SEC launches formal investigation of CellCyte

The Securities and Exchange Commission has upgraded its probe of Bothell-based CellCyte to a formal investigation, the small biotechnology company said Thursday.

In a quarterly regulatory filing, the stem-cell research company said it learned this week that the informal inquiry the SEC began in January has become a formal investigation. The original inquiry was related to unspecified material in CellCyte's filings, and the company said it thinks the investigation will focus on the same issues.

CellCyte said it "intends to fully cooperate with the SEC" and "is committed to resolving the issues raised in connection with the investigation."

CellCyte shares traded as high as $10 last year. The Seattle Times reported in December that the stock was being promoted by a wave of brochures and unsolicited faxes paid for by a major company shareholder who has been sanctioned by regulatory authorities in Canada.

Shares plummeted in January amid a Times inquiry into discrepancies in Chief Executive Gary Reys' résumé, including statements posted on the company's Web site and filed with the SEC.

The sharp fall in the stock triggered three shareholder lawsuits. The company said in its quarterly filing that it is "disputing the basis for all three lawsuits and intend to vigorously defend against them."

At the end of the quarter March 31, CellCyte had $1.2 million in cash and some $906,074 in working capital — about three months' worth of operating money.

Its operating expenses for the quarter reached nearly $1.4 million. That included $307,833 in professional fees, up from $71,430 in the same quarter last year — an increase mainly related to the firm's annual audit and to litigation costs, the filing said.

The company raised some $6 million from private investors last year; it raised another $411,000 in the first quarter.

CellCyte shares closed at 52 cents Thursday.

Ángel González: 206-515-5644 or agonzalez@seattletimes.com