NEW YORK, June 20 /PRNewswire-FirstCall/ -- Ortec International, Inc. , a company focused on advancing regenerative medicine through the development of cellular technology and advanced biomaterial products, announced today that it has completed a private placement of its Series A Convertible Preferred Stock (A Preferred) and warrants to new and existing institutional and accredited investors.
The Company sold 580 shares of A Preferred with a stated value of $10,000 per share and received gross cash proceeds of $5.8 million. At the same time, the holders of convertible bridge notes issued between October 2006 and the Closing who had loaned the Company an aggregate of $2.7 million converted their bridge notes into 349 shares of A Preferred and warrants.
The Company has also entered into an Exchange Agreement with Paul Capital Healthcare ("PCH," formerly Paul Royalty Fund). Under the terms of this agreement, PCH has exchanged its revenue interest in OrCel(R) for A-1 and A-2 Convertible Preferred shares. In conjunction with the PCH Exchange Agreement, Ortec terminated its employment agreements with Chief Executive Officer Ron Lipstein and Chairman Steven Katz. Costa Papastephanou, Ph.D., the Company's current president and chief operating officer will be appointed CEO upon the reconstitution of the Board of Directors.
Additional details of this transaction may be found in the Company's Form 8-K to be filed shortly with the U.S. Securities and Exchange Commission (SEC). Burnham Hill Partners, a division of Pali Capital, Inc, acted as the Company's advisor on the PCH transaction and served as the placement agent in the private placement.
The net proceeds from this financing will allow Ortec to generate the data necessary to file its application with the U.S. Food and Drug Administration for Pre-Market Approval (PMA) of its OrCel(R) product for the treatment of venous stasis ulcers. The Company expects to file this PMA application during the third quarter of 2007.
Dr. Papastephanou, Ortec's president and COO and CEO designee, commented, "I am happy that we have finally completed our financing which was the result of a lot of hard work and cooperation from numerous parties. We believe we are back on track and look forward to filing our OrCel(R) PMA later this year. Separately, I would like to thank outgoing CEO Ron Lipstein and Chairman Steven Katz for helping build a strong foundation at Ortec and wish them the best in their future endeavors."
Alan W. Schoenbart, CFO, commented, "The agreements entered into today give us significant financial flexibility and allow us to eliminate over $43 million in debt from our balance sheet. We are now well positioned to raise capital from an expanded universe of investors who will no longer fear that their capital is at risk due to the existence of significant liabilities on the balance sheet."
Commenting further Ron Lipstein and Steven Katz stated, "We consider ourselves fortunate and honored to have had the opportunity to have founded Ortec and to have been a critical part of the successful development of OrCel(R) which is poised to assist a huge and needy patient population. We also have had the good fortune to have worked alongside very talented and dedicated employees and professionals to whom we express our sincere gratitude for their tenacious support and loyalty. Our special appreciation goes to an outstanding individual, Dr. Mark Eisenberg, Ortec's founding scientist and OrCel(R)'s inventor, who trusted us with his life's passion. We are honored to know him and be part of his dream. After 17 challenging yet very exciting years we are proud of our accomplishments and of successfully overcoming the many obstacles and challenges that confronted us. We continue to have a significant vested interest in Ortec and strongly believe Ortec is now positioned for success. We wish the management team and all employees continued success as they complete our 17 year odyssey and bring OrCel(R) through final FDA approval."
About Ortec International, Inc.
Ortec International, Inc. (OTCI.PK) is a company focused on advancing regenerative medicine and stem cell therapy through the development and commercialization of innovative products by combining advanced cell technology and advanced biomaterials. Ortec's lead product is OrCel(R) (Bilayered Cellular Matrix). Ortec's current focus is the application of OrCel(R) to heal chronic and acute wounds. OrCel(R) is composed of a collagen sponge seeded with allogeneic epidermal and dermal cells. These cells secrete growth factors and cytokines normally found in acute human wounds and are believed to have a beneficial role in promoting tissue repair.
A pivotal clinical trial evaluating a cryopreserved version of OrCel(R) in the treatment of venous leg ulcers has been completed and a Pre Market Approval (PMA) application has been filed. Ortec has completed a confirmatory trial requested by the FDA, and the data from this trial are expected to be integrated with the results of the pivotal clinical trial and submitted as a clinical supplement to its PMA filing. Ortec has already obtained FDA approvals for use of a non-frozen version of OrCel(R) in the treatment of Epidermolysis Bullosa and donor sites in burn patients. In addition, the FDA has granted Ortec approval to initiate a pivotal (Phase III) trial evaluating OrCel(R) for the treatment of diabetic foot ulcers.
Ortec recently acquired two fibrin derived advanced biomaterial technologies, Fibrin MB and Haptides(TM). Fibrin MB has the potential to play a significant role in advancing stem cell therapy having demonstrated the ability to efficiently recover adult stem cells and allow for their growth, differentiation and potential re-implantation into the patient. Haptides(TM) utilize proprietary synthetic peptides that mimic the mechanism of cell attachment to fibrin. These peptides have demonstrated the ability to significantly enhance cell attraction and attachment providing the potential to use Haptides(TM) in the development of product opportunities applicable to the cosmetic tissue augmentation, wound healing, orthopedics and drug delivery markets.
This news release may contain "forward-looking statements" for the purposes of the United States Securities and Exchange Commission's "safe harbor" provisions under the Private Securities Litigation Reform Act of 1995 and Rule 3B-6 under The Exchange Act. Without limitation, statements regarding expected FDA approvals, clinical trial results, product performance, expectations with respect to sales, gross margins, research and development expenditures, earnings per share, capital expenditures, collaborations, or other expansion opportunities would be "forward-looking statements." These statements may be identified by words such as "expects", "anticipates", "intends", "estimates", "believes" or similar expressions in connection with any discussion of future financial and operating performance. The forward- looking statements contained herein involve risks and uncertainties that may cause results to differ materially from the Company's expectations including but not limited to, global economic trends, competitive pricing or product developments, government legislation and/or regulations, technology, manufacturing, legal and patent issues, suppliers, capital availability, personnel changes, cancellation or delays in renewal of contracts, and lack of suitable raw materials or packaging materials. Investors are cautioned to review risk factors in the Company's filings with the United States Securities and Exchange Commission.
Ortec International, Inc.CONTACT: Costa Papastephanou of Ortec International, Inc.,Costa@ortecinternational.com
