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Biotech Genetronics reduces staff, officers while seeking new funding

Elitra Collaborates With Merck to Develop Antibiotics

A Genetronics Biomedical Corp. spokesman said the biotechnology firm hopes to raise between $2 million and $3 million from private investors by the year’s end.

The private placement follows recent news of restructuring which called for the departure of the chief operating and financial officers and 20 percent of Genetronics’ support staff.

Genetronics’ spokesman Clarke Galvin said company officials hope the private placement and reorganization will extend the life of the cash-stripped San Diego-based biotechnology firm.

“The company was getting low on cash and (there wasn’t enough) available to fund the company any further,” Galvin said. “By cutting out upper management and support staff, we will be able to extend the life period until we have (another) infusion.”

As of June 30, Genetronics, which makes electroporation equipment to deliver anticancer drugs to cells, had $4.5 million in cash. The reduction of 14 people, including the two top managers, will save the firm about $1 million a year, he said.

The restructuring also calls for the separation of the firm’s BTX division, which focuses on the sales of electroporation and electrofusion equipment to scientists. BTX had $4.5 million in revenues in the last fiscal year.

It will be up to the firm’s remaining 62 employees to carry out the new objectives.

Those include speeding up the initiation of pivotal trials for the use of electroporation in treating head and neck cancer.

Genetronics also said it wants to start clinical trials using its device to treat melanoma, pancreatic and liver cancer, Galvin said.

Positive trial results are likely to attract the attention of bigger companies and lead to new partnership deals, Genetronics said.

Genetronics has already signed partnership deals with a number of bigger firms, including Chiron Corp. in Emeryville; Boehringer Ingelheim Pharma KG, a unit of German pharmaceutical giant Boehringer Ingelheim GmbH; and Johnson & Johnson Research Pty. Ltd. in Everleigh, Australia, a unit of Johnson & Johnson.

In 1999, Genetronics lost a collaboration with Johnson & Johnson that had the potential to be worth more than $130 million.

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Elitra/Merck Deal:

San Diego-based Elitra Pharmaceuticals, Inc.’s chief executive said his company’s recently signed deal with pharmaceutical giant Merck & Co., Inc. validates the firm’s work and could pave the way to an initial public offering.

Elitra said Oct. 25 it will supply Merck of Whitehouse Station, N.J., with an undisclosed number of “novel” antibacterial drug targets.

Financial details were not disclosed.

Harry F. Hixson, chairman and CEO of Elitra, called it a “very substantial” multiyear collaboration.

Merck made an equity investment, paid a technology access fee, agreed on milestone payments and will pay Elitra royalties on any products that hit the marketplace, he said.

Hixson said, “Our investment bankers have always suggested that we should have a validating partner that the financial community would recognize , Merck meets that criteria.”

Elitra will use its proprietary bioinformatics technology to select antibiotic targets and will develop tests that can be used by Merck’s high-throughput screening system.

The hope is to find a “hit,” a molecule that binds well to a target and translates into a marketable drug down the road.

Hixson said Elitra has identified more than 3,100 gene targets in 11 different bacterial and fungal pathogens.

“There are existing antibiotics against a fairly small number of targets,” he said.

But resistance against bacterial strains has been rising and more effective antibiotics are needed to close the gap.

Hixson didn’t specifically comment on which branch of antibiotic medicine the companies will work on, but said that Elitra’s targets have potentially broad applications.

He also didn’t provide details on the second part of the agreement, which calls for Elitra to take compounds provided by Merck and work backwards to determine their previously unknown target.

Three-year-old Elitra has enough funding to last until the end of 2003, Hixson said.

By then, he expects to sign additional collaborations that would bring enough cash to offset R & D; costs.

In September 2000, Elitra filed for an IPO seeking about $86 million, but was forced to pull it in November amid the increasingly souring market.

Hixson sees the Merck collaboration as a vehicle to put Elitra on investors’ radar screen.

So when the IPO market opens up again, investors will find Elitra an attractive buy.

Hixson was previously president and COO at Amgen Inc., the Thousand Oaks-based biotechnology which launched the blockbuster drugs Epogen and Neupogen.

Send biotech news to Webb at mwebb@ sdbj.com.


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