Chiron Corp.'s $20 million investment in Viagene Inc. shouldmake Viagene's revived initial public offering more attractiveto potential investors. Viagene announced both Chiron'sinvestment and its refiling for an IPO on Tuesday.
For the second time this year, Viagene filed a registrationstatement with the Securities and Exchange Commission for aproposed IPO of 2.5 million shares of common stock at a pricerange of $11-13 per share. A statement filed in January hadbecome inactive.
Alex. Brown & Sons Inc. has replaced Prudential Securities Inc.as an underwriter for the second filing. First Boston Corp. andNomura Securities International Inc. remain as underwriters.
Chiron's $20 million investment in Viagene is part of acollaborative agreement to develop gene transfer products forthe prevention and treatment of cancer, and a gene therapydrug-activation technology for the prevention and treatment ofa broad range of human diseases.
Under the pact, Chiron (NASDAQ:CHIR) has agreed to purchase1.6 million shares of Viagene's preferred stock for $17.6 millionand warrants for $2.4 million, which gives Chiron an option tobuy an additional 2.75 million shares of Viagene common stockat $11 per share.
If Chiron purchases the additional shares, Viagene said it wouldget another $30 million. Following the IPO, Chiron would thenown 15 percent of Viagene. The warrants will expire inNovember 1998.
Viagene of San Diego noted that the shares and purchase priceshave been adjusted to reflect a proposed 1-for-2 reverse stocksplit. Chiron also has the right to appoint a senior executive toViagene's board.
Under their collaboration, Viagene will provide its viral vectortechnology and Chiron will contribute its multidrug resistancegene as well as its genes for interleukin-2, tumor necrosisfactor and macrophage-colony stimulating factor for use indeveloping gene transfer cancer products.
Viagene will have exclusive worldwide rights to manufactureand supply all products developed under the agreement, whileChiron will have exclusive worldwide marketing rights.
Bob Ralston, director of Chiron's gene therapy program, notedthat one of the initial studies will evaluate the use of low-doseProleukin (interleukin-2) in combination with gammainterferon transduced autologous melanoma cells.
Ralston said one area that drew the companies together wastheir work in the pro-drug area; Viagene holds the first patentapplication and Chiron the second for pro-drug activation. Thetechnology involves using enzymes to convert pro-drugs intoactive drugs in certain cells.
Chiron also is providing retroviral vectors for use in a study oftumor infiltrating lymphocyte (TIL) cells altered to contain thetumor necrosis factor gene. That trial, for the treatment ofmelanoma, is being conducted by Steve Rosenberg at theNational Institutes of Health.
The funding for the research collaboration will be split equallybetween the two companies. Viagene will fund the first $12million of expenditures, and subject to certain terminationrights, Chiron will fund the second $12 million. Any costs above$24 million will be shared equally.
Viagene will primarily be responsible for research anddevelopment up to the filing of an investigational new drug(IND) application for each product and Chiron will haveprimary responsibility for conducting clinical trials and filingfor drug approval. The research will be directed by acommittee of representatives from both companies.
Chiron of Emeryville, Calif., is Viagene's third corporate partner.In January, Viagene announced a $9 million, three-yearagreement with Miles Inc. to develop a gene therapy productfor hemophilia A. It also has a 1991 agreement with GreenCross Corp. of Osaka, Japan, for development of HIVtherapeutics.
Viagene has two gene therapies in clinicals, one for HIV andone for malignant melanoma. The company is sponsoring twoHIV trials that involve direct intramuscular injection of amurine retroviral vector encoding HIV-1 genes. Researchers atDuke University are sponsoring a clinical trial of Viagene's genetherapy for malignant melanoma. Initiated in August, themelanoma trial involves removing a patient's cells, infectingthem with a retroviral vector that contains the gene for humangamma interferon, and then inserting the cells back into thepatient.
As of Sept. 30, Viagene had cash and cash equivalents totaling$2.9 million and a net loss of $3.9 million for the first threequarters. The company raised $4 million last fall when itcompleted a private placement of convertible preferred stock.
Upon completion of the offering, Viagene would haveapproximately 10.7 millions shares of common stockoutstanding.
-- Brenda Sandburg News Editor
(c) 1997 American Health Consultants. All rights reserved.