Cellular Transplants Inc. has raised $15.4 million in a privateplacement of convertible preferred stock that includedGenentech Inc. among the lead investor group.

The Providence, R.I., company is developing encapsulated celltherapeutic products. Its lead product, NeuroCrib for thetreatment of Parkinson's disease, is expected to enter clinicaltrials next year.

The company is using PC12, a dopamine-producing tumor cellline derived from rats, encapsulated in a polymer membrane.The dopamine is delivered through the membrane directly tothe site in the brain where it is needed. In rat trials, theencapsulated compound reduced Parkinson's-like symptoms.

PC12 cells will be used for human therapy as well. A non-human cell line is preferable because if a break occurs in thecapsule, the cells are killed by the immune system, said EricaKarplus, director of business planning.

Other lead investors in the financing were J.P. Morgan andRobertson, Stephens & Co.

"This was a true mezzanine round," said Dr. Seth Rudnick,president and chief executive. J.P. Morgan is one of the fewmajor investment banks that makes such investments, Rudnicksaid, adding that Robertson, Stephens participated via itsmezzanine fund.

Genentech (NYSE:GNE) of South San Francisco, Calif., contributedjust under 10 percent of this round, giving it about a 3 percentequity interest in Cellular.

"Genentech was interested in the technology and wanted tostay in touch with it and thought the easiest way to do that wasto be an investor," Rudnick said. The two companies are notengaged in any collaboration.

Cellular raised $2.5 million in seed money in 1989 from theMayfield Fund and $8.1 million in 1990 in its first ventureround with St. Paul's; Hill, Carmen, Kirby & Washing; andCommonwealth Bioventures.

First Boston served as underwriter for this round. -- KarenBernstein

(c) 1997 American Health Consultants. All rights reserved.