believe they could meet the listing requirements. The company had announced Nov. 18 a plan to offer as much as $50 million in stock to U.S. and overseas investors, with a minimum of $12.5 million in the first of several closings. (See BioWorld Today, Nov. 20, 1997, p. 1.)

That financing plan was scrapped after the NASDAQ delisting. Now a more complicated overseas financing arrangement has replaced the earlier efforts.

Under the new plan, Hybridon will offer notes, due in the year 2007, that are convertible to preferred stock under certain circumstances. Each unit will consist of $100,000 worth of notes, plus warrants to purchase common stock. A maximum of 400 (raising $40 million) units will be offered to overseas investors. The minimum of 20 units (raising $2 million) already has been subscribed.

An overallotment option covers 150 units, which would raise $15 million. The company may also commence a private offering in the U.S., on similar terms.

To pull off the new plan, Hybridon gained the consent of holders of 9 percent convertible subordinated notes, which had been purchased in an earlier private offering and are due in the year 2004. Those note holders agreed to allow the new notes to rank senior to their 9 percent notes.

In return, Hybridon will offer the 9 percent note holders a chance to exchange their notes for preferred stock and warrants. Then, if at least $20 million is raised in the new offering, the preferred stock for which the 9 percent note holders trade will automatically become senior to the new notes (which are not convertible at the holder's option).

Hybridon would not comment on the offering.

Antisense uses synthetic segments of DNA and RNA to stop the production of disease-associated proteins by interacting at the genetic level with target strands of messenger RNA.

In July 1997, Hybridon quit developing GEM 91, an antisense oligonucleotide, for advanced HIV infection, based on a review of data from a Phase II trial that showed patients with lowered platelet counts. GEM stands for "gene expression modulator." Two months after the halt of GEM 91, Hybridon's partner since 1992 pulled out of their deal to identify lead compounds for hepatitis C and human papillomavirus. (See BioWorld Today, Sept. 5, 1997, p. 1.)

But the work done on GEM 91 helped Hybridon with its development of GEM 92, a second-generation compound for HIV and AIDS. Hybridon was able to prove oral bioavailability of GEM 92 in a Phase I trial, and is working with chimpanzees to establish whether the drug works in combination with protease inhibitors.

Despite its difficulties, Hybridon was able to gain FDA clearance on schedule late last year to begin clinical trials with another compound, the hybrid antisense GEM 231. This second-generation antitumor drug down-regulates the R1-alpha subunit of protein kinase A, which is overexpressed in various cancers and is associated with rapid cell growth.

Since last August, Hybridon also reduced last year's plan for an annual burn rate of $64 million to an estimated rate of $14 million per year. The staff has been reduced from 228 to 95 employees.

As of Sept. 30, 1997, Hybridon had $14.7 million in cash, with a net loss of $49.9 million for the first nine months of that year. Hybridon's stock (OTC-BB: HYBN) closed Friday at $2.063, down $0.06. *