Diagnostics & Imaging Week Contributing Writer
And D&IWs

MTM Laboratories (Heidelberg, Germany) raised EUR 22 million ($27.6 million) in a Series C financing round to fund further clinical development of its diagnostic products for detecting cervical cancer.

The company, which has raised a total of EUR 41 million since its formation in 1999, has developed diagnostic methods for detecting cancerous and precancerous cells based on a biomarker called p16INK4a, a cell-cycle protein that is significantly overexpressed in cancers induced by human papillomavirus (HPV).

In 2001 it assigned rights to two products — CINtec Histology and CINtec Cytology — to Dako (Glostrup, Denmark), but having restructured that agreement earlier this year, it will take on full responsibility for the production and the sales and marketing of both starting in 2007.

"Now we can really leverage its value ourselves," MTM CEO Peter Pack told Diagnostics & Imaging Week's sister publication BioWorld International.

The company had never out-licensed a third product, Cervatec, a biochemical screening tool available in an ELISA assay format.

MTM's strategy is based on reducing the strong element of doubt associated with routine smear tests.

"A lot of these Pap tests are ambiguous. You don't get a clear result," Pack said. In the U.S., he said, $6 billion is spent every year on administering smear tests and on follow-up. And $3.6 billion of that total, he added, is spent on follow-up, even though fewer than 10% of tests require further analysis.

CINtec Cytology is designed for the cytological analysis of cervical smears and liquid-based cytological samples. CINtec Histology is designed to aid in the diagnosis of cervical cancer in tissue biopsies. In each case, immunohistochemical staining of p16INK4a provides additional information to aid diagnosis, which otherwise is dependent on expert visual analysis of cell and nuclear morphology.

In the long term, the company aims to remove the necessity for expert analysis — a current bottleneck, Pack said — by establishing its Cervatec product as a clinically validated test. "We have to change clinical practice. We are fully aware there is a long way to go," Pack said. At present, it is positioned, along with CINtec Cytology, as an adjunct to current screening methods.

The company's products have a CE mark and a Class I research reagent designation in the U.S. It will use its latest cash injection to fund large-scale clinical trials in the U.S. and in Europe in order to obtain more clinical validation and to establish them as standalone in vitro diagnostics. "We are talking about substantial clinical trials," Pack said. The studies will involve several thousand subjects.

In other financing activity:

• Chembio Diagnostics (Medford, New York) reported receiving private funding of $8.15 million of Series C 7% convertible preferred stock, together with warrants to purchase common stock.

The placement was co-led by Inverness Medical Innovations (Waltham, Massachusetts) and Crestview Capital Master, each investing $2 million. About $600,000 of the private placement resulted from conversion of previously outstanding debt of the company, Chembio said.

Chembio said that the proceeds will be used for general corporate purposes, including growth and capital initiatives such as additional manufacturing equipment, FDA clinical trials, marketing, travel, investor relations, public relations and payment of debt. Lawrence Siebert, president/CEO of Chembio, said that the new funding "will help Chembio's efforts to assist in meeting the growing demand for rapid HIV testing in the U.S. and around the world."

Chembio develops rapid diagnostic tests for infectious diseases.

• Image Technology Laboratories (IMTL; Kingston, New York) reported concluding a settlement agreement with a co-founder of the company that included a repurchase of the entire 2,309,583 shares of his remaining IMTL common stock.

Details of the transaction are contained in an 8-K recently filed with the Securities and Exchange Commission.

Lewis Edwards, chairman of IMTL, said, "We are pleased to close this chapter of the company's history and eagerly look to the future . . . [allowing] the company to focus on expanding our market share and continuing our R&D efforts."

IMTL is a medical image and information management company. It has developed a single database radiology information system/picture archive and communication system.

• NightHawk Radiology Holdings (Coeur D'Alene, Idaho) reported that it has filed a registration statement with the SEC relating to a proposed public offering of 5 million shares of common stock by certain stockholders of NightHawk. The company will not receive any proceeds from the offering

Certain stockholders also granted the underwriters an over-allotment option to purchase up to 750,000 additional shares of common stock.

Morgan Stanley is the sole bookrunning manager on the deal. Banc of America, Cowen & Co., Piper Jaffray and Montgomery & Co. will act as co-managers.

NightHawk, which will have about 29.9 million shares outstanding after the offering, provides emergency radiology services to radiology groups and hospitals across the U.S.