Neose Technologies Inc., which was running a little low on cash, is raising about $43.3 million through a private placement to fund development of its pegylated protein programs.

However, the Horsham, Pa.-based firm is selling nearly 40 percent of the company in the deal, a total that would increase to about 48.6 percent if all warrants attached to the sale were exercised.

The deal, expected to close Tuesday, entails the sale of about 21.44 million shares and warrants to purchase about 9.65 million shares, at $2.02 per unit. The unit price was based on the $1.96 closing price Thursday, plus 12.5 cents per full warrant (which added nearly 6 cents per unit).

The five-year warrants are exercisable at $1.96 per share. Neose said it would file a registration statement for the securities by May 15. Neose's stock (NASDAQ:NTEC) were down 7 cents Friday to close at $1.89.

Neose said the securities were being purchased by institutional investors and investment funds affiliated with directors.

Among the uses for the money will be to support development of NE-180, which in January began Phase II development in Switzerland for treatment of chemotherapy-induced anemia. NE-180 is a GlycoPEGylated erythropoietin agent designed to have an improved therapeutic profile, including a longer half-life, compared to non-pegylated EPO.

A Phase II trial of NE-180 for treating anemia associated with chronic kidney disease was expected to begin this year. Development of the product in the U.S. has been on hold pending resolution of FDA questions about assay potency.

Company officials were not available for comment, but were expected to provide updates on Neose programs when they release fourth-quarter earnings this week.

The other clinical-stage program at Neose is GlycoPEG-GCSF, a long-acting version of granulocyte-colony stimulating factor. Partner BioGeneriX AG, of Mannheim, Germany, is testing the G-CSF product for neutropenia in a Phase I trial in Europe, a study comparing the agent to Amgen Inc.'s Neulasta (pegfilgrastim).

Late last year BioGeneriX, a Ratiopharm Group company, said it would exercise its option to continue development of GlycoPEG-GCSF. Neose retains rights in North America and Japan. At the same time, BioGeneriX declined its option to develop a pegylated EPO program made in Chinese hamster ovary cells. (NE-180 is made in an insect cell-based expression system.)

Neose also has a partnership with Novo Nordisk A/S, of Bagsvaerd, Denmark, which is using the GlycoPEGylation technology to develop next-generation versions of Factors VIIa, VIII and IX for bleeding episodes, hemophilia A and hemophilia B, respectively. Neose received $4.3 million up front under the November 2003 deal, and is entitled to up to $51.3 million in milestone payments. Neose also would get royalties on resulting sales.

Neose has programs in the research stage on GlycoPEGylated products incorporating human growth hormone, for growth hormone deficiency, and interferon alpha, for hepatitis C.

In its 10-Q filing in November, Neose had estimated its cash on hand of $23.6 million at the end of September would fund operations at least though this quarter, so the new funding gives the company some breathing room.

Its loss in the third quarter was only $1.4 million, but that included one-time gains related to the sale of a facility containing its headquarters and a pilot manufacturing plant, and the recognition of charges from an August 2005 restructuring. Its net loss for the nine months ending Sept. 30 was $17.6 million.

Neose' enzymatic GlycoAdvance and GlycoPEGylation technologies are designed to improve properties of therapeutic proteins by building out, and attaching polyethylene glycol to, carbohydrate structures on the proteins. It said the modified proteins could offer significant advantages to the original version, including less frequent dosing and, potentially, improved efficacy.