NeoTherapeutics Raises $5 Million for Research

NeoTherapeutics Inc., an Irvine biopharmaceutical company, said Monday it has raised $5 million by selling preferred stock that can be converted into a 10% stake in its genomic research unit, NeoGene Technologies Inc.

The company said in a news release that it will use proceeds of the sale, a private placement, to expand research at NeoGene. It did not identify the institutional investors that bought the stock.

NeoTherapeutics retains 80% ownership in NeoGene, which focuses on gene research to develop drugs to treat neurological, psychiatric and other disorders.

Under terms of the private placement, the institutional investors received 5% convertible preferred stock in NeoGene and five-year warrants to buy up to an additional 2% of the company’s stock. If exercised for cash, these warrants could raise as much as $1 million more.

In addition, the investors received five-year warrants to buy 80,000 NeoTherapeutics shares at $10.47 a share. The NeoGene preferred stock is convertible into NeoGene common stock automatically upon closing of a NeoGene public offering that meets certain criteria.

Shares of NeoTherapeutics closed unchanged Monday at $8 a share in Nasdaq trading.