DeCell Technologies Inc., a Halifax biotech startup that is improving skin grafts for wound treatment, has landed about $500,000 in investment to finance clinical trials and its first processing system.

President and CEO Paul Gratzer said in an interview Wednesday that the company has landed a $250,000 equity investment from Innovacorp. It has also received financing from private individuals, including long-standing biotech entrepreneur Steve Arless of Montreal, who has joined the company’s board.

Gratzer said the $500,000 financing marks an initial close of DeCell’s seed round, and it is leaving the round open for other investors to come in at the same terms as the existing investors. It hopes the total round will be worth about $1.2 million, including equity investments and funding from government programs.

“This is an essential step toward the commercializing our product, by providing funding to do our first clinical trials . . . as well as getting our manufacturing system fully complete,” said Gratzer. “It is the first big step toward entering the commercial world.”

DeCell's first product, DermGen, uses its patented technology to cure quickly and affordably chronic foot ulcers, which are a common and dangerous ailment for diabetics. DermGen is a natural scaffolding made from donated human skin, which can be placed over the ulcer to encourage the regeneration of skin cells and keep the wound clean to avoid infection. It is free of bacteria and viruses and has no chance of being rejected by the patient.

The company’s early studies indicate that DermGen not only reduces complications during the healing process but also is cheaper than other competitive products now on the market.

Gratzer said the company, which now has an office in the Innovacorp  Enterprise Centre, will use the funds to conduct its first feasibility studies in humans and complete its initial processing system.

DeCell has completed its animal-based tests with good results, said Gratzer, and the company hopes to publish its finding by the end of the year. It now has authorization from Health Canada to test DermGen on humans. Since the product is made of human skin, it is treated for regulatory purposed as transplantable tissue rather than a medical device. That means it has a relatively simple regulatory process.

The company is planning clinical tests in Halifax, Montreal, Toronto and Vancouver in the next year. These will be followed by larger tests in three Canada cities and at least three U.S. centres. Rather than conduct the studies for regulatory purposes, the company wants to build up a library of data that proves the effectiveness of the product for commercial reasons.

The company intends to raise a venture capital round with a target of $5 million to $8 million by the spring of 2015. It hopes to have its product on the market in two-and-a-half to three years.

As well as Gratzer, who is a biomedical engineer at Dalhousie University, the DeCell team includes Vice-President Sean Margueratt, an engineer with extensive experience in tissue banking.