Tissue-regeneration company Isolagen Inc. brought in $59.5 million in a follow-on offering Thursday, leaving it with wrinkle-free plans to begin pivotal trials and bring its lead anti-aging product to the market.

The Houston-based company offered 7 million shares at $8.50 each, a slight discount. Isolagen's stock (AMEX:ILE) dropped 2 cents Thursday to close at $8.97.

It expects to use the estimated net proceeds of $55.4 million, not including any funds from an overallotment option, to expand its manufacturing capabilities in the U.S. and Europe. About $28 million is earmarked for that, while another $10 million is set aside so the company can build its own direct sales force and to fund U.S. product-launch expenses. Isolagen also intends to use $6 million in proceeds for research and development, including funding two pivotal Phase III trials for its lead product candidate. The balance would be used for general corporate purposes.

New York-based CIBC World Markets Corp. and Baltimore-based Legg Mason Wood Walker Inc. are acting as co-lead managers, with Boston-based Adams, Harkness & Hill Inc. serving as a co-manager. The underwriters have an overallotment option on up to 1.05 million additional shares, 200,000 from the company and 850,000 from selling stockholders. The company, which first proposed the offering in April, now has 33.8 million outstanding shares. Officials could not comment on Thursday due to an SEC-imposed quiet period, Isolagen Chief Financial Officer Jeff Tomz said.

Isolagen's lead candidate, based on the Isolagen Process, is designed to correct and reduce the normal effects of aging, such as wrinkles and nasolabial folds. Phase III data from an evaluable 146 patients showed an efficacy rate of 77 percent with the treated group, as compared to a 36 percent response with the placebo group. Isolagen plans to begin two pivotal Phase III trials in the third quarter, and file a biologics license application in the first quarter of 2005.

The company began marketing the product on a limited basis in late 2003 in the UK and Australia. It believes there will be growth in the aesthetics market due to the aging baby-boomer population and the increased desire of people to improve their appearance.

Isolagen's second product, to treat periodontal disease, finished Phase I testing late last year. That trial showed a positive response in the growth of papilla, as well as significant bone deposition, in patients treated with the Isolagen Process candidate. The company began a Phase II trial in May.

Isolagen focuses on developing and commercializing autologous cellular therapies for soft- and hard-tissue regeneration. The Isolagen Process entails extracting a patient's own cells, multiplying them and injecting them back into the patient six weeks later. The patient receives a total of three injections at two-week intervals. The process is designed to replenish fibroblast cells, which produce collagen and elastin and are support structures for the skin and other body tissues. The loss of fibroblasts causes the normal signs of aging, including wrinkles and nasolabial folds. Patients also can cryogenically store their fibroblasts at Isolagen's facilities to be used in the future.

The company has a strategy to expand its therapies into other applications, build a direct sales force, and to optimize its manufacturing processes to achieve cost reductions and scalability.

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