By Debbie Strickland
With the FDA approval of its lead product still fresh in the minds of investors, Genzyme Tissue Repair (GTR) is seeking $40 million in a public offering.
GTR is a division of Cambridge, Mass.-based Genzyme Corp. but, like Genzyme Molecular Oncology and Genzyme General, has a separate tracking stock. The GTR division in late August received a biologics license for its lead product, the Carticel treatment for damaged knee cartilage.
The division's shares (NASDAQ:GENZL) closed Thursday at $10.125, down $0.875.
At that price, GTR would need to sell 3.95 million shares to reach its $40 million goal. GTR has 13.2 million shares outstanding, and as of June 30, had cash and cash equivalents of $20.9 million.
The co-managers of the offering are Credit Suisse First Boston Corp., Cowen & Co. and PaineWebber Inc., all of New York.
The division plans to use proceeds from the offering to fund research and development, including payments to meet funding obligations to Diacrin/Genzyme L.L.C., a joint venture with Charlestown, Mass.-based Diacrin Inc. GTR committed to investing $20 million in the venture in 1997 and 1998, of which $4.1 million has been paid thus far.
Diacrin/Genzyme is developing products based on transplantable fetal porcine brain cells. Two products, NeuroCell-PD for Parkinson's disease and NeuroCell-HD for Huntington's disease, are currently in Phase I trials.
The remainder of the public-offering proceeds will be used for working capital, marketing expenses associated with Carticel and for general corporate purposes.
The cash infusion combined with GTR's existing cash reserves and expected sales revenues should be sufficient to fund the division's operations through the end of 1998, according to the registration statement filed with the Securities and Exchange Commission.
FDA Approval Should Boost Carticel Revenues
Last week's approval of Carticel autologous cultured chondrocytes for the treatment of damaged articular knee cartilage opened the door for insurance companies to reimburse for the $10,000 procedure that had been available as an unregulated service since 1995.
Through June 30 (before the FDA approval), GTR's U.S. Carticel revenues totaled $5.1 million.
According to the company, the launch has been slower than expected due to difficulties obtaining reimbursement from insurance companies. The regulatory stamp of approval, along with a growing force of surgeons trained in the procedure and the division's effort to educate third-party payers, could improve matters.
The product could potentially benefit about 100,000 patients annually, according to the company. The division has taught the procedure to 1,086 surgeons in the U.S. and 622 in Europe.
The Carticel treatment system involves extracting a patient's cartilage cells (chondrocytes), growing those cells in cell culture, then reimplanting the cells into the knee, where they grow and replace damaged cartilage.
Carticel was launched in the U.S. in 1995, but at the time, the FDA had no regulations regarding autologous cell therapies. After an initial safety evaluation, the agency considered the product an unregulated medical device and GTR began marketing the service.
It is the first manipulated autologous cell therapy product to win a biologics license under the FDA's new tissue regulations. (See BioWorld Today, March 4, 1997, p. 1.)
A second service product, Epicel, is on the market currently as an unregulated device and has generated revenues of $6.1 million to date. Epicel is an autologous skin graft, which can provide burn victims with an alternative form of permanent skin replacement.
GTR's development portfolio includes Carticel II, to enable the surgeon to perform the procedure arthroscopically; and transforming growth factor beta 2, a treatment for chronic skin ulcers and multiple sclerosis. Currently in a Phase II trial, the latter product stimulates connective tissue growth.
In the second quarter, GTR reported $2.65 million in service sales, a 61 percent gain over the comparable quarter in 1996. The division's quarterly net loss was $11.39 million, up 8.5 percent vs. the 1996 period. *