Staff Writer

Palatin Technologies Inc. continued its comeback efforts by pricing an underwritten public offering of 23 million units of stock and warrants at $1 per unit, about 4 percent less than Wednesday's closing price. The offering is expected to net about $21.1 million – enough to get the company through the end of 2012 – with proceeds intended for a Phase II trial of bremelanotide for female sexual dysfunction, development of PL-3994 for asthma and development of new peptides for sexual dysfunction.

Roth Capital Partners is the sole book-running manager for the offering, which is expected to close by March 1. Madison Williams and Co. is co-manager. Shares (AMEX:PTN) were down 10 cents, or 9.5 percent, to 94 cents at close Thursday.

Cranbury, N.J.-based Palatin has struggled since a clinical delay with bremelanotide in 2007. Last year it cut its 40-person staff in half and implemented a 1-for-10 reverse stock split to regain listing requirements. (See BioWorld Today, Sept. 28, 2010.)

Co-founder, President and CEO Carl Spana said during a conference call Thursday that the offering will allow the company, which ended 2010 with only $3.7 million, to "concentrate on advancing our programs and not to be concerned with doing small capital raises several times per year."

Each of the 23 million units offered consists of one share of common stock; a Series A warrant exercisable for 0.087 of a share of common stock at an initial exercise price of $1 per share; and, a Series B warrant exercisable for 0.913 of a share of common stock at an initial exercise price of $1 per share.

Series A warrants are exercisable immediately upon issuance and expire on the fifth anniversary of the date of issuance. Series B warrants are exercisable beginning one year and one day from the date of issuance, but only if Palatin's stockholders increase the number of its authorized shares of common stock, and expire on the fifth anniversary of the date they first become exercisable, the company said.

Spana emphasized during the call that the company was focusing its bremelanotide development efforts on female sexual dysfunction, which he described as an area of need "and a substantial commercial opportunity." He said the company had submitted a protocol and met with the FDA, and agreed on the protocol and design of an at-home Phase II trial of subcutaneously administered bremelanotide for premenopausal women with female dysfunction. Palatin hopes to start the trial in the second quarter, he said.

The female emphasis represents a tweak in earlier strategy for bremelanotide, which had been progressing well as a compound for erectile dysfunction (ED) when a 2007 meeting with the FDA unveiled safety concerns, specifically a blood pressure increase in certain patients. That delayed the drug's move into Phase III testing as a first-line therapy in the general ED population and caused partner King, of Bristol, Tenn., to bail on the firm's potential $250 million collaboration, returning all rights to Palatin. (See BioWorld Today, Aug. 31, 2007.)

Palatin modified the bremelanotide program, switching to subcutaneous administration from nasal administration, and adding a Phase II trial in female sexual dysfunction.

The company had planned to conduct early this year a Phase II trial in ED patients who fail to respond to existing phosphodiesterase-5 (PDE5) inhibitors such as Viagra (sildenafil, Pfizer Inc.) and Cialis (tadalafil, Eli Lilly and Co.) About one-third of patients prescribed PDE5 inhibitors are considered nonresponders. That study was expected to test bremelanotide as both a monotherapy and as an adjunct to PDE5 inhibitor treatment, but it now appears to have been delayed or shelved in favor of the trial for female sexual dysfunction.

Bremelanotide is in a class of therapies called melanocortin agonists and works through the central nervous system rather than directly on the vascular system, the company said, adding that it may benefit patients nonresponsive to PDE5 inhibitors.

The U.S. erectile dysfunction market has an estimated value of more than $2 billion today and is projected to reach $3 billion in three years, the company said. While statistics for females are not yet well defined, the company said studies showed that approximately 50 million women suffer from female sexual dysfunction, for which there are limited treatment options.

During the call, Palatin CFO Stephen Wills reported on the company's 2011 fiscal year second quarter, which ended Dec. 31. The company had a net loss for the quarter of $1.1 million or 9 cents per basic and diluted share, compared to net income of $4.5 million or 42 cents per basic and diluted share for same quarter the previous year. Revenue for the quarter was $1 million, consisting of $847,000 in grant revenue from the Patient Protection and Affordable Care Act of 2010 and $195,000 in contract revenue from partner AstraZeneca for a collaboration based on Palatin's melanocortin receptor obesity program.

In other financing news:

• Paladin Labs Inc., of Montreal, closed an offering of 1.15 million common shares, including 150,000 common shares issued to underwriters as an overallotment option, at $35 per share for gross proceeds of about $40.25 million. Proceeds will be used acquire products, in-license and launch brands and for working capital and corporate purposes, the company said. The syndicate of underwriters was led by GMP Securities LP and included Paradigm Capital Inc., RBC Dominion Securities Inc., TD Securities Inc., Versant Partners Inc., Cormark Securities Inc. and Desjardins Securities Inc.

• Sirona Biochem Corp., of Vancouver, British Columbia, proposed a private placement of 10 million units – each comprising one common share and one-half of one transferable share purchase warrant – priced at C25 cents apiece for proceeds of C$2.5 million (US$2.5 million). Proceeds are expected to fund its acquisition of TFChem SAS, of Rouen, France, and for general working capital.