Deltagen Inc. completed a private placement of 5,543,822 shares, raising $25.3 million that will be used to advance its internal drug discovery efforts.

The shares were sold at $4.57 each, a 15 percent discount to a five-day average, Deltagen Chairman and CEO William Matthews said. The company has about 41 million shares outstanding following the placement.

"We're obviously delighted to get on and build our business," Matthews said.

The company had $60 million in cash as of March 31, and with the private placement, it has about $85 million on hand.

"We have a burn rate of about $40 million a year, so this puts us at over two years of cash," Matthews said, enough to execute its business plan.

Deltagen, of Redwood City, Calif., has built a "tremendous drug discovery infrastructure" to focus on oncology, metabolic disorders and inflammatory diseases, based on discoveries from the human genome, he said.

The company expects its lead candidate to enter the clinic in 2003, Matthews said.

Deltagen recently completed the acquisition of Bristol-Myers Squibb Pharma Research Labs LLC, of San Diego, for $23.5 million in stock, which gave Deltagen a small-molecule drug discovery unit that functions as a wholly owned subsidiary. (See BioWorld Today, Feb. 12, 2002.)

In March, Deltagen began its drug discovery efforts around its first inflammatory disease target, DT0211, a G protein-coupled receptor that demonstrated it plays a role in the blocking of T-cell responses, the company said.

Earlier this month, Deltagen reported that its second potential therapeutic target in inflammatory diseases, DT0311, had shown promise in animal models of Crohn's disease. DT0311 is a GPCR and is expressed on a number of leukocyte subsets.

Deltagen also has two technology products for subscription called DeltaBase, a searchable gene function database, and DeltaXpress, a gene expression profile database.

Investors in the private placement included the largest investor, Alta Partners, of San Francisco, which invested $10 million, Matthews said. Investors also included the Sprout Group, of New York, at almost $8 million; Cooper Hill Partners LLC, of New York; Tang Family Funds, of San Diego; Cranshire Capital, of Northbrook, Ill.; Castle Creek, of Chicago; Mikels Miller, of Los Angeles; and Acqua Wellington, of New York.

Deltagen's stock (NASDAQ:DGEN) fell 44 cents Thursday to close at $4.61.