Washington Editor

The stem cell firm Osiris Therapeutics Inc. went public last week, raising gross proceeds of $38.5 million in an initial public offering that priced Friday.

The transaction, in which the Baltimore company sold 3.5 million common shares at $11 apiece, closed three months after being registered. The stock's original price range was set between $11 and $13, and net proceeds totaled $34.2 million after expenses. An additional 525,000 are available to cover overallotments.

Osiris' stock began trading on Nasdaq under "OSIR," and closed at $11 on volume in excess of 630,000.

According to a prospectus filed with the SEC, proceeds will be directed to fund clinical trials and preclinical research and development activities, in addition to general corporate purposes such as working capital needs and paying back principal and interest on a $20.6 million promissory note ahead of schedule.

The company had $39.1 million in reserve cash and short-term investments as of March 31.

Its tissue regeneration therapeutics are born of human mesenchymal stem cells, which are derived from adult bone marrow. Those cells can differentiate into various connective tissues, such as bone, muscle, fat, tendon, ligament, cartilage and bone marrow stroma, and Osiris said its treatments are not rejected by patient immune systems, unlike other stem cell therapies, and do not require matching.

The company already has one product on the market, Osteocel, which is used for regenerating bone in orthopedic indications. Launched a year ago, it has been used in more than 1,250 surgical procedures, such as spinal fusion. Osteocel consists of a matrix of cancellous bone containing mesenchymal stem cells.

Its lead investigational product is Prochymal, which is entering Phase III trials for steroid refractory graft-vs.-host disease. The stem cell therapeutic has both orphan drug and fast-track status from the FDA in that indication, and it also is expected to be used in acute graft-vs.-host disease. In addition, Prochymal is in a Phase II trial for Crohn's disease.

Additional biologic drug candidates in its pipeline include Chondrogen, in Phase I/II for regenerating cartilage in the knee, and Provacel, in Phase I for repairing heart tissue following a heart attack.

After the offering, the company had about 27.1 million shares outstanding. In its original filing, the company had hoped to bring in as much as $80 million. (See BioWorld Today, May 15, 2006.)

The amount raised matches the downward trend in biotech investments. Since a peak this year in public and private offerings in March and April, such financings have sloped negatively, as have the values of publicly traded shares.

BioWorld's figures show that in March $922 million were raised via public offerings (initial and follow-on), but that decreased to $574 million in April, $268 million in May, $317 million in June and just $32 million in July. BioWorld's stock tracker hit its peak in late April, and has fallen since then - at the end of July, the average percent change year to date for firms in the tracker was negative 7.5 percent.

Osiris' offering is the 19th biotech IPO to price in 2006.

Its shares are being offered by an underwriting syndicate led by New York-based Jefferies and Co. acting as the bookrunning manager. Lazard Capital Markets in New York and Leerink Swann and Co. in Boston acted as the co-lead and co-manager, respectively.

Osiris was founded in 1993 based on discoveries made at Case Western Reserve University in Cleveland.

Cancer Firm Brings In $22.6M

Reata Pharmaceuticals Inc., of Dallas, raised $22.6 million in private financing. The company plans to use the funding to advance its development programs, which include three Phase I drugs.

Among them is RTA 744, an anthracycline that penetrates the blood-brain barrier being developed for primary brain cancer and also expected to be studied in other forms of brain cancer born of metastases arising from breast and lung cancer.

Reata also is conducting Phase I trials of RTA 401 and 402, the lead compounds from a new class of synthetic triterpenoids that selectively induce apoptosis and inhibit inflammatory processes needed for the survival and growth of tumors.

The financing round was led by Cardinal Investment Co., also of Dallas, and also included a new investor, Novo A/S, of Copenhagen, Denmark. As a result, Novo's Jack Nielsen joined Reata's board.

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