Xcyte Therapies Inc. grossed $26 million through a public offering of 2.6 million preferred shares at $10 apiece.

Officials at the Seattle company couldn't comment on the transaction due to SEC-imposed quiet-period rules, but in its prospectus, Xcyte said the funding would be used for working capital and general corporate purposes, such as clinical trial activities, preclinical research, manufacturing activities, capital expenditures and complementary technology acquisitions.

Its ongoing clinical activities include studies of its Xcellerated T Cell products in chronic lymphocytic leukemia, multiple myeloma and non-Hodgkin's lymphoma. Xcyte's T cell products stem from its Xcellerate Technology, which it uses to generate activated T cells (Xcellerated T Cells) from blood that is collected from a patient. Activated T cells have been stimulated to carry out immune functions, and the technology is designed to activate and expand a patient's T cells outside the body. The Xcellerated T Cells are then administered to the patient.

In a Phase I/II trial in chronic lymphocytic leukemia, treatment with Xcellerated T Cells resulted in a 50 percent to 100 percent reduction in the size of enlarged lymph nodes in 12 of 17 patients for whom data was available as of Sept. 27. In a Phase I/II trial in multiple myeloma, findings to date have shown that treatment with Xcellerated T Cells led to rapid recovery of T cells and lymphocytes in all 36 treated patients following treatment with high-dose chemotherapy and autologous stem cell transplantation. In an independent non-Hodgkin's lymphoma study, conducted by one of the company's scientific founders under a physician-sponsored investigational new drug application, 16 patients undergoing high-dose chemotherapy and autologous stem cell transplantation were treated with T cells activated with an earlier version of the technology and half were still alive with a median follow-up of 33 months.

Xcyte also plans to begin a Phase II/III trial in chronic lymphocytic leukemia in patients treated with Campath, as well as a new Phase II trial in patients with HIV.

The company expects to keep net proceeds of about $23.9 million. Based on the status of its product development and collaboration plans, Xcyte expects that such net proceeds and cash reserves on hand would be adequate to satisfy its capital needs through at least the end of the second quarter of 2006.

The transaction involves the sale of shares of 6 percent convertible exchangeable preferred stock with a liquidation preference of $10 per share. Each is convertible into about 4.25 shares of Xcyte's common stock, based on an initial conversion price of $2.35. An annual 6 percent dividend will be payable quarterly in arrears. The first dividend will be payable on Feb. 1 and will be pro-rated based on the settlement date of Nov. 3.

In addition, Xcyte granted the underwriters an option overallotment to purchase up to 390,000 additional shares. The offering's lead manager is Piper Jaffray & Co., of Minneapolis, with JMP Securities LLC acting as co-manager.

All the shares are being offered by the company, and the preferred stock will be listed on the Nasdaq National Market as "XCYTP."

Xcyte has no other outstanding preferred shares; it has about 14.8 million common shares outstanding. On Friday, Xcyte's common stock (NASDAQ:XCYT) gained 27 cents, or 13.5 percent, to close at $2.27.