By Randall Osborne

To move forward its DNA-based AIDS vaccines, Apollon Inc. has registered for an initial public offering (IPO) of 2.5 million shares, priced between $11 and $13 per share.

Apollon, of Malvern, Pa., would raise $30 million, based on a mid-range price of $12. After the offering, the company will have 8.145 million shares outstanding.

An overallotment option of 375,000 shares was given to the underwriters, Smith Barney Inc., of New York, Genesis Merchant Group Securities, of San Francisco, and Cruttendon Roth Inc., of Seattle.

Earlier this month, A.H. Investments Ltd., an affiliate of Madison, N.J.-based American Home Products Corp., invested $3 million in Apollon in exchange for a promissory note in that amount and a warrant to purchase 68,910 shares at 115 percent of the IPO price.

At the closing of the offering, the promissory note will be converted into shares at the IPO price.

In October 1995, the company signed an agreement worth up to $100 million with Wyeth-Ayerst Laboratories, of Radnor, Pa., a division of American Home Products. As of Sept. 30, 1997, Apollon had received $15.1 million from Wyeth-Ayerst in the collaboration. The pharmaceutical firm is working with Apollon on development of AIDS and herpes simplex virus vaccines.

When Apollon finished its third round of equity financing in June 1996, from which it raised almost $10 million, it had enough money to fund operations into next year.

Apollon was spun off from Centocor Inc., also of Malvern, which maintains a collaboration with Apollon. After the offering, Centocor would own 23.6 percent of the outstanding shares.

Apollon began its first clinical trial of the DNA-based AIDS vaccine in healthy volunteers in March 1996, and now has eight of its genetically engineered vaccines, called Genevax, in Phase I/II clinical trials. The vaccines are for the prevention or treatment of HIV, herpes simplex, hepatitis B and cutaneous T cell lymphoma.

Apollon expects to begin Phase II clinical trials of the herpes, hepatitis and HIV vaccines within the next 15 months.

Intending to stimulate antibodies and killer T cells against the targeted virus, Apollon bases its vaccines on viral genes rather than the proteins encoded by those genes. The facilitated-DNA vaccines use a local anesthetic named bupivacaine, a chemical cousin to the better-known lidocaine, to enhance uptake. (See BioWorld Today, April 29, 1997, p. 1.)

The AIDS vaccine was developed by Apollon in collaboration with researchers at the University of Pennsylvania and is covered under the agreement with Wyeth-Ayerst, which provides milestone payments for Apollon along with manufacturing costs.

Until 1995, Apollon had no revenues. The next year, revenues from corporate collaborations were $8.2 million, about $6.9 million of which came in the second half of the year. In the six months ended June 30, 1997, the company's revenues were $161,000 and it expects to bring in revenues of less than $1 million in the remainder of the current year.

Following the IPO, Apollon said it will have enough money to fund operations until mid-1999. As of June 30, Apollon had $4.002 million in cash, with a net loss of $6.412 million for the first six months of 1997. *

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