By Frances Bishopp

Megabios, which develops gene delivery systems and gene-based therapeutics, has registered with the Securities and Exchange Commission for an initial public offering (IPO) of 2.5 million shares of common stock in an estimated price range of $11 to $13 per share. At a price of $12, Megabios could raise approximately $30 million.

Underwriters Montgomery Securities and Hambrecht & Quist, both of San Francisco, have been granted an option to purchase an additional 375,000 shares to cover over-allotments.

In June, Megabios, of Burlingame, Calif., raised $14 million in a private placement and launched its first product, GR213487B, a gene-based therapeutic for cystic fibrosis, into Phase I/II trials. GR213487B uses the Megabios gene-delivery system to deliver a healthy cystic fibrosis transmembrane conductance regulator (CFTR) gene to ciliated epithelial cells lining the lungs. A defect in the CFTR gene is the cause of the disease.

Gene-based therapy is an approach to the treatment or prevention of certain diseases in which therapeutic genes are introduced into target cells to cause the production of specific proteins needed to bring about a therapeutic effect.

To date, a limiting factor in gene-based therapy has been the lack of safe, effective gene-delivery systems. The company's in vivo, nonviral gene delivery systems are designed to avoid the limitation of ex vivo (whether viral or nonviral) and in vivo, viral gene delivery. The company's gene delivery systems consist primarily of two components: DNA plasmids containing a therapeutic gene that controls its proper expression, and lipids and other agents that facilitate the delivery of the DNA plasmids into the target cell.

In most of the gene delivery systems, Megabios combines negatively charged DNA with positively charged lipids and neutral lipids to form DNA lipid complexes. These complexes are the active ingredient in the company's gene delivery systems.

Certain of the company's other gene delivery systems use polymers and peptides instead of lipids to facilitate the delivery of DNA plasmids.

The company's portfolio includes seven gene delivery systems, which are classified by mode of administration and cell type to which the gene-based therapeutic is delivered. Each formulation within a series has distinct specifications and potential applications.

Megabios is collaborating with Glaxo Wellcome plc, of London, for the treatment of cystic fibrosis using the CFTR gene; Pfizer Inc., of New York, for the treatment of cancer via angiogenesis inhibition; and Eli Lilly & Co., of Indianapolis, for the treatment of breast and ovarian cancer using the BRCA1 gene.

Megabios had $12.3 million in cash as of March 31, 1997. After the offering, it will have 12.225 million shares outstanding. The company's proposed NASDAQ symbol is MEGA. *