Diagnostics & Imaging Week Senior Staff Writer
And D&IWs

In what could bring the company $39 million, Rosetta Genomics (Rehovot, Israel) filed for an initial public offering to fund R&D work, including work on diagnostic products for prostate, lung, colorectal and breast cancers.

The company said it plans to offer 3 million shares at between $11 and $13 per share. It would list the shares on the Nasdaq National Market under the symbol ROSG.

Underwriters include C.E. Unterberg, Towbin; Oppenheimer & Co. and Maxim Group. They have an over-allotment option to purchase another 450,000 shares, which would bring the company $5.85 million in additional gross proceeds if priced at the top of the price range.

About $17 million in net proceeds from the IPO would be used for research and development activities, consisting of $1.5 million each for a prostate cancer and a lung cancer diagnostic product; $3 million each for a colorectal cancer and a breast cancer diagnostic product; and $4 million each for a CUP (cancers of unknown primary site) diagnostic product and a liver cancer therapeutic. Another $2.5 million in proceeds would be set aside to fund licensing and protection of intellectual property rights, and $12.6 million would fund business development and cover general corporate purposes.

Rosetta Genomics is studying a group of genes known as microRNAs, which are naturally expressed using instructions encoded in DNA. They are believed to play a role in regulating protein production and could be used to form diagnostics and therapeutics for cancer and infectious diseases. Diagnostic tests based on microRNAs may provide information that result in the earlier detection of diseases and the ability to make individual treatment decisions.

MicroRNAs, Rosetta said, are expressed in different amounts in diseased vs. healthy cells and therefore can be used in diagnostic tests and as targets for therapeutics. Drugs that use microRNAs as targets may be more effective than existing classes of drugs because microRNAs are believed to be closer to the biological origin of the disease.

The idea is that drugs targeting microRNAs might take less time to design than others because they won't require scanning large libraries. MicroRNAs have known sequences, so developing a targeted drug would require a molecule that is a complementary sequence of that particular microRNA.

MicroRNAs also may have broader applications than small-interfering RNAs, which cannot increase protein production and cannot be used as biomarkers of disease because they are synthetically produced. MicroRNAs can be used to decrease or increase the levels of proteins, and because they are naturally produced by cells, can be used as indicators of disease.

As Rosetta works on its diagnostic and therapeutic products, it also is pursuing strategic collaborations. It currently has license agreements with, among others, Applied Biosystems Group (Foster City, California) and Johns Hopkins University (Baltimore). It is collaborating with Asuragen (Austin, Texas), to co-develop diagnostics for prostate cancer; with U.S. Genomics (Woburn, Massachusetts., to incorporate its microRNA profiling technology into Rosetta's development of a lung cancer diagnostic; with Isis Pharmaceuticals (Carlsbad, California), to co-develop therapeutics for liver cancer; and with Sloan-Kettering Institute (New York) for Cancer Research and Hadassah Medical Organization (Jerusalem, Israel) to develop microRNA-based products.

Rosetta has filed patent applications with claims that cover about 350 biologically validated human microRNAs and 35 viral microRNAs. Incorporated in March 2000, it has a wholly owned subsidiary, Rosetta Genomics, based in North Brunswick, New Jersey.

Following the offering, the company would have 10.5 million shares outstanding. Major shareholders include Isaac Bentwich, the company's founder and chief architect, who currently holds a 29.4% stake; and Kadima Hi-Tech Ltd., which has a 23.7% stake. Directors and executive officers of the company own about 38.1% of the company.

In other financing news:

• Chinese medical device maker Mindray Medical International (Shenzhen, China) reportedly has filed with the Securities and Exchange Commission to raise up to $276 million in an initial public offering. Terms for the offering have not been set, and expected underwriters were not identified in the SEC filing.

Mindray is the largest manufacturer of patient monitoring products in China and reports having a growing presence outside China, primarily in various regions of Asia and Europe.

In its SEC filing, the company says it offers 40 products across three business segments: patient monitoring devices, diagnostic laboratory instruments and ultrasound imaging systems. It cites Frost & Sullivan as giving it the leading market share in China by units sold, and the second leading market share by revenue, for the sale of patient monitoring devices in 2003. It says it believes it holds a leading share in China "in diagnostic laboratory instruments and grayscale ultrasound imaging systems. Due to our leading market position, we believe we have one of the most recognized brands in the medical device industry in China."

It reports having 1,950 distributors and 500 direct sales and sales support personnel, and it sells its products internationally through more than 660 distributors and 75 sales and sales support personnel. It reports having sold products to about 25,000 hospitals, clinics and other healthcare facilities in China and more than 170,000 devices sold worldwide.

The company has applied for a New York Stock Exchange listing under the symbol MR.

• Merge Technologies (d.b.a., Merge Healthcare; Milwaukee) reported that its board has adopted stock buyback plans for up to $20 million of the company's common stock over a two year period.

"Management believes that the potential long-term value of the company under new leadership is not currently reflected in the share price. As a result, the board of directors enacted measures which will help to more fully realize the potential of the company's strategy," said company chairman Michael Dunham.

Merge Healthcare develops medical imaging and information management software and services.

• Vital Images (Minneapolis), a provider of visualization and analysis solutions, reported that it has filed a shelf registration statement with the Securities and Exchange Commission which, when declared effective, will permit the company to sell up to $150 million of equity or debt securities from time to time.

"This shelf registration will provide us with flexibility to obtain financing on a prompt basis as market conditions allow to support our growth by pursuing opportunities that may present themselves in the future, such as new technologies or applications for advanced visualization, or geographic expansion of our distribution channels," said Jay Miller, Vital Images' president/CEO.

The company said that the proceeds from the sale of any securities will most likely be used for general corporate purposes including expanding sales and marketing and customer service and training efforts internationally and investing in the company's product development resources. Vital Images said it may also use the net proceeds from any offering to acquire or invest in businesses, products and technologies that are complementary to its current products, can enhance its market coverage or technical capabilities, or offer growth opportunities.

Vital Images is a provider of advanced visualization and analysis software solutions. The company's technology gives radiologists, cardiologists, oncologists and other medical specialists productivity and communications tools that can be accessed throughout the enterprise and via the Web for use in the day-to-day practice of medicine.