In what could bring the company $39 million, Rosetta Genomics Ltd. filed for its initial public offering to fund research and development, including work on diagnostic products for prostate, lung, colorectal and breast cancers.

The Rehovot, Israel-based company plans to offer 3 million shares at a price between $11 and $13 per share. It would list the shares on the Nasdaq National Market under the symbol "ROSG."

Underwriters include New York-based firms C.E. Unterberg, Towbin; Oppenheimer & Co.; and Maxim Group LLC. They have an overallotment option to purchase another 450,000 shares, which would bring the company $5.85 million in additional gross proceeds if priced at the top of the price range.

About $17 million in net proceeds from the IPO would be used for research and development activities, consisting of $1.5 million each for a prostate cancer and a lung cancer diagnostic product; $3 million each for a colorectal cancer and a breast cancer diagnostic product; and $4 million each for a CUP (cancers of unknown primary site) diagnostic product and a liver cancer therapeutic. Another $2.5 million in proceeds would be set aside to fund licensing and protection of intellectual property rights, and $12.6 million would fund business development and cover general corporate purposes.

Rosetta Genomics is studying a group of genes known as microRNAs, which are naturally expressed using instructions encoded in DNA. They are believed to play a role in regulating protein production and could be used to form diagnostics and therapeutics for cancer and infectious diseases. Diagnostic tests based on microRNAs may provide information that result in the earlier detection of diseases and the ability to make individual treatment decisions.

MicroRNAs, Rosetta said, are expressed in different amounts in diseased vs. healthy cells and therefore can be used in diagnostic tests and as targets for therapeutics. Drugs that use microRNAs as targets might be more effective than existing classes of drugs because microRNAs are believed to be closer to the biological origin of the disease.

The idea is that drugs targeting microRNAs might take less time to design than others because they won't require scanning large libraries. MicroRNAs have known sequences, so developing a targeted drug would require a molecule that is a complementary sequence of that particular microRNA.

MicroRNAs also may have broader applications than small-interfering RNAs, which cannot increase protein production and cannot be used as biomarkers of disease because they are synthetically produced. MicroRNAs can be used to decrease or increase the levels of proteins, and because they are naturally produced by cells, can be used as indicators of disease.

As Rosetta works on its diagnostic and therapeutic products, it also is pursuing strategic collaborations. It currently has license agreements with Applied Biosystems Group, of Foster City, Calif.; The Rockefeller University; Garching Innovation GmbH, the technology transfer agency of the Max Planck Society; and Johns Hopkins University. It is collaborating with Asuragen Inc., of Austin, Texas, to co-develop diagnostics for prostate cancer; with U.S. Genomics Inc., of Woburn, Mass., to incorporate its microRNA-profiling technology into Rosetta's development of a lung cancer diagnostic; with Isis Pharmaceuticals Inc., of Carlsbad, Calif., to co-develop therapeutics for liver cancer; and with Sloan-Kettering Institute for Cancer Research and Hadassah Medical Organization to develop microRNA-based products.

Rosetta has filed patent applications with claims that cover about 350 biologically validated human microRNAs and 35 viral microRNAs. Incorporated in March 2000, it has a wholly owned subsidiary, Rosetta Genomics Inc., based in North Brunswick, N.J.

Following the offering, the company would have 10.5 million shares outstanding. Major shareholders include Isaac Bentwich, the company's founder and chief architect, who currently holds a 29.4 percent stake; and Kadima Hi-Tech Ltd., which has a 23.7 percent stake. Directors and executive officers of the company own about 38.1 percent of the company.