By Matthew Willett

Organogenesis Inc., whose tissue-replacement product Apligraf logged record sales of 1,813 units in April, entered an agreement to sell, from time to time, the 1.9 million shares it registered through an amendment to its shelf registration filing last month.

The sales of all 1.9 million shares would bring in about $15.4 million based on Wednesday¿s opening price.

The Canton, Mass., company disclosed its intention to enter the underwriting agreement it entered Wednesday with UBS Warburg LLC, of Stamford, Conn., upon registration of the shares last month.

The financing agreement calls for the company to issue for sale to UBS Warburg, on any trading day over the next two years, shares numbering between 5 percent and 25 percent of the average trading volume for the previous five days.

The shares are to be priced at the volume-weighted average price per share the stock traded at during trading hours on the purchase date, less underwriters¿ commissions. The pricing, company officials said, is an equitable ¿cookie-cutter¿ structure for the equity shelf financing, a standard agreement for a financing of this kind.

John Acari, Organogenesis¿ chief financial officer, said the financing allows for flexibility and availability, two things the growing company needs. The funding will allow the company to best utilize the $20 million Novartis AG ¿put,¿ he said, the equity investment commitment the Basel, Switzerland, company made when the companies renegotiated their Apligraf commercialization deal in February. (See BioWorld Today, Feb. 27, 2001.)

¿We need to raise working capital, and keep our put¿ in reserve,¿ Acari said. ¿Valuation isn¿t very good today, and with the direction the business is going ¿ we¿ve been on a great track here; in the last two quarters the unit volume growth has been in excess of 25 percent, and we¿ve had a record month in April ¿ we¿re going to have a growing working capital need. This financing is a nice way to pace how we bring the funds in, and we¿ll just hope the market gets better.¿

Apligraf is made by culturing the cells from discarded infant foreskins in a 3-dimensional culture system to create two layers of skin that lack blood vessels, hair follicles and sweat glands.

In 1998, the FDA approved Apligraf for venous leg ulcers caused by circulatory problems, and last year gave the nod for diabetic foot ulcers. (See BioWorld Today, Feb. 2, 1998, and June 21, 2000.)

Apligraf unit sales in the U.S. for the first quarter increased 27 percent compared to the fourth quarter of 2000 and showed a 103 percent increase compared to the first quarter of 2000. Total revenues for the first quarter were $2.5 million, although Apligraf sales were not broken out.

That increase creates a need for expansion, Acari said.

¿What¿s critical to the company right now is that we [increase] our unit volume capacity, that we automate,¿ Acari told BioWorld Today. ¿The fact that we¿ve now moved, in a short period of time, out of the R&D stage and into the early production phase means it¿s a more customized manufacturing environment. With the unit volume we¿re seeing from our partner Novartis we need to automate our facility to complement this growth, and that¿s what we¿re doing.

¿We¿re making an investment in the future to satisfy a rapidly growing marketplace,¿ he added. ¿We¿ll have capacity needs in the short term, working capital needs, and the expectation is that as we move a few years out we¿ll really have to expand the facility and manufacturing capacity.¿

Another use of proceeds and funding from Novartis will be efforts toward regulatory approval for facilities and marketing of Apligraf in Europe, he said. Though reluctant to estimate, Acari agreed Apligraf could be marketed in Europe, roughly doubling the market for the skin replacement, in 12 to 18 months.

Organogenesis has about 34.5 million shares outstanding, Acari said, and claimed $3.7 million in cash and investments at the end of the first quarter, though payments received quickly thereafter, he added, raised the company¿s cash position to about $6.5 million.

In the meantime, he said, Organogenesis is keeping a focus on the future as it expands to accommodate the present.

¿We do have a pipeline out there with a number of products,¿ Acari said. ¿We¿re operating on all cylinders in the near term in terms of increasing capacity, but we haven¿t taken our eyes off future to ensure what we want: a continuous pipeline for the future.¿

Organogenesis¿ stock (AMEX:ORG) dropped 27 cents Wednesday, closing at $8.58.