National Editor

With pivotal Phase III trials under way testing its technology for inactivating pathogens in blood, V.I. Technologies Inc. (Vitex) said its shareholder rights offering has nailed down commitments totaling more than $14.4 million and is in line for another $4 million payment from a partner.

"This tides them over into next year, but not real far into next year," said Peter Parker, general partner with Ampersand Ventures, of Wellesley, Mass., which is Watertown, Mass-based Vitex's largest shareholder.

"It's enough time to get a corporate partner, which is what they really need and that's the whole point of the financing," Parker told BioWorld Today.

He said the company has been in talks with would-be partners, and he expected a disclosure of progress "before the end of the year."

No one at Vitex was available for comment, but the news helped keep the firm's stock (NASDAQ:VITX) above $1, which is one issue in its possible delisting from Nasdaq. Shares closed Tuesday at $1.12, up 7 cents.

Nasdaq also noted Vitex was not in compliance with the $10 million minimum stockholders' equity requirement, and a hearing was expected within 45 days. At the end of the first quarter, Vitex had $4.2 million in cash.

The offering included participation by several existing venture and institutional investors, along with Vitex directors and officers. Vitex had extended the original May 15 deadline for a week so that shareholders, including Ampersand, could complete due diligence reviews.

In early April, Vitex declared its registration statement effective for the distribution of subscription rights. Under the terms, shareholders of record on March 31 will receive 0.87 subscription rights for each share of stock that they own, entitling them to purchase 19.8 million shares of Vitex stock at an exercise price of $1.02 per share, which is the same pricing as East Hills, N.Y.-based Pall Corp.'s $4 million Phase III milestone commitment.

Pall was obligated to make the investment in Vitex upon completion of an equity financing (including the rights offering) in an amount of $11 million or more before Sept. 30. In April, Vitex said it had received between $14 million and $19 million worth of nonbinding expressions of interest from certain institutional and venture capital shareholders and affiliates.

Vitex's lead product in Phase III trials is Inactine, a pathogen-reduction system that uses nucleic acid chemistry to inactivate blood-borne viruses, parasites, lymphocytes and bacteria in red blood cells. Inactine, a small-molecule compound, binds to the RNA or DNA of the pathogen, preventing replication.

"What you're starting with is a bag of red cells," Parker said. "You've got to have a way of incubating it and then treating it to remove the compound. There are a number of devices that go along with it."

More than 40 million red cell units are transfused annually in the U.S., Europe and Japan, which means a market opportunity of more than $4 billion, the company said, and Parker estimated the Phase III trials will finish "around this time next year."

"It's a large market and the largest part of it is red cells," Parker said. "The other two [parts of the market, platelets and plasma] are fairly small."

A Vitex competitor in the blood-purifying arena is Cerus Corp., of Concord, Calif., which Parker said has "a very similar approach. They add a compound and take it out, and they're in Phase III trials [with red blood cells], and frankly, we wish them luck. It's a big enough market for both of us."