A direct equity placement netted $13 million for Genaera Corp.

The Plymouth Meeting, Pa.-based company received definitive commitments from unaffiliated institutional investors for the purchase of about 3.8 million shares at $3.45 apiece. That price represents a 13 percent discount to the stock's closing price on Monday, and Tuesday, the shares (NASDAQ:GENR) fell 43 cents, or 11 percent, to close at $3.53.

The added funding is slated for general corporate purposes.

"We're in the midst of negotiating with potential partners, so it's always helpful to have a stronger balance sheet," Genaera President and CEO Roy Levitt told BioWorld Today. "Specifically, it helps us achieve our growth plan for '05 and to hit the milestones we have laid out for people through '05, where our cash fell short of that prior to this financing."

While he conceded disappointment with the per-share price, he was pleased with the relative lack of dilution from the stock sale. According to the company's second-quarter financial report, it had $25.3 million in cash reserves and about 52.4 million shares outstanding through June 30. The company reported a $4 million net loss in the second quarter.

Some of the new funding will be directed toward the further development of squalamine, an anti-angiogenesis treatment for eye disease and cancer. Genaera is focused on completing three Phase II trials and the accompanying continuation studies, and in the first half of next year plans to begin Phase III testing of the drug for wet age-related macular degeneration.

"We'll raise money when we need to," Levitt said. "We're willing to tell pharma that if you give us the right deal, we'll move forward. If you don't, we'll raise additional capital because it will all come back to us later."

He said the product is being developed to follow closely behind Avastin (bevacizumab, Genentech Inc.), which earlier this year became the first FDA-approved anti-angiogenesis product as a first-line treatment for colorectal cancer. Squalamine also is being tested in an oncology setting through a Phase II prostate cancer program funded by the Department of Defense.

Genaera is looking for the right partner to aid in the product's further development.

"We're looking for Phase III economics," Levitt said. "The investment is largely to ensure that we get those Phase III economics, and people should not misconstrue that because we're raising cash now that a deal is potentially a long way off."

Genaera has two other products in development.

Interleukin-9 antibody is a respiratory treatment based on the discovery of a genetic cause of asthma. It is partnered with MedImmune Inc., of Gaithersburg, Md. It also has Lomucin, a mucoregulator to treat the overproduction of mucus and secretions involved in many forms of chronic respiratory disease. That product is part of an alliance with the Cystic Fibrosis Foundation.

The stock was offered through a prospectus supplement pursuant to the company's effective shelf registration statement. The offering essentially equaled the remainder of the shelf, Levitt said, and a registration statement relating to the securities has been declared effective by the SEC. The sale is expected to close on or about Friday.

WR Hambrecht + Co LLC and Fortis Securities LLC, both of New York, are the offering's placement agents.