Rockville-based EntreMed Inc., which in April canceled plans to sell 2 million additional shares after investors fled biotechnology stocks, announced plans yesterday to complete a more modest, 1-million-share offering that would net the company about $20.6 million.
EntreMed said the proceeds - enough to help carry it "well beyond" a year - would be used to test its experimental protein drugs designed to block the growth of tumor-feeding blood vessels as well as for day-to-day expenses and general corporate purposes.
But the offering of 1 million shares at $22 each also is expected to help EntreMed in two other key ways: By attracting more institutional - as opposed to individual - investors, and by expanding analyst coverage.
EntreMed Chief Executive Officer John W. Holaday hoped the combination would make the company's stock less subject to the kind of wild swings it has seen as individual investors trade on news reports.
EntreMed's shares, for example, soared nearly 330 percent in one day in 1998 after a front-page New York Times article trumpeted its proteins as a potential cure for cancer, a claim the company quickly moved to temper by explaining that research to that date had shown the proteins effective only on tumors in mice.
"Joe Blow in Kokomo trades on news as opposed to substance," Holaday said, adding that the company's 28,000, mostly individual investors have served the company well through its early years. Institutional investors, however, may be more likely to hang on for the long haul as EntreMed's products wind through a years-long process of development.
EntreMed, which hit a high of $101.24 on March 1, had fallen to $41 by April 13 as the biotechnology sector crashed. Yesterday, shares dropped $3, or 11.59 percent, to $22.875 on the Nasdaq stock market.
Banc of America Securities LLC is underwriting the offering and plans to begin writing research reports on EntreMed for investors. The offering is expected to close Monday. Afterward, institutional investors should hold just under 30 percent of the company's stock. Holaday said he would like to see institutional investors holding 30 percent to 60 percent.
EntreMed is issuing the shares under a registration statement filed with the Securities and Exchange Commission in January. It still has about 2 million shares left under that statement and could choose to sell more of the shares later should the market improve.
Like most biotechnology companies, EntreMed faces years of losses as it tries to get significant money-makers to market. The company already has licensed one drug - Thalidomide - to a pharmaceutical company that sells it as a treatment for leprosy.
EntreMed is deriving royalties from those sales, but not nearly enough to cover the costs of putting drugs under development through the rigorous testing needed to win Food and Drug Administration approval. The company lost $10.7 million in the first quarter that ended March 31 on revenue of $726,699.