GeneMedicine Inc. raised more than $18 million throughits public offering of 3 million shares, but the Texas genetherapy company had to settle for a price that plummeted28 percent in the past month.

"The market for biotech stocks is very selective," saidRichard Waldron, GeneMedicine's chief financial officer."Those buying are only the most sophisticated investors.There's little interest among those who don't follow thebiotechnology field."

GeneMedicine's 3 million share offering was priced at$6.50, raising $19.5 million in gross proceeds. When theshares were registered in late September, the company'sstock was trading at $9.06, a price that would havegenerated more than $27 million.

"We would have preferred a better pricing, but we got agood, firm base of institutional investors," Waldron said.

The company's stock (NASDAQ:GMED) closed Fridayat $6.56, down $1.06, a 14 percent drop.

Despite a lower than anticipated offering price, the $18.2million in net proceeds from the stock sale givesGeneMedicine, of The Woodlands, Texas, $38 million incash, an amount sufficient to cover operations throughmid-1999. The company has about 12 million sharesoutstanding.

Calculation of the cash reserves, GeneMedicine said, didnot include anticipated milestones from the company'spotential $100 million collaboration with Bermuda-basedCorange International Ltd. on development of non-viralgene therapies for head and neck cancers and melanoma.

Since negotiation of the July 1995 alliance,GeneMedicine has received $5.2 million of the $24million in guaranteed equity and research payments fromCorange.

Under the agreement, Corange, through its Germany-based subsidiary, Boehringer Mannheim Group, hasagreed to make up to $20 million in equity investmentsand $25 million in research payments over five years.After three years, Corange has an option to expand thealliance, making another $12 million equity investment inGeneMedicine and providing an additional $25 million inresearch financing. The remaining $18 million in thepotential $100 million deal is subject to achievement ofdevelopment milestones.

GeneMedicine also has a collaboration with RocheBioscience, of Palo Alto, Calif., to develop a genetherapy for asthma. Roche Bioscience, a subsidiary ofSwitzerland-based Roche Holdings Ltd., made a $15million equity investment in GeneMedicine as part of theApril 1994 deal, which also includes milestone payments.

Managing GeneMedicine's follow-on offering were Alex,Brown & Sons Inc., Lehman Brothers Inc., both of NewYork, and Vector Securities International Inc., ofDeerfield, Ill. In addition to 3 million shares sold, theunderwriters have an option to purchase 450,000 sharesto cover overallotments.

GeneMedicine's one product in clinical trials targets adeficiency of the alpha-1-antitrypsin gene, which exposeslung tissue to destruction by infection and inflammation.GeneMedicine has a Phase I study under way atVanderbilt University in Nashville, Tenn. n

-- Charles Craig

(c) 1997 American Health Consultants. All rights reserved.