A challenging economic market calls for resourceful methods of fund-raising, such as the $21.25 million private placement pulled off by SuperGen Inc.

The $21.25 million financing consisted of senior exchangeable convertible notes and related warrants. The notes have a final maturity date of Aug. 26, 2004, and bear interest at 4 percent annually. The notes are convertible at investors' option into SuperGen stock at $4.25, which is a 22 percent premium to the average closing price for 10 trading days prior to the financing's closing.

There's nothing particularly noteworthy there, but investors also have the option to exchange notes into a maximum of about 2.6 million shares (all that SuperGen owns) of AVI BioPharma Inc., of Portland, Ore., at $5 apiece - a 40 percent premium to AVI's 10-day trading average before the close of the deal.

"It's kinda creative," said Joseph Rubinfeld, CEO and chairman of Dublin, Calif.-based SuperGen. "It's unique in that we can pay for it in three different ways: cash, SuperGen shares or AVI shares. And those are fixed prices; they are not floating."

SuperGen will pay the principal on the notes generally in four quarterly installments beginning nine months from the closing and can decide how it wants to pay it back. Prior to then, investors have the option to convert the notes into shares of either company. Also, investors received warrants with a term of five years to purchase nearly 2 million shares of SuperGen at $5 per share.

"If either company is wildly successful in nine months, [the shares] will be gone," Rubinfeld said. "If not, then it is still my option. So, it's not like we are going to dilute the hell out of our shares. If neither company is successful, then I pay in cash. The market may have not understood that."

SuperGen's stock (NASDAQ:SUPG) fell 26 cents Thursday, to close at $3.37. AVI BioPharma's stock (NASDAQ:AVII) fell 5 cents to close at $3.16.

The AVI shares come from a deal in which SuperGen licensed U.S. marketing rights to AVI's Avicine, a cancer vaccine. In a tight financing market that had Rubinfeld looking for a way to generate cash without further dilution, he felt SuperGen's share of AVI wasn't being recognized. (See BioWorld Today, April 6, 2000.)

"We had [the shares] of AVI and nobody gives us credit for it," he said. "So, this is a way of monetizing it and I haven't diluted SuperGen. It's easier than trying to go to the open market and trying to sell it."

The money, added to SuperGen's cash position of about $40 million as of Dec. 31, gives the company "between 18 months and two years of cash," Rubinfeld said, based on current projections. A knock on SuperGen in the past, he said, was that although it has a reputable pipeline, it would run out of cash before being able to generate enough revenue from sales. The financing, he said, takes "that argument off the table."

In the fourth quarter SuperGen lost $6.3 million. For the year, it lost $49.5 million, down from $55.6 million the previous year. That number is expected to fall to $30 million in 2003, Rubinfeld said. It posted a record year for revenue, bringing in $15 million - five years ago that figure was at $300,000, he said. Fueled by sales from its anticancer product Nipent, the company expects further growth.

"[Nipent] is the driver of all this," Rubinfeld told BioWorld Today. "We look for $20 million at a minimum [in 2003]. We also expect some good news in publications and that might drive sales further."

Nipent is a small-molecule purine analogue approved for hairy-cell leukemia, of which there are only about 800 cases a year, indicating it is being used well off label, Rubinfeld said.

Mitozytrex, a proprietary version of generic mitomycin, was approved in November, but it has not yet hit the market. Rubinfeld said he expects to see sales by the end of 2003. Just before 2003, SuperGen began the rolling application for Orathecin (rubitecan) for refractory pancreatic cancer patients. The third and final module is expected to be filed in "the next six to eight weeks," he said, and approval is targeted for the end of the year. (See BioWorld Today, Nov. 18, 2002, and Dec. 31, 2002.)

Decitabine, for myelodysplastic syndromes, is in a Phase III trial that has enrolled 152 of a planned 160 patients. The plan is to submit for approval by the end of 2003 or early in 2004, Rubinfeld said. The company has "strategic partners lined up, because our drugs are so late stage," he said, but added, "We've become hoggish now. We want to partner just Orathecin, and do decitabine ourselves."

So much in the near future explains the financing's 18-month time frame, Rubinfeld said. He's now got the cash to get SuperGen there.

"I'm sleeping a lot better this morning," he said. "I'm a lot more bullish. Having the money in the bank is the best, and I'm quite gratified to have put the company on solid footing."