BioWorld International Correspondent

London - Privately-held CellFactors plc is setting out to raise £3.5 million from the issue of 70 million new shares at 5 pence per share to advance its Skeletex bone repair product and license it out to orthopedic and dental companies.

The company's shares are not traded publicly, but the 5 pence price is at a discount to previous funding rounds.

Paul Bailey, CEO, told BioWorld International: "It is a very difficult climate for businesses in our sector to raise money. The price is very sensible given the market sentiment towards biotech, but very frustrating for us."

In July, the company launched an ultimately unsuccessful offer to raise £8 million (US$12.6 million). Before that, it raised £4.2 million, with much coming from private investors rather than venture capitalists. Already committed to the current funding round is £1.125, comprised of a £1 million investment from a private individual and £125,000 from members of CellFactor's board.

Following last year's failed fundraising, Bailey joined CellFactors as chief operating officer from the supermarket chain Safeway plc. He became CEO in January, replacing Iain Cubitt, who left the company.

Since then, Bailey relocated CellFactors from Cambridge, UK, to Newport, Wales, consolidating three offices and installing a pilot manufacturing plant for Skeletex on a single site.

"There have been a lot of changes to the business in the last six months," Bailey said. "We have moved from an R&D focus to a commercial focus and have talked to potential customers in orthopedic, dental and big pharma companies about what their requirements are of our products."

Skeletex is being assessed by five orthopedic firms and two dental companies. Bailey hopes to set up joint ventures to develop the product that would include up-front payments, development milestones and royalties for CellFactors.

"The [orthopedic] industry has recognized that biological add-ons will differentiate and extend the life of their metal and plastic products," he said.

CellFactors also intends to step up commercialization of its NeuCell library of conditionally immortalized human neural cell lines as a research tool. However, Bailey said the market is small and might provide revenues of £500,000 per annum in the next two years.

With the shortage of funding, CellFactors has slowed down overall development of its whole cell therapy products. However, it is still seeking to advance one, Volonte, a dopamine-producing cell line for the treatment of Parkinson's disease, to preclinical proof of principle in two years.

CellFactors filed its first patents on cell therapy in 1994 and boasts a considerable intellectual property portfolio, some of which it believes will be a block on rival companies.

"We have broken down the IP into core and non-core areas and are seeking to license, or even sell, some of it," Bailey said .