By Lisa Seachrist
Cardiac gene therapy-specialist Collateral Therapeutics Inc. (CTI) raised $33.9 million through the sale of 2.15 million shares of common stock to institutional and accredited investors.
The financing comes a little more than a year after CTI went public in a difficult market, raising a disappointing $15.95 million. The investors purchased their shares at a discount to prevailing prices of about 15 percent.
"The shares were purchased below market, as you would expect, because they aren't immediately tradable," said Christopher Reinhard, co-founder, chief operating officer and chief financial officer at CTI. "Approximately 40 percent of the placement went to previous investors and 60 percent was new investors."
The stock sold at about $15.77 per share. CTI's stock (NASDAQ: CLTX) closed Thursday at $18.25 a share, down 50 cents.
CTI intends to use the money raised to advance its lead product, Generx - a non-surgical approach to delivering the FGF-4 gene to restore blood flow and heart function by stimulating new blood vessel growth, or angiogenesis. Generx is in Phase I/II clinical trials as a treatment for patients with stable, exertional angina due to coronary artery disease.
The funds also will be used to develop Corgenic, another CTI gene therapy program aimed at congestive heart failure. It introduces the adenylycyclase gene into heart cells to increase the heart's ability to pump blood in response to adrenergic signaling. This program is being developed with Targeted Genetics Corp., of Seattle.
With the addition of the newly raised funds, CTI has enough cash for several years. Reinhard estimated the company's burn rate at $5 million per year and noted that since it was founded in 1995, CTI has spent only $11 million .
"We are a third-generation biotechnology company," Reinhard said. "We structured ourselves on some of the successes and failures that we've seen in this industry. When we started this company we decided to focus only on very large product areas in cardiovascular gene therapy."
Reinhard noted that by having a product focus, the company has employed a small but targeted staff with a good balance between cardiologists and molecular biologists. In addition to focusing on products for cardiovascular disease, the company made the decision up front that it would never manufacture products. Instead, CTI relies on contract manufacturers.
"When the first biotechnology companies were starting no one could ever conceive that you could outsource manufacturing, yet that is commonplace now," Reinhard said.
The company also determined that it would never be in the business of selling products. CTI partnered with Schering AG, of Berlin, in May 1996 to develop the angiogenesis gene therapy technology that includes FGF-4 and VEGF genes. That relationship meant that CTI never had to rely on venture capital.
With the addition of the shares raised in this private placement, CTI has a total of 12.75 million shares of common stock outstanding, and the company is still 45 percent owned by management.
With its focus on non-surgical means of delivering genes, Reinhard said that company is offering new avenues of therapy. For example, Generx is delivered via a catheter, which is used during angioplasty. Once the vector is in place it spreads from the blood vessel to the heart, where it stimulates the formation of new blood vessels to provide more oxygenated blood to the heart. Other attempts to provide gene therapy products to the heart muscle require a surgeon to open the chest cavity.
"We feel strongly that we are leading a revolution in new ways to treat heart disease," Reinhard said. "These are new agents that address certain limitations of surgical procedures and existing drug therapies."