By Randall Osborne

West Coast Editor

Hardly beyond newborn status, ViaCell Inc. - started in April through a coupling of two firms that aim to capitalize on embryonic stem cells and cord blood banking - raised $48 million in mezzanine financing.

The investment amounts to a major growth spurt, upping Boston-based ViaCell's cash position to $60 million, said Marc Beer, the company's CEO.

"We went out to the toughest investors," Beer said. "We had a list of 30, but only visited 15, and had written subscriptions from 10 within four weeks. We ended up taking six new investors, and I just stopped the road show."

The cash provides ViaCell with "a good three years-plus" of operations, said Beer, former vice president of worldwide marketing for Cambridge, Mass.-based Genzyme Corp.

Committing $15 million to the round was a division of Frankfurt, Germany-based Deutsche Bank, called Die Wertpapier Spezialisten. Nomura International's private equity group, based in London, chipped in $10 million.

Other new investors include The Stephens Group, of Little Rock, Ark.; Sofinov Societe Financiere D'Innovation Inc., of Quebec; United Offshore Bank Venture Technology Investments Ltd., of Singapore; and Singapore's economic development board.

Previous ViaCell venture investors contributed more than $10 million, including MPM Capital, of Cambridge, Mass., which is ViaCell's largest shareholder; Zero Stage Capital, also of Cambridge; Tullis Dickerson, of Princeton, N.J.; and Aurora Assets LLP, of Boston.

MPM was ViaCell's largest shareholder before the financing, and remained the largest afterward, said Beer, who would not disclose the ownership percentage.

ViaCell is the product of a merger between Viacord, of Boston, and Worcester, Mass.-based t. Breeders Inc. Viacord was a cord blood stem cell banking firm, and t. Breeders focused on cellular therapy, with a patented technology for expanding stem cells. (See BioWorld Today, May 11, 2000.)

In ViaCell's methodology, the selecting, purifying and amplifying process is repeated, Beer said, because when the cells differentiate, they have no therapeutic value, and must therefore be sorted again.

He said ViaCell will file in mid-December an investigational new drug application for a Phase I/II clinical trial of stem cells that have been amplified using the technology.

"It's for hematologic malignancies," Beer said. "These are leukemia patients."

Having found a way to amplify stem cells 20-fold, he said, ViaCell expects to eventually treat "the majority of the patients on the list" - only 15 percent of whom can be treated with the available stem cells.

ViaCell's approach has proven workable in a mouse model, Beer said.

"We eliminated the immune system and injected stem cells," he said. "We found that they were engrafted in the mouse."

A similar tack will be used with human leukemia patients.

"You 'chemo' the patient, and then you have to reconstitute the immune system," Beer said. "You can only do it twice, and after that it's not good news. But if you can get there early enough, you might not have to [administer chemotherapy] at all."

Either way, the stem cells would boost the system, he said.

With 80 employees, ViaCell is "being courted by the investment banking community very heavily," Beer said, and an initial public offering may be just around the corner.

"We'll be ready to go out next year sometime," he said.

Meanwhile, ViaCell is planning a get-together at which employees will meet people stricken by leukemia - the people most likely to benefit from stem cell therapy.

"We're looking forward to hugging that first patient," Beer said.