Allos Therapeutics Inc. is raising $54 million to fund development of its late-stage cancer compounds.

The Westminster, Colo.-based company is selling 9 million shares at $6 per share. Net proceeds are expected to total about $50.5 million. Allos' stock (NASDAQ:ALTH) gained 32 cents Tuesday to close at $6.35.

The funds will be used primarily for one of the late-stage compounds, PDX (pralatrexate), a small-molecule agent designed to inhibit dihydrofolate reductase, a folic acid-dependent enzyme involved in the building of nucleic acid. Preclinical data suggested that PDX may have improved potency and toxicity characteristics versus methotrexate and other agents from that class.

Allos began a pivotal Phase II trial of PDX in August under an FDA special protocol assessment in patients with relapsed or refractory peripheral T-cell lymphoma. The PROPEL trial is designed to enroll at least 100 patients. Monitors earlier this month recommended continuation of the study following an interim analysis.

"We expect to complete patient enrollment in the third quarter of 2008," Jennifer Neiman, manager, corporate communications at Allos, told BioWorld Today. She added that interim data on the first 35 patients in the PROPEL trial are expected in the second half of this year.

Allos' other late-state program is Efaproxyn, a small molecule designed to sensitize hypoxic, or oxygen-deprived, areas of tumors during radiation therapy. Allos in August completed enrollment of 368 patients in the pivotal Phase III ENRICH trial, which is testing the product as an adjunct to whole-brain radiation therapy in patients with brain metastases originating from breast cancer, a subgroup that showed benefit in a previous trial.

An earlier attempt at gaining marketing clearance for the product was met with an approvable letter from that FDA in June 2004 that said efficacy would have to be proved in the study focused only on the breast cancer group.

Final analysis from the ENRICH trial will begin following the occurrence of 282 patient deaths, which the company has said were expected to occur in mid-2007.

Neiman said Allos retains all rights to all its products, and intends to commercialize them itself in the U.S. "We see these as targeted markets that can be addressed with a specialty sales force," she said. A partner will be sought for Europe and other markets, she said.

Allos also is investigating PDX in a Phase I/II single-agent study in patients with relapsed or refractory non-Hodgkin's lymphoma and Hodgkin's disease. Interim data demonstrated encouraging responses, a result that led to the start of the PROPEL trial. PDX also is being studied in a Phase I trial, with vitamin B12 and folic acid supplementation, in patients with advanced non-small-cell lung cancer.

Allos' third clinical-stage product, RH1, is in a phase I trial in patients with advanced, refractory solid tumors. RH1 is a small-molecule agent believed to be bioactivated by the enzyme DT-diaphorase, or DTD, which is overexpressed in many tumors.

Allos reported having cash and equivalent of about $37.8 million at the end of September. Its net loss for the first nine months of 2006 was about $22 million. The company now has about 65.7 million shares outstanding.

In the new financing, Baker Brothers Life Sciences LP and affiliated funds were expected to purchase 3.3 million shares, which would give Baker and affiliates about 9.93 million shares, increasing its stake in Allos from about 11.7 percent to more than 15 percent.

Baker entered into a standstill agreement with Allos agreeing not to pursue, for four years, certain activities to change or influence control of the company. That agreement is contingent upon the closing of the financing, which was expected on Friday.

Merrill Lynch & Co. is sole bookrunner and lead manager in the offering. Banc of America Securities LLC is co-lead manager. JMP Securities LLC is co-manager.

In other financing news:

• Osprey Pharmaceuticals Ltd., of Montreal, secured $9 million in financing, including $6 million in tranched convertible debt from existing investors and $3 million in venture debt from MMV Capital, an arm of MMV Financial. The convertible debt placement was led by GeneChem Therapeutics Venture Fund and included Desjardins Capital Regional et Cooperatif, BDC Venture Capital and Western Technology Seed Investment Fund. Funds will be used to complete preclinical development and fund early clinical trials of its lead product candidate, OPL-CCL2-LPM, for patients with chronic kidney disease. OPL-CCL2-LPM is a leukocyte population modulator.

• IsoTis Inc., of Irvine, Calif., filed a registration statement for a proposed public offering of up to $45 million in stock. The lead underwriter is Thomas Weisel Partners LLC. William Blair & Co. is co-manager.