By Jim Shrine

Advanced Tissue Sciences (ATS) received $15 million from Smith & Nephew plc as part of their joint venture's expansion, which took place a year ago.

The $15 million payment comes on top of the $20 million equity investment London-based Smith & Nephew made in January 1998, when the venture involving the skin-replacement product, Dermagraft, was expanded to include venous ulcers, pressure sores and burns, as well as marketing of another product, TransCyte, outside the U.S.

The original agreement, signed in April 1996, included only Dermagraft to treat diabetic foot ulcers, the lead indication for the bioengineered, living human skin replacement product. The FDA, however, issued a non-approvable letter for Dermagraft in June 1998. (See BioWorld Today, June 15, 1998, p. 1.)

Jack Strube, ATS' executive director of finance, said another trial began in August 1998 and the company believes it is on track to file a premarket approval application for diabetic foot ulcers in August of this year. Separately, he said, ATS is close to starting a pilot trial of Dermagraft in venous ulcers and would follow that with a pilot trial in pressure sores.

Approvals in diabetic foot ulcers and pressure sores would trigger a $5 million milestone payment each from Smith & Nephew, and $3 million would be paid for approval of Dermagraft for treating venous ulcers. The same amounts would be paid for each indication covered under Medicare. Strube said another $5 million in milestones would be paid for each $50 million in sales of joint venture products, up to $100 million in milestones on $1 billion in sales.

ATS, of La Jolla, Calif., reported $32 million in cash on Sept. 30, with a burn rate of about $11 million per quarter. The company can borrow nearly $5 million under the joint venture, and is positioned to get through 1999 with cash on hand. ATS also has a $50 million equity line of credit, good through February 2000.

Sales of TransCyte (formerly Dermagraft-TC) — a temporary skin substitute for burns that was approved in March 1997 in the U.S. — totaled about $1 million through the first three quarters of 1998. Dermagraft already is approved in the UK and Canada for treating diabetic foot ulcers. *