Seragen Inc. said Wednesday it completed negotiations for $23.8million in bank loans, adding $3.5 million to commitmentsannounced in March and giving the Hopkinton, Mass.-basedcompany about 18 months worth of cash.
Seragen has four years to repay the loans, which are guaranteed byBoston University, Seragen's majority shareholder, and twoindividuals, who were not identified.
As an incentive, the guarantors were issued warrants to purchase atotal of 2.78 million shares of Seragen stock (NASDAQ:SRGN) at$4.75 per share, a discount of $1.50 to Tuesday's closing price of$6.25. The warrants can be exercised for 10 years.
Boston University guaranteed $11.8 million in bank loans andreceived warrants to purchase 1.39 million shares. The other twoguarantors are responsible for a combined $12 million and wereissued warrants to buy the other half of the 2.78 million shares.
The guarantors' support enabled Seragen to borrow the $23.8 millionat a reduced cost. In March, the company said Boston University andthe other two participants were committed to backing $20.3 millionin loans. All three agreed to support the additional $3.5 millionborrowed.
Helen Maslocka, Seragen's vice president of investor relations andcorporate communications, said the bank financing strategy isdesigned to result in less dilution to the company's stock.
Seragen currently has 16.2 million shares outstanding. Based on thecompany's earnings report for the first quarter, ending March 31,Seragen had about $3 million in cash and a quarterly burn rate of$5.5 million. With the bank financing, the company has enough cashto operate into the third quarter of 1996.
Seragen, which has no significant revenues, will pay back the bankloans by 1999 through a future equity offering or anticipated productsales, Maslocka said.
Seragen's lead product is an interleukin-2 (IL-2) fusion toxinmolecule in Phase III trials for cutaneous T cell lymphoma. The drugis being developed with Eli Lilly and Co., of Indianapolis. SomeWall Street analysts have predicted the product could be on themarket by 1997 if the Phase III studies are successful.
Maslocka said Phase II trials of IL-2 fusion toxin for psoriasis areexpected to begin this summer and Phase II trials are planned forother forms of lymphoma and HIV.
Seragen's stock closed Wednesday at $6.75, up 50 cents. n
-- Charles Craig
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