GenVec invests $15M from stock sale into drug

Friday, Sept. 30, 2005

GenVec Inc. will apply $15.2 million in committed stock sales it received this week to its effort to fine-tune dosages of TNFerade, the company’s turn-back-the-clock drug for shrinking cancer tumors, said CFO Jeffery W. Church.

In phase 2 clinical trials of patients with pancreatic, rectal and esophageal cancer, TNFerade has reduced tumors in a process that Church has described as ‘‘turning back the clock” by killing tumor cells and limiting the need for some radical surgeries.

The new financing will help the Gaithersburg biopharmaceutical company set dosage levels for different cancers in its application to the U.S. Food and Drug Administration for phase 3 trials, Church said. ‘‘We have now seen activity of TNFerade with 12 to 15 different tumor types. We expect to expand our studies of treating melanoma, head and neck cancer, breast and others,” he said.

Earlier this month, GenVec also reported, in phase 1 clinical trials, that its experimental HIV vaccine was safe and produced ‘‘vigorous” immune responses in the eight patients tested. GenVec is developing the vaccine with the National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health in Bethesda. GenVec’s HIV vaccine and malaria vaccine programs are not funded by sales of company stock, but through $20 million per year in government contracts.

Church also explained that the GenVec HIV vaccine is designed to fight off all three of the major strains or clades of the AIDS virus. The company is working with HIV researcher Gary Nabel of the NIAID’s Vaccine Research Center in Rockville. The center is focused on providing a vaccine that will be effective worldwide.

Church described the stock sale as ‘‘along the lines that we expected.”

But financial analyst Michael Zasloff of Ferris Baker Watts speculated, ‘‘I can only assume that the cost of equity, at this time, was higher than they would have wished.”

Still, ‘‘I remain quite positive about GenVec,” Zasloff said, adding that if all goes well for lead product TNFerade, ‘‘GenVec will become a successful company.”

GenVec has 80 employees. For the quarter ended June 30, it reported a net loss of $3 million, compared with a net loss of $4.8 million in the same quarter of 2004. For the six months ended June 30, the company reported a net loss of $6.4 million, versus a net loss of $10.4 million for the same six-month period in 2004.

‘‘This year, we expect our loss to be slightly lower again, but in line with where we were last year, because we are expanding the trials of TNFerade,” Church said.

GenVec announced Monday that it was selling 7,250,000 shares of its common stock at $2.00 per share to a group of institutional investors. After the market closed, said Church, another investor asked to be included. GenVec decided to modify the sale and include an additional 400,000 shares the next morning for the belated investor.

The company’s stock sale for $15.2 million leaves approximately $20 million in future sales potential left and available from the Security and Exchange Commission’s approval earlier this year of GenVec’s shelf registration to sell $35 million in stock, Church said. The stock closed at $ 1.95 per share on Wednesday and the 52-week high has been $3.05.

Prior to the sale, the company had planned to spend $15 million in R & D this year and had budgeted about 85 percent of it into developing TNFerade.

With the new capital infusion from the stock sale, GenVec will look for partners as it enters final stages of development and approval of the drug by the FDA, said Church. GenVec is also developing Biobypassae for severe coronary artery disease and Adpedf for age-related macular degeneration.

In a recent published analysis of the company, Ferris Baker Watts’ Zasloff compared trial results of TNFerade favorably to a competing pancreatic tumor-fighting drug, Tarceva, from the biotechnology firm Genentech in San Francisco. The analyst based his investment judgment on data from a FDA evaluation on September 13 of Tarceva in phase three clinical trial of 569 patients who have tumors of pancreatic cancer.

While noting difficulties in comparing results of smaller TNFerade phase two trials with the phase three Tarceva trial, he offered, ‘‘It is clear that although very few patients have been studied in this trial, should TNFerade behave similarly in the current, larger trial, the drug exhibits an efficacy that exceeds that of Tarceva.”

Church pointed out however that the two drugs would potentially work in different ways. Genentech’s Tarceva starves tumors of blood supply, where as GenVec’s TNFerade destroys the abnormal blood vessels in the tumor. ‘‘It is like saying one stops water from getting to the house and the other, TNFerade, destroys the plumbing in the house. We think it has the advantage of creating an immune response. With TNFerade, we have seen it work synergistically with radiation and chemotherapy with pancreatic tumors.”

In experiments, GenVec, working with scientists at the NIH’s National Cancer Institute, found that tumors shrunk in eight of nine breast cancer patients, who received weekly treatments of TNFerade in conjunction with radiation and chemotherapy, said Church. ‘‘We are also seeing it is very synergistic with radiation treatment.”