OXFORD BioMedica saw its share price plummet after announcing that it needs £20m from investors to fund its research into gene therapy treatments for eye disease, cancer and Parkinson's.

Because of the difficult market conditions, it intends to issue new shares at 5p, but existing investors will see their holdings diluted as last week's share price was 9.25p.

The money is guaranteed as the new share issue is underwritten by stockbrokers Singer Capital Markets.

Spokesperson Lara Mott said: “Current market conditions are not as favourable as they were. With any fundraising priced at a certain discount, you do expect the share price to fall.”

The company, which employs about 78 staff at Oxford Science Park, is to spend £5.4m on a manufacturing facility for its LentiVector technique, which allows genes to be delivered using a horse virus.

Ms Mott said the new plant would not be built at the science park. Instead, they had an exclusive option to acquire a UK-based facility at a location which would be disclosed in the new year.

Another £8.2m will go on developing a possible treatment for Parkinson's, ProSavin, with the remaining £4.8m used to fund the business.

BioMedica is expecting key results from clinical trials from mid-2011 to mid-2013. If these are successful it will earn payments from drug company Sanofi-aventis, as well as reaching deals for ProSavin and TroVax. It has enough cash to last until early 2012, but it needs more to develop and market its products.

Chief executive John Dawson said biotech had experienced “substantial volatility” in recent years.

He added: “This funding will strengthen the business with a view to ensuring that Oxford BioMedica can extract the highest value from its innovative products.”