BioDelivery Sciences Inc. priced its initial public offering at $5.25 per unit, raising $10.5 million, the lion's share of which will be spent on product development.

BioDelivery, of Newark, N.J., filed for its IPO in November. In February it decreased its range from $5 to $9 per unit to $5.25 to $6 per unit. On Tuesday the company priced its offering of 2 million units at the low end of that range.

The company opened on Nasdaq Tuesday under the ticker BDSIU. Its stock closed Thursday at $5.25, up 15 cents.

BioDelivery is developing a drug delivery technology designed for pharmaceuticals, vaccines and over-the-counter drugs. It said the technology should be applicable to agents for which oral delivery is difficult, such as protein and peptide drugs. The technology nano-encapsulates the drug in a structure the company calls a "cochleate" cylinder. The "jellyroll-like" cylinder is comprised of naturally occurring neutraceuticals.

The technology is being developed in collaboration with the University of Medicine and Dentistry of New Jersey and the Albany Medical College. BioDelivery has been granted exclusive worldwide licenses to the related patents.

After nano-encapsulating the selected drug, BioDelivery said it plans to market products under the name "Bioral."

The company said in its prospectus that about $6 million of the net proceeds - not including overallotments - would be used for research and development of its technology and its proposed drugs and patient-specific HIV therapy. About $800,000 would be used for licensing and other marketing activities. About $1.25 million would be used to repay debt. Approximately $200,000 would be used to pay stockholder tax liability. And about $211,000 would be used for general and administrative support and working capital.

Kashner Davidson Securities Corp., of Sarasota, Fla., is the lead underwriter. Other underwriters are Roan Meyers Assoc. LP, of New York; Investors Capital Corp., of Lynnfield, Mass.; Sterling Financial Investment Group Inc., of Boca Raton, Fla.; and Schneider Securities Inc., of Denver. The underwriters have an overallotment option on 300,000 units.

The company's CEO, president and chairman is Francis O'Donnell, who owns about 3.2 million shares of the company, or about 45 percent after the IPO. The University of Medicine and Dentistry and Albany Medical College, combined, own just more than 2 percent. O'Donnell's holdings include shares he owns through Hopkins Capital Group II LLC, and also shares held by his wife.

BioDelivery is working with three off-patent drugs, now called Bioral Amphotericin B, Bioral Clofazimine and Bioral Anti-Inflammatories.

Amphotericin B is an intravenous drug identified as an oral treatment for systemic fungal infections and as an oral prophylactic agent for immunosuppressed patients. The company is collaborating with the National Institutes of Health in Bethesda, Md., the Public Health Research Institute of New York and the University of Texas to develop the product.

Clofazimine, an antibiotic, is marketed to treat cells infected with the microbacteria that causes tuberculosis. Clofazimine is administered orally and BioDelivery's goal is to improve oral bioavailability, reduce side effects and improve therapeutic effects. The company is in preclinical development of Bioral Clofazimine in collaboration with the Institute for Tuberculosis Research at the University of Illinois.

BioDelivery has identified several over-the-counter, nonsteroidal anti-inflammatories, such as generic aspirin or ibuprofen, for nano-encapsulation. The company is in the process of preparing formulations for preclinical trials.

Also, the company is preparing an application for Phase I trials of its autologous HIV immunotherapeutic. The technology is designed to be a patient-specific therapeutic for treatment following HIV infection.