Shares of Cleveland BioLabs Inc. (NASDAQ:CBLI) dipped 13.5 percent, or $1.37, on Monday to close at $8.82 after the company announced that it raised $30 million through a private placement.

The Cleveland-based company issued approximately 4.3 million shares of Series B Convertible Preferred Stock as well as Series B Warrants to purchase an additional 2.1 million shares. Deutsche Bank Securities Inc. served as the financial advisor for the transaction, which is expected to provide approximately two years worth of cash.

Proceeds will be used to advance Cleveland BioLabs' pipeline, which includes radiation protection drugs Protectan CBLB502 and Protectan CBLC612 as well as cancer drug Curaxin CBLC102.

Protectan CBLB502, a rationally designed derivative of flagellin, protects cells from apoptosis. In preclinical studies, an injection of the drug protected both mice and non-human primates from lethal doses of total body gamma radiation. Cleveland BioLabs president and CEO Michael Fonstein pointed out that the drug has demonstrated efficacy in both hematopoietic and gastrointestinal syndromes associated with exposure to radiation.

Mammals receiving a lower dose of radiation will die mostly from hematopoietic syndrome, the "complete inability to restore blood," Fonstein said. Yet as the dose increases, gastrointestinal syndrome plays a growing role. "To save a mammal from high doses of radiation, you must address both," he said, adding that Protectan CBLB502 is the only radiation exposure drug that addresses gastrointestinal syndrome.

Since human efficacy studies can not be completed in that indication, marketing approval is based on Phase I safety studies in humans and efficacy studies in animals. Cleveland BioLabs plans to submit an investigational new drug application to begin human studies with the drug this year, potentially leading to an application for final approval in mid to late 2008.

Fonstein also said Cleveland BioLabs will use some of its $30 million financing to pursue a Request for Proposal (RFP) recently issued by the U.S. Department of Defense for the advanced development of medical radiation countermeasures to treat gastrointestinal effects of acute radiation syndrome. Responses to the RFP, which is for 50,000 to 500,000 doses, are due April 23.

The DOD's issuance of an RFP for a radiation treatment follows the recent cancellation by the U.S. Department of Health & Human Services of a similar RFP under Project BioShield. The HHS said it cancelled the RFP because no competing product met the government's requirements, a finding that came as a surprise to San Diego-based Hollis-Eden Pharmaceuticals Inc., which had hoped its drug Neumune would win the contract. (See BioWorld Today, Mar. 9, 2007.)

The HHS stated that it plans to issue a new RFP in acute radiation sickness, and Fonstein said Cleveland BioLabs "will certainly apply."

In addition to Protectan CBLB502, Cleveland BioLabs is conducting a Phase II trial with Curaxin CBLC102 in hormone-refractory prostate cancer. Additionally, a second-generation radiation drug, Protectan CBLC612, "may enter the clinic within a year," Fonstein said. Earlier this year, shares of Cleveland BioLabs got a 40 percent boost from preclinical data suggesting CBLB612 can promote mobilization and proliferation of stem cells throughout the blood. In the study, the number of progenitor stem cells in mouse bone marrow increased threefold with 24 hours and tenfold within four days of administration.