By Karen Pihl-Carey

Privately held Athersys Inc. raised $47.5 million in its third institutional financing since being founded in 1994.

A number of new and existing investors participated in the placement of convertible preferred stock. Dain Rauscher Wessels, of Minneapolis, and ING Barings LLC, of New York, served as placement agents for the financing.

"I think it's a very important step forward for us because it allows us to accelerate several of our programs, certainly our functional genomics programs and our RAGE-VT program," said Gil Van Bokkelen, president and CEO of Cleveland-based Athersys. "This financing coupled with the move into a new facility and some other things we have going on make this an important year for us."

The company expects proceeds will allow it to further characterize thousands of novel genes and proteins already discovered by the company. It also will help bring the company's lead therapeutic proteins closer to clinical development. Athersys is actively developing six specific protein therapeutics, and two of them are expected to enter the clinic next year, Van Bokkelen said. The two therapeutics are being tested to treat cancer and metabolic disorders.

Proceeds from the placement will enable Athersys to broaden its RAGE-VT (random activation of gene expression for validated targets) program, which focuses on a novel way of creating cell lines that express validated drug targets without having to clone the genes that express specific proteins. RAGE also enables Athersys to commercially produce specific therapeutic proteins and to conduct rapid phenotypic screening on a genome-wide basis for gene discovery. It allows for the direct measurement of a protein's function without prior knowledge of its DNA sequence.

Van Bokkelen said this is the company's largest institutional financing. Athersys raised $2.5 million in 1996 and a little over $10 million in October 1998.

"I think if we maintained a fairly conservative ramp-up of our expenses, this will last us the next three years," he told BioWorld Today. "But that could change. We have lots of opportunities to spend money on. I could foresee us getting even more aggressive."

While the company has no specific plans to go public, Van Bokkelen said it always is a possibility in the future and could be the source of the company's next financing.

Investors in the $47.5 million financing include Invesco Funds, of Denver; Van Wagoner Funds; Crestwood Capital Partners; Cogene Biotech Ventures; Roxbury Capital; Chelsey Capital; KBC Equity Funds; MCP Global Corp.; President Life Sciences; Manschot Opportunity Fund; TalMor Capital Management; Curran Partners, of Stamford, Conn.; Emerging Growth Management; and DRW Venture Partners.

Previous investors contributed $8.5 million to the financing. They included Blue Chip Venture Co.; Primus Venture Partners; Warburg Dillon Read, of New York; Sentron Medical Ventures; NeoMed Innovation; Hoegh Invest; and the Ohio Innovation Fund.

"All of the people that invested in the last institutional financing participated again in this financing," Van Bokkelen said.

In February, Athersys entered into a joint venture with Elan Corp. plc, of Dublin, Ireland, to develop and commercialize a therapeutic protein to treat AIDS-associated muscle wasting. It also entered into a collaboration with Acorda Therapeutics Inc., of New York, to focus on the discovery of validated drug targets to treat central nervous system disorders. (See BioWorld Today, Feb. 17, 2000, p. 1.)

The company has filed patent applications covering more than 10,000 novel gene sequences identified using RAGE. It also has a second platform technology, synthetic microchromosome vector system, which is an artificial human chromosome for therapeutic applications of gene therapy, transgenics and functional genomics.