Need Cash? Go Buy It.

That was one CFO's solution for keeping his small company afloat as it waits for regulatory approval of its product and continues to burn through funds.

CFO Philip Donenberg prides himself on being patient and optimistic — necessary traits, he says, for any executive at a pharmaceutical product-development company.

After all, companies like BioSante Pharmaceuticals, where Donenberg has worked for more than a decade, often endure years without seeing revenue, riding on the hopes of products that may not even get regulatory approval to go to market. But when companies including his saw their capital-raising options dwindle or disappear in the latter half of last year, patience was not enough for Donenberg.

BioSante needed either a buyer or the promise of fast cash last year. But no one was offering either, and prospects turned even worse as the credit crisis peaked in the latter half of 2008. So Donenberg began seeking an alternative means of financing. “It’s not easy keeping a company funded and to keep product development moving when you don’t have revenue,” he told

Donenberg estimated BioSante needed to raise $30 million to $35 million to fund the advertising, monitoring, and testing of three separate clinical trials for its lead product before the company could apply for its approval by the Food and Drug Administration. Called LibiGel, the product would basically serve as the first equivalent of Viagra for women, Donenberg says, designed to treat sexual dysfunction in women.

The final phase of testing for the gel takes time and money: BioSante has to run two, six-month-long clinical trials with 1,000 women using either placebos or LibiGel, and another, year-long trial with at least 2,400 women to test for cardiovascular and breast-cancer risks. “BioSante is spending $4 million to $5 million a year on drug development, and they had only a year’s worth of cash left. They had to do something,” says Matt Gurin, vice president, life sciences, of consultancy Hay Group, who does not work with BioSante but recently reviewed the company’s financials.

Donenberg’s solution: buy another company, biotech firm Cell Genesys, and consume its cash balance, in order to keep his company running long enough — he hopes — to get LibiGel tested, approved, and to market, all before the bulk of the acquired company’s debt comes due in four years.

Pending shareholder approval at a meeting at the end of September, BioSante will acquire Cell Genesys in an all-stock, $38 million transaction. While other firms are acquired for their particular product, or to gain market share, this deal will be done with only one goal in mind: “The primary reason for the merger was their cash,” says Donenberg.

BioSante has no need for Cell Genesys’s nine employees — although its CEO and a board member will sit on BioSante’s board — and little need for its products. However, Donenberg says his company plans to eventually monetize some of the assets and will have a 16% equity stake in a former Cell Genesys subsidiary that develops gene therapies for neurodegenerative disorders.

Announced in June when BioSante had about $6 million in cash and cash equivalents and Cell Genesys had approximately $36 million in cash, the merger will give Cell Genesys’s shareholders a 39.6% stake in BioSante, with 0.1615 of a share of BioSante’s common stock. Most important, in return, depending on BioSante’s stock price on the closing date of the deal, the merger could net BioSante between $21.5 million and $23 million in cash.


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