Somatogen Inc. on Tuesday announced that it has filed aregistration statement with the Securities and ExchangeCommission for a proposed public offering of $40 million ofconvertible exchangeable preferred stock.

Somatogen has not priced the stock yet, a representative said.Lehman Brothers and Montgomery Securities will co-managethe offering.

This is the first time the Boulder, Colo., company has gone tothe well since last August, when it offered 2 million new shares(NASDAQ:SMTG). Somatogen had hoped to raise more that $50million from the follow-on offering, but grossed only about $38million. The company was planning to use most of those fundsto build a clinical manufacturing facility, for which it brokeground in September. By May, however, the company wasslowing down construction to "accommodate processimprovement design details," keep pace with the clinicaldevelopment schedule and conserve cash, according to itspresident, Charles Scoggin.

Somatogen plans to use the funds garnered from this newestpublic offering for research and development, manufacturingprocess improvement and clinical trials.

These types of expenses account for the company's fiscal lossesof $23.3 million, or $2.37 per share, for the year ended June 30.These compare to a net loss of $10.5 million, or $1.37 per share,for the previous fiscal year.

In fact, Somatogen is about to launch the next phase of clinicaltrials of its recombinant human hemoglobin molecule rHb1.1.The ongoing safety trials in human volunteers have enrolled 86subjects to date, 70 of whom received rHb1.1.

The FDA has given Somatogen the nod to start initial safety anddose-escalation testing of its molecule, which is designed as analternative therapy to blood transfusion, in anesthetizedsurgical patients. This is Somatogen's target patient population.

"It is our intention to develop rHb1.1 as a key component inthe evolving total blood conservation strategy for surgicalpatients," said Scoggin.

The stock gained 38 cents a share on Tuesday, closing at $9.0728SOMATOGEN

-- Jennifer Van Brunt Senior Editor

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