Ortec Engineers $9M PIPE Deal

In the latest example of a publicly traded biotechnology company raising capital from the private markets, Ortec International Inc. raised $9 million through a private placement of common stock.

New York-based Ortec, which develops human tissue-engineering products, has passed its CCS product through Food and Drug Administration approval. In addition to treating epidermolysis bullosa, a congenital skin disease that causes severe blistering, CCS is used to aid reconstructive surgery, treat burns and to treat skin ulcers and various skin diseases. Chief Financial Officer Ron Lipstein said CCS and future Ortec products are eligible for special FDA humanitarian approval, which speeds up the regulatory process. Nonetheless, Lipstein said the company has yet to receive substantial interest from the public markets.

“The public markets in our evaluation have not been receptive to our types of companies, although it is getting a little stronger,” he said. “As the overall impact of biotech stocks have gone down in value, raising sizable levels of capital [through secondary offerings] would be very costly.”

Pequot Capital Management of Westport, Conn., invested $7 million in Ortec, while the balance of the round was provided by S Squared Technology Corp. of New York. Upon closure of the transaction, 48% of Ortec’s approximately 8.2 million outstanding shares will be held by institutional investors.

Proceeds from the round will be used to push products through the regulatory process, expand sales and marketing efforts and for continued product development. Lipstein said the company is significantly funded for the next 12 months, and at that time would review its financing alternatives.

“The challenge for biotech microcaps is to have the financial wherewithal to move products through commercialization,” he said. “Capital may not just come from a private placement, but through strategic partners committed to putting the company in the best possible position.”