Genex Corp., the Rockville biotechnology company that pioneered the application of genetic engineering techniques to industry, may have to sell a substantial interest in the firm and take on a corporate partner to raise the funds it needs for continued growth, according to biotechnology industry sources.
The eight-year-old company, which saw its losses rise from $5.5 million in 1983 to $7.4 million last year because of manufacturing start-up costs, is looking for a major infusion of investment capital to help it make the transition from a biotechnology research and development firm to a mass producer of specialty chemicals.
"There's been a good probability that there will be a corporate partner," said Robert F. Johnston, formerly Genex's chairman and a director of the company. "The objective is to sell a minority interest in the firm."
But he conceded that, since Genex's stock value has plummeted from a historic high of $22.50 a share to roughly $4.75 a share, "a significant amount of stock" would have to be sold to provide Genex with the capital it needs for further expansion.
In January, the company retained the investment banking firm ofE. F. Hutton to explore its financial options.
"We are looking at various ways of raising capital other than a public stock offering," said Shellie Roth, a Genex spokeswomen, "Among the alternatives would be a joint venture or a private placement."
The company has roughly 8 million shares available for such a private placement but at least one New York venture capitalist, who asked not to be named, said it was "very unlikely" that those shares could command the current market value of $4.75 a share.
The company would not comment on the amount of money it was trying to raise.
The search by fledgling biotechnology companies for equity partners has become a pervasive phenomenon in the industry as it moves from an emphasis on research to mass production. Cetus Corp., one of the first biotechnology companies, recently launched a $90 million joint venture with W. R. Grace, and E. I. du Pont de Nemours recently acquired a minority stake in Rockville-based Biotechnology Research Laboratories.
Genex, best known for synthesizing ingredients in the artificial sweetner Aspartame, was one of the first biotechnology companies to look for industrial applications of biotechnology rather than medical or agricultural applications. The company sought to devise specialty chemical niches in such areas such as food processing and cleaning products and to avoid the regulatory barriers to trying to develop genetically engineered pharmaceuticals.