Houston Biotechnology Inc. begins trading today on theAmerican Stock Exchange (ASE) after a self-managed initialpublic offering completed Friday.

The offering, directed principally to the company's 1,900existing stockholders, raised $3.3 million, bringing total capitalinvested in the company since its inception to approximately$32 million.

The company also dissolved its affiliated R&D limitedpartnership of 1,800 individuals. They had provided $26million in R&D support through E. F. Hutton in 1986 and 1987,receiving in exchange ownership of the technology developed,which was then licensed to the company.

This structure impeded future financing of the publiclyregistered company, said Russell Denson, president and chiefexecutive officer.

"You go to finance the company and that's wonderful, exceptthe company doesn't own the technology," he explained.

The offering took place now because the Securities andExchange Commission had requested the company to eitherdissolve the partnership or register as an investment companyby July 31. The company would have argued for an exemption,Denson said, but instead wanted to enhance future access tocapital markets.

"This is step one," he said.

After the offering, outstanding shares and warrants total about3.9 million and 650,000, respectively. The shares will tradeunder the symbol HBI, and warrants under the symbol HBIWS.

"I suspect we'll have a modest market capitalization initially,"Denson said. "We're relatively unknown. Trading could be alittle sloppy and volatile initially as we settle out buyers andsellers."

Based outside Houston in The Woodlands, Texas, the companywas founded with $3 million in venture capital in 1986 by acataract surgeon and a scientist associated with the BaylorCollege of Medicine. The company's 38 employees primarilyresearch and develop biopharmaceuticals to prevent or treateye-related ailments.

Santen Pharmaceuticals of Japan has paid $2 million for theright to negotiate a license in Japan for the company's initialproduct, the 4197X-RA Immunotoxin. This conjugate isdesigned to remove residual lens epithelial cells, whichcontribute to secondary cataract in up to half of patients whoundergo primary cataract surgery.

If effective, the product should eliminate costly laser surgeryused to treat this disorder. The treatment would beadministered during primary cataract surgery, an operationperformed about 1.5 million times in the U.S. in 1991.

Santen would pay another $1 million to complete theagreement.

Houston Biotechnology (HBI) is also working with GenentechInc. (NYSE:GNE) of South San Francisco, Calif., to develop lung-derived neurotrophic factor (LDNF), a possible growth factor fornerve cells.

HBI believes LDNF may have applications in the treatment ofglaucoma, the leading cause of blindness in the U.S.

In April, HBI granted Genentech the rights to negotiate alicense to use the factor for treating diseases other than thoseinvolving the eye.

HBI expects to increase its activities over the next few months,raising the monthly burn rate from about $250,000 to$400,000, Denson said, but has "something over" a year inoperating capital.

"We have plans to raise more money already," he said.

-- Nancy Garcia Associate Editor

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