Creative BioMolecules came into extra money, and reduced its burn rate by nearly 50 percent, when it sold OP-1 manufacturing rights and assets for $20 million to partner Stryker Corp. in November. Creative BioMolecules also gained increased royalties, to double digits, from that deal, said Steven Basta, the company¿s vice president, finance and business development.

¿This worked out well for the company,¿ Basta told BioWorld Today. ¿We were able to get the cash when we needed it. The transaction we did in November brought in additional cash and substantially reduced our burn rate, so now we have the money to buy back the instrument, which eliminates future conversion and dilution.¿

Last May the company sold $25 million in convertible stock in a deal with several features: the stock would convert at $10 if the common shares were trading at more than $10 per share; if it was below $10, there would be a floating conversion price determined by the market price; and if the stock fell below $5 the company had the option to buy it back at 105 percent of the principal amount, which it did.

Built into that financing were protections against significant dilution, including a conversion cap of 175,000 shares per month. Also, the conversion could represent no more than 20 percent of the outstanding shares.

Creative BioMolecules was expected to disclose the repurchase today. Its stock closed Friday at $2.50 per share, up 15.62 cents. The company has about 35 million shares outstanding.

¿We and our board believe the stock is undervalued,¿ Basta said. ¿We¿re not interested in selling a significant amount of stock at around $2 per share. The other reason for eliminating this is that the convertible preferred created the perception of an overhang, and it created uncertainty. We¿ve eliminated any uncertainty for our investors.

¿Repurchasing this is something a number of investors and analysts indicated would be in the best interest of our shareholders,¿ he said. ¿We agreed with them.¿

Basta said Creative BioMolecules is in a good position now, with about $28 million in cash, a net loss projected at less than $9 million for the final three quarters of the year, and a partner with a premarket approval application pending with the FDA.

Stryker, of Kalamazoo, Mich., and Creative BioMolecules have been working together since 1985. OP-1, an osteogenic protein, belongs to the transforming growth factor-beta family. The device under review is a paste-like combination of OP-1 and a resorbable collagen scaffold that is surgically implanted in unhealed bone fractures. The protein activates a cell reaction intended to start normal bone regeneration.

Separately, Creative BioMolecules is collaborating with Biogen Inc., of Cambridge, Mass., to use OP-1 for renal failure. Biogen is funding research in chronic renal failure and has an option through the end of the year to develop the product, Basta said. n