BILTHOVEN, the Netherlands — IsoTis BV, which is aiming to create a new class of replacement body parts based on combinations of synthetic materials and cultured human tissues — in essence, "substitution medicine" — has raised US$2 million in a second-round private placement.

The financing was led by existing shareholder Atlas Venture, and new investors include 3i, of the U.K., and GIMV, of Belgium.

Headquartered in Bilthoven, IsoTis was originally called Matrix Medical. It was launched in 1996 by the company's CEO, Clemens van Blitterswijk, then professor of biomaterials at the University of Leiden, in the Netherlands. The company is now in the final stages of severing its ties with the university, though some of the 25 employees are still on the university's payroll.

Pieters Wolters, chief financial officer, told Bioworld International the money would last for most of 1998: "The $2 million we have raised is relatively modest, but it was all we wanted for the moment. There will be a further round of fund raising later this year."

Wolters said the company would decide between a "really substantial" fund raising to take it through to an IPO, or choose to have another round before an IPO. He is pleased to have attracted overseas investors.

"We hope to get some U.S. investors in the next round, and believe GIMV and 3i may want to increase their investments," he said.

In the first round of funding in June 1997, Atlas invested $500,000.

"This new financing will enable us to accelerate the development of our biomimetic and tissue engineering bone and skin replacement products," said van Blitterswijk.

He believes that while it will be impossible to meet the need for replacement body parts with conventional technology materials alone, completely natural replacements produced using biological techniques are a long way off. He argues that the fastest progress in "substitution medicine" will come from combinations based on manmade materials and biological techniques.

This hybrid approach is exemplified by one technology which IsoTis is developing — its osteovitro system. This technique involves taking a bone biopsy and multiplying the cells in the company's tissue engineering facility. The cells are then seeded onto a conventional bone replacement prosthesis, forming a complete coating in two months. When these hybrids are implanted in rodents, the bone growth continues.

The company has another platform technology called Rainbow, which it believes will allow it to initiate bone regrowth in situ.

In the Rainbow system, ceramic materials are produced at 37 degrees from solution, rather than being manufactured at temperatures of 1,000 to 1,500 degrees Celsius. At this low temperature, growth factors can be incorporated, which are released once the implant is in situ, to promote bone formation.

IsoTis's initial target will be the market for second-time hip or knee replacements. Van Blitterswijk notes that, while hip replacement is a very successful procedure, if the first implant fails there is a 70 percent failure rate for subsequent implants.

This market currently is worth an estimated US$1 billion per year.