Aradigm Corp. entered into a definitive agreement for a $15 million private placement of common stock and the concurrent issuance of warrants for the purchase of common stock.

The Hayward, Calif.-based company, which reported cash, cash equivalents and investments of about $35.2 million as of Sept. 30, said the additional funding provides sufficient cash to last into 2004. In the near term, Aradigm said it is preparing for commercial production of its AERx insulin diabetes management system, which is in Phase III trials with Novo Nordisk A/S. For the quarter, Aradigm reported a net loss of $10.3 million; its nine-month net loss totaled $28.8 million.

The company said it also would apply a portion of the proceeds to further develop core platforms, and for working capital, manufacturing and general operations.

Aradigm will sell about 19 million shares of common stock for 79 cents apiece. The company also will issue warrants to purchase about 4.3 million shares for $1.07 each, a 33 percent premium to the closing price on the commitment date.

Aradigm also agreed to reprice warrants for the purchase of 4 million shares from $6.97 to $1.12 per share, subject to a cash-only exercise. The company last reported about 30.6 million shares outstanding.

Its stock (NASDAQ:ARDM) closed Tuesday at 75 cents, an hour after the news was released. On Wednesday the shares climbed 5 cents to close at 80 cents.

Investors include New Enterprise Associates, of Baltimore, and Special Situations Funds, as well as members of Aradigm's senior management.

In connection with completing the definitive agreement for the financing, Aradigm said its lead investor has secured agreements from 10 shareholders, who collectively hold about 50 percent of the outstanding stock, to vote in favor of the transaction. Aradigm's largest stockholder, Copenhagen, Denmark-based Novo, has a 20 percent ownership stake in Aradigm. SG Cowen acted as the financing's placement agent.

Concurrent with the transaction, Aradigm is executing a cost-reduction plan to lower its unreimbursed burn rate to about $2 million per month - a 20 percent drop. Specifically, its management expects to pare spending on non-reimbursed and non-core projects by about 15 percent, largely by reallocating personnel to partnered projects that are expanding in efforts to achieve goals.

Aradigm said it expects its aerosol-based drug delivery technology to continue to attract partners. The AERx insulin diabetes management system, its most advanced product, has advanced in a potential $50 million partnership with Novo begun in 1998. In October 2001, Novo made a $20 million investment in Aradigm at the same time the companies first disclosed Phase IIb data. (See BioWorld Today, Oct. 26, 2001.)

In September the partners began the Phase III program. Aradigm is responsible for product development, manufacturing and delivery, while Novo gained responsibility for all further clinical trial costs, and has worldwide marketing and sales rights for the resulting product.

Another late-stage program has completed Phase IIb trials in partnership with London-based GlaxoSmithKline plc. The AERx pain management system is designed to allow patients to self-administer electronic pulmonary-delivered opioid analgesics at home.

Company officials could not be reached for comment.