LCT raises $3m from mainly US investors

Cell therapy company Living Cell Technologies (ASX:LCT) has raised more than AUD$3 million through a placement of ordinary shares to US shareholders and an Australian investor.

Working with Californian-based Hunter Capital International, over 14 million ordinary shares were issued at AUD$0.205 per share to US institutions and investors and an additional 500,000 shares were issued to an Australian investor at AUD$0.22 per share.

"The view from the US investors is very interesting because they look at our company and our share price, and they look at companies that are trying to do roughly the same thing but with less intellectual property, and fewer products in development, and being valued much more," said LCT's New Zealand managing director Dr Paul Tan. "If you look at US-based companies that are involved in cell therapy, none of them have got products in the market, but they are valued several times more, in terms of their market capitalisation.

"That is an issue for Australian and New Zealand biotech companies, always. Going to the US makes a big difference. When Australian and New Zealand investors see investment coming from the US, then they see that as confirmation that this is a good program. And they're happy to contribute."

The funds raised will be used as working capital to progress LCT's lead product, NeurotrophinCell (NtCell), into phase I/II clinical trials. NtCell consists of alginate-encapsulated pig choroid plexus (or brain) cells and preclinical trials of NtCell for the treatment of Huntington's disease have shown positive results.

"For us -- like any other biotech company -- getting investment and funds for every stage of our work is absolutely essential," said Tan. "Gone are the days when you will get people who will give you $20-$50 million to set up a company.

"At each stage of our fundraising we have told our investors what we are going to use the money for and we state what we have achieved to date. That's how I think biotech companies have to work. You raise them in tranches, rather than in huge amounts as happened maybe five or ten years ago."

Tan said it was "heartening" to see the company expand its investor base. "Originally only New Zealand investors, subsequently Australian, and a small international component -- to see the investment base expanding internationally says a lot about where the company has gone to," he said.

FDA meeting

In December, LCT met with US Food and Drug Administration officials to discuss NtCell's pre-clinical and research data, manufacturing and clinical trial strategy. While LCT has indicated that it will disclose details of the meeting when it receives the minutes, Tan said he thought the company's pre-IND application was well received.

"We are seen as a company that is at the leading edge of this technology," said Tan. "It clarifies for us what the requirements are to submit an IND application, and the FDA has been very open in allowing us to communicate with them so that we can develop this further."

Tan said LCT was aiming to take NtCell to enter clinical trials this year or next year. "The first trial will probably take six months to a year to complete, and the target is to get FDA IND approval this year and to get into [phase I] human trials," he said. "It is a critical phase for any company when it moves from its R&D preclinical into humans in phase I trials -- it is a major milestone."

Close behind is LCT's second product, DiabeCell for diabetes, made from encapsulated pig eyelet cells from the pancreas. "We hope that with work done throughout this year we can follow the IND application for NtCell with one for DiabeCell at the end of this year or early next year," said Tan. "It has the potential to be about a year behind if we have all the funding to do the R&D that we'd like to do."

Haemophilia grant

LCT's third product is its Fac8Cell program of liver cell transplantation to treat haemophilia, for which the company was awarded NZ$100,000 by Cure Kids New Zealand in December.

Fac8Cell uses pathogen-free human liver associated cells (hepatocytes) to produce factor 8 required for blood clotting. The implanted liver cells may also be applicable to other disorders that interfere with normal liver function.

The program is still at R&D stage and has not yet reached preclinical work, said Tan. "We have isolated cells, we want to perfect the encapsulation of the cells," he said. "We've reported on the first experiments in transgenic animals, and more work needs to be done on that."

LCT was also awarded a NZ$480,000 grant by the government organisation New Zealand Trade & Enterprise (NZTE) in December 2005. "The grant does not fund capital expenditure," said Tan. "At LCT we are committed to expanding our pig facilities... this fund supports all the expenditure to do that."

The grant will also assist LCT in progressing its virology screening tests and to upgrade and seek accreditation for the companies clinical diagnostic lab. "We screen our pigs and the tissues and cells for a panel of important viruses, and bacteria and other infections, and ensure that these are negative," said Tan. "Following xenotransplantation we're also required to monitor our recipients and we've been doing that for that past nine years."

The grant will also assist LCT to complete some preclinical studies required for regulatory approval, said Tan. "We would like to keep a big chunk of our R&D work, and manufacturing, in this part of the world -- in Australia and New Zealand," he said. "We were very cheered to see that the government is supporting this whole concept of having that work actually being done here."

NZ xeno thumbs-up

In a move welcomed by LCT, the New Zealand Bioethics Council (Toi te Taiao) made its final recommendation that animal to human transplantations, xenotransplantation, should be allowed to develop in New Zealand.

Established in 2002, the Bioethics Council considers cultural, ethical and spiritual issues raised by biotechnology. After a year of public consultation and review, the council's report - 'The Cultural, Spiritual and Ethical Aspects of Animal-to-Human Transplantation' -- was presented to the New Zealand Minister for Environment and will further open the path to market for xeno-based therapies in New Zealand.

Tan said that while the announcement was good news, it did not come as a surprise because LCT participated in the Bioethics Council discussions with various groups and it was evident that there was no fundamental ethical objection to xenotransplants from the New Zealand public.

"Sure, there are people who would rather not use animal cells, but we're not talking about transplanting cells into people who don't want it," he said. "We're talking about permitting this in people who wish to have animal cell transplants."

The recurring issue during discussions was related to safety rather than any religious, ethical or cultural aspect of transplantation, said Tan. The council also recommended that an appropriate regulatory and decision-making framework be implemented to ensure that xenotransplantation research is conducted under guidelines.

"We're also pleased to see that the Australian regulatory authorities are reviewing the current status of xenotransplantation in Australia," said Tan.

LCT shares were trading at $0.22 at the time of writing.