By Karen Young

Aradigm Corp. received a $20 million investment from Novo Nordisk A/S, which bought Aradigm shares at a premium.

Aradigm and Novo Nordisk entered a potential $50 million deal in 1998 to develop the inhalable-insulin AERx Diabetes Management System, which is about to complete Phase II trials and is set to begin Phase III in early 2002. It included milestone and equity components, and Novo previously invested $10 million in Aradigm.

¿The money will be used for general operating purposes,¿ Rick Thompson, chairman, president and CEO of Aradigm, told BioWorld Today. ¿We¿re a development-stage company, and we still have development costs and manufacturing development ahead of us.¿

Aradigm sold nearly 5.67 million shares of common stock at $3.53 per share. Its stock (NASDAQ:ARDM) gained 92 cents, or 28 percent, Thursday to close at $4.18.

The company had just fewer than 30 million shares outstanding after the deal, making Novo Nordisk the largest stockholder in the company, Thompson said.

¿They¿ll have about 23 percent of the company after this,¿ he said.

Aradigm, of Hayward, Calif., which disclosed its third-quarter results on Wednesday, had a cash position of $41 million following the investment from Novo Nordisk, of Copenhagen, Denmark, Thompson said.

Also as part of the agreement, Novo Nordisk will take on additional manufacturing responsibilities to handle excess needs beyond the capability of Aradigm¿s Hayward, Calif., manufacturing facility. The 30,000-square-foot factory will have the capacity for 750 million doses upon completion, Thompson said, and will be used primarily for insulin production.

¿The facility is complete, but not scaled up yet,¿ he said.

Prior to this agreement with Novo Nordisk, Aradigm was responsible for all manufacturing, which would have necessitated additional manufacturing facilities. With the new deal, Novo Nordisk is responsible for all those additional factories, Thompson said, noting that this would have been ¿a very significant capital expenditure¿ for Aradigm.

¿This deal does not change the profitability of the relationship to Aradigm,¿ Thompson said.

Separately, Aradigm is completing Phase IIb trials for the AERx morphine Pain Management System, which is being developed with GlaxoSmithKline plc, of London.