Cytori to raise $16.95 million from deal with investor Olympus; OPKO plans $15 million stock sale

By Devika Patel

Knoxville, Tenn., Aug. 8 - Cytori Therapeutics, Inc. arranged a $17 million private placement of units with lead investor Olympus Corp., which the company says plans to develop and manufacture the commercial version of Cytori's Celution System.

Separately, health care company OPKO Health, Inc. said it hopes to raise $15 million in a stock sale. The company will use the funds for phase 3 trials of a new drug that is being evaluated for the treatment of age-related macular degeneration.

Cytori to get $17 million

Cytori Therapeutics further cemented its relationship with Japanese medical device and optics company Olympus on Friday, as the company announced a private placement of units with the lead investor, a company which is better known for cameras than life sciences gadgets.

"The company actually has a well-developed life sciences division," Cytori's director of investor relations, Tom Baker, told Prospect News in an interview Friday. "We've formed a joint venture with Olympus, when the company was looking to expand into regenerative medicine, and they've invested $45 million up to this point."

The $45 million will become $51 million by the end of the week, as Olympus increases its investment in the San Diego-based company. It plans to buy 1 million units of one common share and a half-share warrant for $6 million.

Cytori, after receiving commitments from Olympus, decided to open the deal to other investors, Baker said. It will sell a total of 2,825,517 units.

The remainder of the deal, for about $10.95 million, will be conducted via agent Piper Jaffray & Co.

The units are being sold at $6.00 apiece. The whole warrants are exercisable at $8.50 for five years.

Proceeds will be used to expand commercialization for the company's Celution 800/CRS System in Europe and Asia Pacific and fund global marketing of its Celution System-based StemSource Cell Bank business. In addition, the proceeds will be used to fund the company's product development, clinical trials, working capital and general corporate purposes.

"Olympus will develop and manufacture the commercial version of our Celution System," Baker said. "The device takes fat tissue extracted with liposuction and processes it to separate the stem cells. These cells, combined with fat cells, can be injected back into the patient, which is useful in cosmetic surgery as a filler."

Introduced in 2008 in Europe and certain Asia Pacific countries, the device is the brainchild of a team of biologists and engineers at Cytori.

Baker says the Celution System can also be used as a reconstructive option for breast cancer patients who elect to have a partial mastectomy, less invasive than a full mastectomy.

And Cytori is developing other applications, since the stem cells can be "injected into the hearts of patients with cardiovascular disease to regenerate the heart muscle," Baker said, "and it may even be used for regenerating spinal discs that have deteriorated."

Baker says he expects to see the system's U.S. clinical trials begin in about 12 to 18 months.

Meanwhile, the company hopes to commercialize the device and its regenerative uses in Europe and Asia Pacific, where the device is already being used, as well as in America. Friday's private placement funds, Baker said, will be directed toward those efforts.

Cytori develops cell-based regenerative therapies. Its shares (Nasdaq: CYTX) fell 10.73%, or 75 cents, on Friday to close at $6.24. The drop is most likely due to the company's concurrent report of a wider-than-expected second-quarter loss. The company's loss widened to $8.4 million, compared with a loss of $4 million during the same period last year. Revenue, however, nearly tripled to $1.4 million from $512,000.

The company said in a webcast Friday that it attributes the revenue growth to continued demand for its Celution System in Europe and Asia.

OPKO arranges $15 million

Miami's OPKO Health, a health care company that commercializes and develops pharmaceuticals and instruments for ophthalmologic disorders, announced it has arranged a $15 million private placement of stock.

The company will sell 13,513,514 common shares at $1.11 per share to a group of investors led by members of the Frost Group, a private investment group controlled by OPKO chairman and chief executive officer Phillip Frost.

The issued shares will be restricted securities, subject to a two-year lock-up, without registration rights.

The Frost Group also includes OPKO's vice chairman and chief technical officer, Jane Hsiao, the company's executive vice president-administration, Steven D. Rubin, and the company's chief financial officer, Rao Uppaluri.

Proceeds will be used to fund research and development, including the ongoing phase 3 trial for Bevasiranib, and for general working capital.

Bevasiranib is designed to treat age-related macular degeneration.

"This financing transaction provides the company with additional financial resources to support bringing the company's projects and pipeline of novel drugs and ophthalmic products to market," OPKO Health's Frost said in a news release. "We continue to believe OPKO has a strong development pipeline and support the company's efforts in bringing its products to the market."

The company's shares (Amex: OPK) gained 2 cents, or 1.09%, to close at $1.85 on Friday.

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