By Mary Welch

Cell Therapeutics Inc., after recently pulling the plug on its lead compound, raised $10 million in a private placement that will fund the company's oncology pipeline.

The company sold $10 million of Series A convertible preferred stock, which converted into 4,624,278 shares of common stock at $2.16 per share. The conversion was based on the five-day closing average of the stock's price prior to the deal. In addition, the company issued warrants to the lead investor group, Essex Woodlands Health Ventures Funds, of The Woodlands, Texas, to purchase about 1.5 million shares of common stock at $2.62 per share, redeemable within the next five years. If fully exercised, the company would raise about $4 million more.

"We had wanted to raise this amount and it will comfortably get us through 2000," said James Bianco, president and CEO of the Seattle-based company. "This will help us focus on Apra and PG-TXL as we wind down lisofylline. It's fortunate that we have a diversified portfolio that will give us staying power."

Essex Woodlands Health led the placement and took the "lion's share" of the stock, Bianco said. Other institutional investors were Orbimed Advisors LLC, of New York, and Aires Fund, a Cayman Island fund.

After the placement is complete the company will have about 20 million shares outstanding. The new round of investors took about 20 percent of the company's stock.

Last month Cell Therapeutics lowered the curtain on lisofylline after the small-molecule anti-inflammatory compound flunked its most recent Phase III trial, this time in acute myeloid leukemia. (See BioWorld Today, Oct. 13, 1999, p. 1.)

The company will now focus on PG-TXL (polyglutamic acid paclitaxel), a water-soluble form of Taxol, the anti-cancer drug marketed by New York based Bristol-Myers Squibb Co. It will begin Phase I/II studies this year.

Apra is the company's second cancer drug, which may be effective in treating cancers that have grown resistant to conventional chemotherapy. It is in a Phase II study in patients with soft tissue sarcomas, as well as for hormone- and chemotherapy-refractory prostate cancer.

Cell Therapeutics' stock (NASDAQ:CTIC) closed Tuesday at $2.812, down 6.25 cents.