By Mary Welch

Ayxs Pharmaceuticals Inc. entered into definitive purchase agreements to sell 3.5 million shares of its stock for $9 each, which would gross $31.5 million.

The financing was "more than we hoped," said Kathleen Stafford, the company's chief financial officer. "We were looking to sell about 2.5 million shares and ended up selling 3.5 million, which is about 10 percent of the company. The institutional investors were good, solid kinds of names."

The South San Francisco-based firm now has about 30 million shares outstanding and has enough money to "solidly take us into 2001," she said.

The proceeds will be used for general corporate purposes as well as to support its oncology program. "We're a hybrid story," Stafford said. "We have live partnerships under way where we don't put out any cash. And then we have several internal programs, particularly in oncology, and we'll use this to help those programs."

Axys, which was formed when South San Francisco-based Arris Pharmaceutical Corp. bought Sequana Therapeutics Inc., of La Jolla, Calif., has a broad pipeline of small-molecule drugs to treat diseases such as asthma, blood clotting disorders, arthritis, osteoporosis, cancer and inflammatory and infectious diseases.

There are three oncology programs in preclinical research. These include a program to inhibit urokinase; a novel tumor suppressor protein, ASP-05; and a recently announced acquisition of development rights to San Diego-based Signal Pharmaceuticals Inc.'s selective estrogen receptor-beta modulators for the treatment of cancer.

Among Axys' partnerships are one with Merck & Co., of Whitehouse Station, N.J., for the treatment of osteoporosis; a combinatorial chemistry agreement with Cephalon Inc., of West Chester, Pa.; and a deal with Rhone-Poulenc Rorer Inc., of Collegeville, Pa., on inflammation, particularly asthma.

The company posted a net loss for the third quarter ending Sept. 30 of $19.9 million. Revenues for the quarter were $9 million. For the nine months, Axys had revenues of $29.1 million. It had a net loss of $40.9 million, or $1.35 per share. The company had $43.2 million in cash.

"The financing was exactly what we wanted," Stafford said. "It was fast, gave us more money than we hoped for and gave us great new investor base."

Axys' stock (NASDAQ:AXPH) closed Friday at $16.25, down 25 cents.