The latest public biotech company to raise funds from theprivate sector is CytoTherapeutics Inc. (CTI), which Mondayannounced that it had closed an agreement to sell 2.5 millionshares of newly issued stock to private investors. Thefinancing, which will gross $18.75 million, was arranged byRobertson, Stephens & Co. and Tucker Anthony Inc.

The shares (NASDAQ:CTII) were sold to the investors at $7.50each, an 11 percent discount from a bid price of $8.50 onSeptember 8 when the deal was negotiated, explained DanielGeffken, CTI's chief financial officer. (CTII closed in trading onSept. 8 at $8.88, which means the new shares were sold to theprivate investors at a 15.5 percent discount to the market.)

CytoTherapeutics, of Providence, R.I., will file an S3 registrationstatement on the transaction imminently; the company willreceive the proceeds when that statement -- which coversresales by the purchasers -- becomes effective. At that time,the newly issued shares are also tradable.

When the financing closes, CTI's cash and investments willexceed $33 million; there will be about 10.4 million shares ofcommon stock outstanding.

This is CTI's first financing since its initial public offering,which completed in the soft market of late March 1992. Thecompany raised $25.8 million on sales of 2.25 million shares at$11. It had hoped to price the shares at $12 to $14.

This time, however, there was no lack of enthusiasm for thestock. "Originally we anticipated selling approximately 1.5million shares," said Geffken. "However, we expanded theoffering significantly...and could have done more," he toldBioWorld. There were a small number of buyers of the newstock, among them a preponderance of new institutionalinvestors, he added.

Just last week CTI announced that it had merged itsdevelopment program in diabetes with that of privately heldNeocrin Co., in exchange for an equity position in the Irvine,Calif., company. The combined diabetes effort -- now underNeocrin's aegis -- is focused on developing a bio-artificial,implantable pancreas for treating type I diabetes.

The merger allows CTI to focus its development efforts onprograms to develop cell and gene therapy for central nervoussystem (CNS) disorders. And the added financial resources fromthe private financing "will allow us to accelerate our programsfor chronic pain, Parkinson's disease and other CNS programs,"said Thomas Wiggans, CTI's president and chief operatingofficer.

The stock gained 38 cents Monday to close at $10.38.

-- Jennifer Van Brunt Senior Editor

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