A month after gaining rights to an approved topical agent for oral mucositis in cancer patients, Cytogen Corp. is raising $20 million through a stock and warrant sale to support the product's upcoming launch.

The Princeton, N.J.-based firm agreed to sell 7.1 million shares and 3.5 million warrants to purchase shares in units priced at $2.82 each in a private placement. Proceeds also will be used to fund ongoing clinical development programs, in-license other products and for general corporate purposes.

Cytogen, which focuses on specialty pharmaceutical products for cancer patients, recently picked up exclusive North American rights to Caphosol, a topical product approved as a medical device for the adjunct treatment of oral mucositis caused by radiation or high-dose chemotherapy, as well as for dryness of the mouth or throat. In that deal, the company agreed to pay Drammen, Norway-based InPharma A/S $5 million up front and an additional $1 million after six months, and then up to $49 million in sales-based milestones, plus royalties following the product's U.S. launch, expected in early 2007.

Cytogen also retains an option to acquire European and Asian marketing rights to Caphosol.

In addition to Caphosol, the company has three other marketed products, including Soltamax (tamoxifen citrate), a cytostatic estrogen receptor antagonist designed to provide hormone therapy to metastatic breast cancer patients, and Prostascint, a monoclonal antibody-based agent that targets prostate-specific membrane antigen for imaging the extent and spread of prostate cancer.

Cytogen also has Quadramet (samarium Sm-153 lexidronam injection), a drug approved to relieve pain caused by metastatic bone disease in patients with prostate, breast, multiple myeloma and other cancers. That product, which recorded sales of $2 million for the third quarter, is being developed for expanded indications as well.

Earlier this year, the company, along with the National Cancer Institute, started a 350-patient Phase III study to test Quadramet against strontium-89 chloride, both in combination with Zometa (zoledronic acid, Novartis AG), in osteoblastomic metastases arising from lung, breast and prostate cancers.

On the same day it announced the latest financing, Cytogen reported results from a Phase I study of Quadramet in combination with hormonal therapy and external beam radiation therapy in high-risk, clinically non-metastatic prostate cancer patients. Data showed that the combination regimen, in addition to being well tolerated, demonstrated preliminary antitumor activity as measured by prostate-specific antigen responses. Those results were presented at this year's meeting of the American Society for Radiology and Oncology in Philadelphia.

Cytogen reported a net loss of $5.7 million, or 26 cents per share, for the third quarter of 2006. As of Sept. 30, the company had cash and cash equivalents totaling $27 million.

Its shares (NASDAQ:CYTO) closed at $2.55 Tuesday, down 22 cents.