Palatin Technologies Inc. generated about $22.7 million in gross proceeds through a stock and warrant sale, essentially tripling its cash reserves in the process.

The Cranbury, N.J.-based company, which plans to use the funds for drug development efforts and general corporate purposes, said the added finances will help support operations well into next year. Palatin reported reserves of $13.8 million in cash, cash equivalents and investments as of Sept. 30, the close of a three-month period in which the company recorded a net loss of $6.7 million.

"We wanted to make sure we were sufficiently capitalized through [June 2005], so that we can focus on running the operations of the company," Palatin President and CEO Carl Spana told BioWorld Today. "Clearly, it's also a good time to raise money in that there is a very high interest in biotech, and we had very high interest in the company, as well."

The company sold about 7 million common shares at $3.25 apiece, which Spana said was in line with a 10-day weighted-average bid for the stock. But he added that the associated five-year warrants, equivalent to 15 percent of the total number of shares and exercisable at $4.06, sweetened the deal for investors. On Friday, Palatin's stock (AMEX:PTN) rose 19 cents to close at $3.73.

The company, which had about 43.2 million shares outstanding through Sept. 30, agreed to register the shares within 30 days of closing.

Palatin is developing its lead therapeutic candidate, PT-141, for sexual dysfunction. The company expects to complete its Phase II program in males with erectile dysfunction by the end of the year, with plans to begin a flexible-dosing efficacy study early next quarter. A 271-patient, dose-ranging Phase II study revealed positive efficacy results in all doses. (See BioWorld Today, Nov. 4, 2003.)

Two other studies will focus on the safety profile of the product, which acts as an agonist to a G protein-coupled receptor called melanocortin, such as its interaction with nitrates and PDE5 inhibitors. Unlike PDE5 inhibitors, which are contraindicated given their potential for cardiovascular problems, PT-141 has not been shown to react with nitrates.

"Those are two studies we feel the agency will want us to do prior to starting a pivotal trial," Spana said, "so we want to get them done."

The company's other primary focus for PT-141 focuses on female sexual dysfunction, with plans for an in-clinic study for women with arousal disorder to measure the compound's effect on vaginal blood flow. Spana said a subsequent study would evaluate PT-141's use in an at-home setting through questionnaires.

"If those two studies were successful, I think it would allow us to establish a leadership position in the female indication," Spana said. "The animal work is compelling, the early female work is compelling, and I think it's worth the risk to establish the indication."

He added that Palatin is in the process of securing a development and marketing partner for the product in an agreement expected to be announced sometime this year.

Another product, LeuTech, remains under FDA review. The company expects a regulatory decision in April for the diagnostic agent, a monoclonal antibody designed for imaging the site of an infection. Spana characterized the expectations for approval as optimistic. Palatin partnered LeuTech's marketing with St. Louis-based Mallinckrodt Inc., a unit of Tyco Healthcare.

"The financing allows us to get into what's quite a busy year ahead of us," Spana said. "We did not want to be distracted with having to raise money, and this transaction essentially was done in a couple of days. Now we can really focus on what's important - the operations of the company."

The investment group featured a mix of new and returning backers, including Alexandra Investment Management, Lurie Investments Inc., Albert Fried & Co., Elliott Associates LP, Perry Partners International Inc., Deutsche Bank AG London, Clariden Biotechnology Equity Fund and Lombard Odier Darier Hentsch & Co.

New York-based CIBC World Markets Corp. acted as lead placement agent, with Baltimore-based Legg Mason Wood Walker Inc. acting as co-placement agent.