By Mary Welch

Organogenesis Inc. completed a $20 million private placement to help further commercialize Apligraf, its skin-graft product, and support its development pipeline.

The placement consisted of 7 percent, five-year convertible debentures at $15 per share, with 400,000 attached five-year warrants at $22.50 per share. Canton, Mass.-based Organogenesis has 30.4 million shares outstanding, with 1.33 million shares involved in the conversion.

¿The debentures involved with this round of funding represent less than five percent dilution,¿ said Alan Tuck, chief strategy officer for the company. ¿In fact, out of our existing 30 million shares outstanding, 20 million were delivered to existing stockholders through stock splits or stock dividends.¿

The financing involved new and existing institutional and private investors; all were undisclosed.

Apligraf is a living skin equivalent engineered from the discarded foreskins of human infants, approved for venous leg ulcers by the FDA in May and launched in June. The company will release sales figures next week, but Tuck said that in the third quarter of 1998, 548 units of Apligraf were sold in 135 sites. In the fourth quarter, that figure was 1,070 units and 316 sites. Tuck did not provide exact figures, but said that, in the first quarter of 1999, more than 1,500 units were sold in more than 520 sites.

About 1 million patients in the U.S. suffer from venous leg ulcers, a chronic wound typically around the ankle caused by poor blood circulation, which can persist for longer than a year.

¿The continued growth in the number of ordering and re-ordering centers shows the increased interest in Apligraf usage across the country,¿ said Tuck. ¿Now, it¿s a matter of building sales volume. We are continuing to grow and make the transition from an initial launching company to a fully commercial company.¿

The product was launched by Organogenesis¿ partner, Novartis AG, of Basel, Switzerland, which paid up to $40 million in research support, milestone payments and equity investments for rights to Apligraf, which contains both epidermis and dermis layers of skin. Rather than utilizing a scaffold for the cells to grow around, Apligraf¿s manufacture involves culturing the cells in a three-dimensional system that yields the two layers of skin. Unlike human skin, Apligraf does not contain structures such as blood vessels, hair follicles and sweat glands. It is all natural, and not removed after application.

The company has fully enrolled patients in a trial of Apligraf for the indication of diabetic ulcers, a potential 600,000-patient U.S. market. ¿We will be presenting the first data at the end of April at the Symposium on Advanced Wound Care [in Anaheim, Calif.],¿ Tuck said.

Apligraf may also potentially be used for an array of chronic and acute wound types, as well as burns.

Tissue Replacement, Bioartificial Liver In Pipeline

Also in Organogenesis¿ pipeline is Vitrix, a soft-tissue replacement product. Scheduled for evaluation in trials starting this year, Vitrix may be used as a dermal replacement, and has applications in plastic surgery, along with reconstructive and periodontal procedures. It contains living fibroblasts (human dermal cells) and collagen.

The company is also developing a bioartificial liver, which an extracorporeal device to which a patient could be temporarily connected, avoiding the major trauma and complications of an implanted device. Components of the patient¿s blood could be passed through the device, processed by living liver cells within it, and then returned to the patient. The bioartificial liver would be used intermittently, until the patient recovered or received a liver transplant.

In preclinical trials, Organogenesis is evaluating engineered collagen fibris that maintain their shape, even after being injected, potentially offering an advantage over available injectables.