By Mary Welch

BioTransplant Inc. raised $7.7 million through a private placement of 1.7 million shares to institutional investors.

"The 1.7 million shares represents about 19.9 percent of the company, and we couldn't have sold any more stock without going to the shareholders," said Elliott Lebowitz, BioTransplant's president and CEO. "Under SEC rules, you can't sell 20 percent or more without shareholder approval. We now have 10.3 million shares outstanding."

The shares sold for $4.50 each, which was based on the one-to-three-month running average vs. the average several days prior to the closing, he said. "Our stock has been going up since the beginning of the year," Lebowitz said. "About this time last year we were about less than $2. Now we're up to $8. I think that investors are slowly recognizing the value of the company and that we are continuing to make progress with our projects."

Exactly one year ago, BioTransplant's stock (NASDAQ:BTRN) closed at $2.187. It closed Wednesday at $8, up 36 cents.

The funds will be used to pad the Charlestown, Mass., company's coffers and advance the clinical development of its AlloMune family of product candidates.

"It's always good to have cash in the bank," Lebowitz said. "Our fourth-quarter numbers aren't out so our last numbers are for the third quarter, which ended Sept. 30. At that time we had $18.9 million in cash." The company's net loss for the first nine months of the year was nearly $6.5 million.

The AlloMune System is being evaluated for kidney transplantation and refractory lymphoma. Phase I/II trials for the latter indication started this year. In transplant patients, it is designed to re-educate the recipient's immune system to recognize the foreign tissue as part of the body. The system allows transplants of mismatched kidneys without the use of immunosuppressive drugs and involves mixing bone marrow from the patient and a donor to create chimeric bone marrow.

In cancer applications the AlloMune System is designed to attack tumor cells more aggressively than the patient's own immune defenses. Additional indications are also being considered, including hematological disorders and other types of cancer.

BioTransplant's lead product, MEDI-507, a humanized monoclonal antibody, is in Phase II trials for the treatment of graft-vs.-host disease, an often fatal outcome of bone marrow transplants. The first of the trials, in severe steroid resistance in graft-vs.-host disease, ended and a 100-day follow-up period is under way. The second trial, in steroid-naove graft-vs.-host disease, completed enrollment. After results from the second trial are reported, sometime in the first quarter of 2000, BioTransplant and its partner, MedImmune Inc., of Gaithersburg, Md., will evaluate the next step.

"The results in the first trial showed that 58 percent showed a complete remission from the treatment," Lebowitz said. "The results are fairly remarkable."

MEDI-507 is also being assessed for treatment of psoriasis as a proof of concept for its use in autoimmune diseases.

The company recently received a $2.5 million milestone payment from its partner, Novartis AG, of Basel, Switzerland, related to their transplantation collaboration. The two companies are collaborating for some of BioTransplant's XenoMune System approaches. The XenoMune System is designed to increase the available supply of organs through the use of porcine-to-human transplantation. It combines elements of the pig and human immune systems in the bone marrow of the organ recipient in order to counter rejection of the animal organs.

The project, which was started in 1991 and has been extended since then, is still in the preclinical stage.