By Lisa Seachrist

Washington Editor

Diacrin Inc., developer of transplantable porcine cells, self-managed and completed a private placement of $9.5 million to cover the expenses of its rapidly evolving clinical development program.

The company issued 1,027,027 new shares of common stock to a group of existing shareholders at a price of $9.25 per share, garnering approximately $9.45 million. Diacrin now has 14.3 million shares outstanding.

"The thing that is very heartening to me is that the people who put the money up have been investors in the company since its beginning eight years ago," said Thomas Fraser, president and CEO of the Charlestown, Mass., company. "It's really nice to have that kind of consistent support from investors."

Diacrin is developing transplantable porcine cells for the treatment of human diseases characterized by cell dysfunction or cell death.

In addition to developing cells for transplant such as nerve cells and liver cells, the company has developed a proprietary immunomodulation technology designed to prevent rejection of the transplanted cells, making chronic immunosuppression with drugs like cyclosporine unnecessary. The technology entails the selective treatment of major histocompatibility class I antigens on the cells before treatment, making them invisible to the immune system.

Fraser said the company raised the money in anticipation of the increased expenditures needed to proceed with clinical trials in Parkinson's disease, Huntington's disease, focal epilepsy and alcoholic hepatitis and cirrhosis.

NeuroCell-PD for Parkinson's and NeuroCell-HD for Huntington's are being developed in collaboration with Genzyme Tissue Repair, of Cambridge, Mass. The deal called for Genzyme to fund the first $10 million in research and development, with the rest of the program funded 75 percent by Genzyme and 25 percent by Diacrin. Genzyme Tissue Repair is a unit of Genzyme Corp., also of Cambridge.

With the NeuroCell-HD completing Phase I trials and the companies having initiated a pivotal Phase II trial of NeuroCell-PD, Diacrin is now contributing to the development of these products.

In addition, Diacrin has begun Phase I trials on NeuroCell-FE for the treatment of refractory focal epilepsy. The company also intends to start Phase I trials transplanting porcine liver cells into patients with alcoholic hepatitis and cirrhosis sometime in the second quarter of this year.

Fraser said the $9.5 million is less than the company envisions spending this year, so it expects to end 1998 in a healthier cash position than it started. Fraser said Diacrin began the year with $30 million in cash.

"The more advanced clinical trials are much more expensive," Fraser said. "We see this financing as a way to ensure we have the funding we will need to complete clinical trials to support marketing applications."

Diacrin's stock (NASDAQ:DCRN) closed at $10, up $0.25. *

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