By Debbie Strickland

Receptagen Ltd. officially has no paid employees and no cash, but the Edmonds, Wash., biotech firm appears on the verge of a recovery, thanks to a C$2.5 million financing and a proposed merger with Generex Pharmaceuticals Inc., of Toronto.

"We felt Receptagen was a very good fit with our program," said Anna Gluskin, Generex's president and CEO. "We can help bring their products to the marketplace much faster, and they can provide us with more research-and-development affiliations on the West Coast."

Although Generex has yet to commercialize a product in North America, the company sells generic drugs in Eastern Europe and central Asia, whose markets are likely to be the first to see the company's experimental oral and intranasal delivery systems for insulin. Approvals could come by the end of 1998.

"Our proprietary large-molecule drug-delivery system may also be appropriate for heparin, phospholipids and chemotherapeutic agents," Gluskin said.

The two-year-old company, which has about $4 million in cash, also is planning to go public, a process the Receptagen deal would facilitate, since the latter company is already traded on the Toronto Stock Exchange and on the NASDAQ Bulletin Board.

No details of the proposed merger have been released. The companies and Receptagen's investment banker, InterUnion Financial Corp., are still negotiating.

Meanwhile, through a bridge loan and debt restructuring of the company, InterUnion Financial will become Receptagen's controlling shareholder, subject to final approval by shareholders and regulatory agencies. Credifinance Securities Ltd., a wholly owned subsidiary of InterUnion, intends to close on the financing, expected to net about C$2.3 million for Receptagen before the end of May, perhaps as early as late this week. The cash infusion amounts to approximately $1.7 million in U.S. dollars.

When the financing is complete, the number of shares will rise to 70 million from 18.6 million. The company's shares have traded as low as C7 cents, but last week's good news lifted them to the C40- to C50-cent range.

With the completion of the financing later this week, the company's seven employees will become "official" again.

"We've been operating on a shoestring," said Joe Baba, director of investor relations.

An additional $1 million special-warrants offering also is in the works. Priced at C$0.272, each special warrant will be exercisable for one common share and one subscription warrant. The subscription warrant will be exercisable into one common share at C$0.33 for a two year period.

The company's cash crunch began in December, when a Cayman Islands investment firm, Pharmaceutical Consultants and Investments Inc., abandoned a plan to invest $27 million, sending the company's stock into a tailspin and the majority of its workforce home.

Receptagen's research efforts are focused on two approaches to regulation of apoptosis: 1) growth-blocking monoclonal antibodies and small molecules that induce apoptosis in cancer cells by depleting them of vitamin B-12; and 2) the company's lead product, water-soluble prodrug derivatives of Coenzyme Q10 (CoQ10), which inhibit apoptosis, for use in stroke and AIDS symptoms.

"If we're successful, CoQ10 would be an injectable drug that could have a major impact on the stroke market," Baba said.

The compound could enter Phase I human clinical trials for the stroke indication in 1999.

The apoptosis-inducing compounds are in an earlier stage of preclinical development, with human testing at least three years away. *