By Matthew Willett

Hemosol Inc., developer of hemoglobin and anemia treatments, registered 7 million shares in connection with a planned public offering in the U.S.

The offering, the company's first in the U.S., is being underwritten by UBS Warburg LLC, of Stamford, Conn., and Dain Rauscher Wessels, of Minneapolis. They were granted an option to purchase an additional 1.05 million shares to cover overallotments.

The Toronto-based company, citing in its prospectus the stock's C$11.50 close on the Toronto Stock Exchange, said it was seeking about C$80.5 million (US$53 million). Hemosol's stock (TSE:HML) closed Thursday at C$13.75, up C$2.25.

Hemosol CEO and President John Kennedy said the company is aiming to increase its U.S. presence through the offering.

"The proceeds will be used to help us pay for the ongoing U.S. Phase III trial and to help us meet debt requirements for our ongoing manufacturing facility, and the balance will be used for general corporate purposes," Kennedy told BioWorld Today. "It's a U.S. deal. The two underwriters are based in the U.S., but we expect to see some shares purchased in Europe, and possibly into Canada, but it's primarily focused in the U.S."

He said Hemosol plans to use proceeds from the offering to fund late-stage clinical development for its lead product, Hemolink, a purified, human-derived hemoglobin replacement product designed to eliminate the need for donor red blood cell transfusions.

A portion of funding will go toward a pivotal Phase III trial in the U.S., currently in enrollment. The company said that funding will amount to about US$15 million.

"We have what we believe is a good opportunity here," Kennedy said. "We're not well known in the U.S., but our program is quite advanced. People know about Biopure [Corp., of Cambridge, Mass.] and Alliance [Pharmaceuticals Corp., of San Diego], but I don't think they often hear of Hemosol. I think by introducing ourselves to the U.S. market we'll get greater visibility."

A similar trial in Canada, now complete, will form the basis for Hemosol's regulatory submission in that country. Hemosol estimates the worldwide market for red blood cell transfusions and related products to be about US$15 billion.

"The market for Hemolink, initially used to replace the use of donor red blood cells in scheduled surgery, will branch out from there as we generate more data and get more indications," Kennedy said. "The total market in North America is 14 million units of donor blood given annually, and about 60 percent of those 14 million units are used in surgery."

Hemosol anticipates launching Hemolink in Canada in the second quarter. The offering also will fund Hemosol's production capacity expansion related to Hemolink and other general corporate purposes. The company said it has earmarked about US$3.5 million for the recently constructed 120,000-square-foot production and headquarters facility in Mississauga, Ontario.

Hemosol partnered in October with Dompe Farmaceutici S.p.A, of Milan, Italy, for southern and eastern European promotion, marketing and distribution. The deal calls for Dompe to make a C$5M investment in Hemosol at C$15 per share, and Dompe has a 16-month option to make a further equity investment of C$5M at C$22.50 per share.

The company also is pursuing other hemoglobin-based oxygen carriers. HML-109 for high-volume and post-surgical blood loss and HML-110 for prevention of oxidative stress are both in preclinical investigation.

"We've got a Phase I test in cell therapy," Kennedy said. "We have some technology that allows us to isolate a type of T cell, the gamma delta cell, that's thought to be a cancer fighter that identifies a tumor and goes after it. We can identify those cells in sample patient blood, isolate them and expand them, and the theory is that if we can give them back to the patient, we might be able to treat tumors more effectively."

If successful, he said, the company will move that compound, HML-115, into Phase II testing when the Phase I test is completed near the end of 2001.

As of Sept. 30, the company had C$53.625 million (US$35.38 million) in cash and cash equivalents. That funding came largely from a C$46 million Canadian offering in January 2000 and a C$23 million offering last April.

Hemosol will have 32.269 million shares outstanding after the offering. The company was founded in 1985.