By Karen Young

Advanced Tissue Sciences Inc. completed a $14.7 million private placement, part of which will be used to launch its Dermagraft product.

Abe Wischnia, director of investor relations, said the money ¿will be used for a lot of things,¿ including expanding the La Jolla, Calif.-based company¿s capacity to produce its tissue-engineered human collagen.

The FDA a month ago approved Dermagraft for the treatment of chronic foot ulcers in diabetics. Smith & Nephew plc, of London, is the marketing partner for the product. (See BioWorld Today, Oct. 2, 2001.)

¿If you look at this investment in the company and the collaboration with Medtronic and the $20 million they invested, I think it shows there¿s a lot of confidence in the progress we¿re making, as well as confidence in our technology and what it has the potential to do,¿ Wischnia said. (See BioWorld Today, Oct. 5, 2001.)

The placement included the sale of 3,534,335 shares of unregistered common stock at $4.15 per share to a group of institutional investors led by the State of Wisconsin Investment Board. The share price was calculated on a 15 percent discount to the average closing price from Oct. 3 to Oct. 29, Wischnia said. ATS¿s stock (NASDAQ:ATIS) closed unchanged Monday at $4.40.

Including these shares, the company has a little more than 73 million shares outstanding, Wischnia said. It had $11.5 million in cash and equivalents on June 30, before the Medtronic investment.

¿The state of Wisconsin Investment Board is a long-time shareholder, and for them to be willing to put even more money in our company is a real vote of confidence,¿ he said.

Wischnia said ATS expects to post a net loss of about $27 million this year.

¿If you use this year¿s loss as a proxy for our burn rate, at our current burn rate, we feel as if we have sufficient cash to last until early 2003,¿ he said.

The company plans to release its third-quarter earnings next week.

In addition to its approval by the FDA to treat chronic foot ulcers in diabetics, Dermagraft also is in pivotal trials for venous ulcers. Wischnia said the trial started a couple of months ago and is scheduled for completion in 2002. The company also is in early clinical trials for Dermagraft as a periodontal graft.

ATS is in preclinical trials using that same Dermagraft technology as a cardiac patch to treat ischemia, under the name Anginera, which has demonstrated effectiveness in allowing the heart in animal models to generate new blood vessels, Wischnia said.

The company also is in preclinical studies on implants of tissue-engineered small-diameter blood vessels in animals.

ATS and Medtronic Inc. are collaborating to determine how their technologies can work together in cardiovascular, neurological, endocrinological and spinal areas. Another area of ATS¿s technology Medtronic will consider is human collagen, a product that is being launched by ATS partner Inamed Corp., of Santa Barbara, Calif., for wrinkles. Inamed subsidiary McGhan Medical Corp. filed a premarket approval amendment in May with the FDA seeking to change McGhan¿s injectable collagen for treatment of wrinkles from a bovine collagen to a human-based collagen developed by ATS.

Four products currently are generating revenue for the company: TransCyte, a temporary covering for second- and third-degree burns; Dermagraft, for the treatment of diabetic foot ulcers; tissue-engineered human collagen for wrinkle injections; and NouriCel for skin care and cosmetic markets.