Advanced Tissue Sciences Inc. completed a $10.3 million privateplacement that includes provisions to change in November thenumber of shares issued or money raised.

Advanced Tissue Sciences (ATS), of La Jolla, Calif., issued about1.5 million shares to three institutional investors. The per-share priceof $6.86 was an 11.5 percent discount to the June 7 value of $7.75per share.

A reset provision will change the terms of the deal unless the averagetrading price of the stock stays at $7.75. The average price over 45days will be determined _ from 90 days past the close of the deal today 135. If the stock rises, the investors will contribute more money.If it falls, they will get more shares.

For example, if the average trading price is $10, the reset price wouldbe $8.85 per share (taking in the 11.5percent discount). The investors then would contribute another $3million, or 1.5 million shares times the $1.99 difference in thediscounted rates. If the stock is at $5 per share, the discounted pricewould be $4.43, so the investors would be issued enough shares tomake their holdings worth $6.68.

ATS' stock (NASDAQ:ATIS) closed at $10 Monday, down 13 centsper share.

"There's potential for some positive developments in that period oftime," Marie Burke, ATS' director, corporate communications andinvestor relations, said in explaining the share-pricing strategy.Interim data from a pivotal trial in France of Dermagraft for diabeticfoot ulcers is expected in the fourth quarter, she said. ATS also haspivotal studies of the human tissue-replacement product ongoing inthe U.S.

The company reported having about $16 million in cash andequivalents and 30.6 million shares outstanding on March 31.Pending any change in the terms of this deal, ATS would have 32.1million shares outstanding. And assuming a burn rate of $2 millionper month, the company now has about $20 million in cash.

Burke said the private placement gives ATS enough money to gatheradditional data on Dermagraft before it enters a collaboration. Thatcould result in a stronger negotiating position.

"We eventually want to sign an agreement or collaboration for thediabetic ulcer product," she said. "We feel very strongly that we'regoing to have excellent data from the pivotal trials based on whatwe've seen in the pilot [trials]. We want to wait until we have thatinterim data before we do a deal."

Dermagraft is a dermal replacement placed permanently in a woundbed. Dermagraft-TC (transitional covering), being developed fortreatment of severe burns, contains a dermal layer with a syntheticepidermis layer that acts as a barrier to infection and prevents loss ofbodily fluids. Since most U.S. patients with severe burns are treatedat 60 to 70 burn centers, ATS plans to market that product itself,Burke said.

Both the U.S. and France trials are blinded, controlled and involve200 patients. U.S. data is expected by early to mid-year 1996, Burkesaid. ATS was granted expedited review for Dermagraft-TC, which isin a 65-patient pivotal trial in the U.S. Burke said data from that burnstudy is expected by the end of the year.

ATS completed pilot studies of Dermagraft products in dermal burnand pressure ulcer indications, but is not going forward at this timebecause it is concentrating on the lead indications, Burke said. Thecompany has preclinical studies ongoing in cartilage and tissue-engineered heart valve indications. n

-- Jim Shrine

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