In an effort to build its oncology franchise and to advance its drug candidates, Ariad Pharmaceuticals Inc. priced a $37.4 million public offering.

The offering consists of 4.4 million shares at $8.50 each and is part of a shelf registration filed in December that registered 7 million shares. The transaction is expected to close next week.

Earlier this month, Ariad said it planned to offer 6 million shares in the offering.

Ariad officials declined comment on Wednesday due to an SEC-imposed quiet period.

According to the company's prospectus, it will use net proceeds of about $34.8 million for research and development, clinical trials, product manufacturing, intellectual property protection and enforcement, and working capital and other corporate purposes. Ariad might use the funds to repay or refinance its debts, or to conduct acquisitions.

Underwriters received an overallotment option for another 660,000 shares. New York-based Lehman Brothers Inc. served as lead underwriter. Co-managers for the offering were New York-based Lazard Freres & Co. LLC; Boston-based Adams, Harkness & Hill Inc.; San Francisco-based JMP Securities LLC; and New York-based Rodman & Renshaw LLC.

Following the offering, the company will have about 51.6 million shares outstanding.

The company's stock (NASDAQ:ARIA) dropped 8 cents on Wednesday to close at $8.97.

Ariad focuses on therapeutics to treat cancer by regulating cell signaling with small molecules. It aims to find therapies for aggressive and advanced-stage cancers for which current treatments are inadequate.

Its most advanced products target oncology indications. It has AP23573 for solid tumors and other malignancies; AP23464 for solid tumors and other malignancies, certain forms of leukemia and to block the spread of cancer; and AP23841 for primary bone cancers and cancer that has spread to the bone.

The lead product - AP23573 - is in a Phase I trial in patients with recurrent, advanced or refractory disease. The company expects to move the product into Phase II trials in the second quarter of this year.

Ariad plans to partner with a medical device company to develop and commercialize AP23573 in drug delivery stents to decrease re-blockage of injured arteries following angioplasty and stenting. In addition to providing benefit for cancer patients, AP23573 might be used to block the growth, proliferation and migration of vascular smooth-muscle cells.

The other two products in Ariad's pipeline are in preclinical development, soon to be subjects of investigational new drug applications.

Both AP23573 and AP23841 starve cancer cells and shrink tumors by inhibiting the critical cell-signaling protein, mTOR, which regulates the response of tumor cells to nutrients and growth factors. The drugs control tumor blood supply by affecting vascular endothelial growth factor.

AP23464 is an oncogenic protein kinase inhibitor that blocks the activity in cells of Abl, a cancer-causing protein. The drug also has shown ability to block Src, another oncogenic protein that enables cancer cells to migrate from primary to distant sites.

Ariad uses structure-based drug design and computational chemistry, functional genomics and proteomics, and protein engineering to develop its drugs. The company has an exclusive license to technology and patents related to drugs that regulate NF-kB cell-signaling activity. Such drugs can be used to treat inflammation, sepsis, cancer and osteoporosis. Ariad's Argent technology is used to control intracellular processes with small molecules, providing tools for applications in cell biology, functional genomics, proteomics and drug discovery research. The company, which has 97 U.S. patents and patent applications, expects to build itself by licensing its NF-kB and Argent technologies to other companies, and to offer the technologies at no cost to nonprofit institutions to conduct research.

As part of its strategy, Ariad plans to develop its products internally to a late stage before partnering them. Ariad also wants to establish a commercial infrastructure to market or co-market its cancer products in the U.S. and to develop partnerships for commercializing its products outside the U.S.

The company last raised money in a $9.4 million private placement in December. Before that, it raised $41 million in a private placement conducted in October. (See BioWorld Today, Oct. 6, 2003.)