By Mary Welch

Staff Writer

Inhale Therapeutic Systems Inc. plans to raise $150 million through a private offering of convertible subordinated notes in order to expand its production capacity in anticipation of Phase III success for inhaleable insulin using its pulmonary delivery system.

Another $22.5 million in convertible notes would be issued if an overallotment option is fully exercised. The notes will be convertible into shares of common stock and will have a seven-year term.

Currently, the San Carlos, Calif.-based company has a little more than 17.2 million shares outstanding. The company's chairman and co-CEO, Rob Chess, could not comment on the offering.

Inhale raised $108.5 million selling convertible subordinated debentures in the fall that was earmarked for expanding its manufacturing facilities as well as the next generation of technology. (See BioWorld Today, Sept. 30, 1999, p. 1.)

Inhale is in Phase III trials testing the use of insulin with its pulmonary delivery system. The studies include more than 117 patients with Type I and Type II diabetes. Patient dosing started at the end of June. Pfizer Inc., of New York, and Hoechst Marion Roussel Inc., of Frankfurt, Germany, will manufacture the insulin and co-develop and co-promote the inhaled formulation.

Inhale's product - about the size of a flashlight - disperses a dose of dry-powder insulin into a small standing cloud within a clear chamber. It delivers the dose through the mouth and directly into the lungs, where it enters the blood system as rapid-acting insulin.

The company reported 1999 year-end revenues of $41.3 million, almost double the previous year's 1998 numbers of $21.8 million. The company posted a 1999 net loss of $38.4 million, compared to 1998's year-end figure of $18.3 million. Inhale had $138.2 million in cash as of Dec. 31.

Inhale's stock (NASDAQ:INHL) closed Monday at $58.437, down $3.687.