Genta Inc. announced Monday that it has raised net proceeds ofapproximately $22 million in a private placement of 477,540units at $50 per unit.

Each unit consists of one share of the San Diego company'sSeries A convertible preferred stock and a warrant to acquireone share of the company's common stock (NASDAQ:GNTA).

Alex. Brown & Sons Inc. and Montgomery Securities wereplacement agents.

The preferred stock is convertible into shares of Genta commonstock at $9 per share, subject to adjustment in certainconditions. Dividends are payable on the preferred stock.

Genta is required to redeem the preferred stock, subject tocertain conditions after three years at a redemption price of$50 per share of preferred stock, plus accrued and unpaiddividends.

The warrants will be exercisable for five years at a price equalto $10.50 per share of common stock.

Genta will file a registration statement (regulation D) coveringthe resale of the preferred stock, the warrants and the commonstock underlying the preferred stock and the warrants within60 days. The preferred stock and the warrants will not belisted on any securities exchange or quoted in any over-the-counter market.

In February, Genta had tried raising funds publicly through asecondary stock offering of 2.5 million shares of common stock,but withdrew the offering in April because the market hadproved generally inhospitable to biotechnology stocks. Genta'scommon stock had been trading at $11.50 a share when it filedfor the secondary but had dropped by almost 40 percent to $7per share by the beginning of April. On Monday the stockclosed at $7.75 a share, up 75 cents.

The financing vehicle that Genta chose in this case differs fromanother method that the majority of public biotechnologycompanies have used in the past several months. In that mode,the company raises money by selling newly issued shares of itscommon stock to private investors at a discount to the publiclytraded price of the stock.

Genta, however, has "tried to avoid discounting, which wouldcreate more dilution of the stock," explained Howard Sampson,the company's vice president and controller. Genta maintainedthe stock's value by placing units that it is obligated to tradeafter three years, but which it could redeem after 18 months(depending on circumstances), Sampson said.

"The stock will convert at $9 and the warrants will convert at apremium to the market," he added. "We wanted to tailor theinstrument to our specific needs," Sampson told BioWorld. "Weneeded something with a three-year life that we could thenconvert to common stock."

At the end of June, Genta reported second quarter cash, cashequivalents and short-term investments of about $15.8 million.

The company intends to use the $22 million from its privateplacement to fund preclinical and clinical trials conducted byits joint venture with Jagotec AG, ongoing clinical trials forGenta's dermatology products, and other research anddevelopment activities.

-- Jennifer Van Brunt Senior Editor

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