By Matthew Willett

Alliance Pharmaceutical Corp. raised $10 million from the sale of debentures convertible to common stock at $13.32 each, a premium to the company's 20-day average closing price.

The small group of investors who participated in the sale have the option to purchase an additional $10 million of similar debentures convertible to common stock at $16 per share, for up to four years after issuance.

Alliance's stock (NASDAQ:ALLP) closed unchanged Wednesday at $14.375.

Tim Hart, Alliance's chief financial officer, said the deal not only will serve his company's ongoing research and development demands for late-stage drug candidates, it also will serve the shareholders. Flexibility, he said, is the key.

"Anytime you can lock in a fixed price at a premium it's an attractive financing, at least to the company," Hart said. "I think it's a fairly good deal that's worked out well for the company and the investors."

He added that the financing will position Alliance favorably in the upcoming search for development partners.

"One of the projects that we have not partnered yet is LiquiVent. We continue to pay 100 percent of the product's development costs," he said. "We're in a Phase II/III trial that is continuing at this point in time, and this will help us continue funding that product's development, though we do plan to try to partner that at some point. This can take some pressure off that timing, and it does provide flexibility throughout the company for product development partnering for that product."

San Diego-based Alliance was created in 1989 through the merger of Flouromed Pharmaceutical and Otisville BioPharm.

LiquiVent Top Priority For New Funds

Its core technologies include perflourochemical medical product developments that use the synthetic substance's high gas solubility capacity to deliver oxygen. One of the company's lead perflourochemical products, LiquiVent, is currently undergoing Phase III clinical trials in conjunction with conventional mechanical ventilation to assist in respiratory gas exchange and open collapsed alveoli, and a pivotal Phase II/III study for treatment of acute lung injury and acute respiratory distress. The FDA has granted LiquiVent fast-track status.

Hart said the LiquiVent program is a top priority for the new funding, providing the pivotal Phase II/III trial goes as expected.

"We have an ongoing research and product development program that continues to require cash," he said. "We won't know until we know the results of the trial, but my hope is that this will allow us the opportunity to complete the trial for LiquiVent and to be able to evaluate our options after we know the results."

Another perflubron emulsion under development in Phase III clinical trails is Oxygent, a blood substitute designed as an oxygen delivery method. In Phase II tests, Oxygent was found to be more effective than fresh blood in reversing transfusion triggers. Researchers also found Oxygent delayed the need for subsequent transfusions.

Alliance partnered with Baxter Healthcare Corp. for the manufacture, sales and distribution of Oxygent in the U.S., Canada and Europe.

Also in the Alliance pipeline is the ultrasound contrast agent Imagent, developed in conjunction with Germany-based Schering AG. The company this week said it received an approvable letter from the FDA for Imagent. It has been shown to be safe and effective at enhancing ultrasound signals from perfused tissues and blood vessels using gray-scale, color Doppler and harmonic ultrasound imaging techniques.

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