By Mary Welch

Inhale Therapeutic Systems Inc. intends to raise $100 million through a private offering of convertible subordinated debentures that's aimed at funding the expansion of its manufacturing facilities as well as the next generation of its technology.

"With our insulin product in Phase III with Pfizer, we need to expand our manufacturing facility in anticipation of the product's launch," said Rob Chess, chairman and co-chief executive officer. "We may also use this money to fund future technology acquisitions."

The debentures will be convertible into shares of Inhale's common stock and will have a seven-year term. If the overallotment option is fully exercised, the San Carlos, Calif.-based company will raise $120 million. Currently, the company has just over 17 million shares outstanding.

The company is in Phase III trials testing the systemic delivery of insulin using its pulmonary delivery system. Dosing of patients started at the end of June. The trial includes more than 117 sites and patients with both Type I and Type II diabetes. Pfizer Inc., of New York, and Hoechst Marion Roussel Inc., of Frankfurt, Germany, will manufacture the insulin and co-develop and co-promote the inhaled formulation. (See BioWorld Today, Dec. 11, 1998, p. 1.)

About the size of a flashlight, Inhale's product disperses a dose of dry-powder insulin into a small standing cloud within a clear chamber. It delivers the dose through the mouth and directly into the lungs, where it enters the blood system as rapid-acting insulin.

In addition to its insulin partnership with Pfizer, Inhale has an agreement, worth up to $25 million, with Biogen Inc., of Cambridge, Mass., to develop a pulmonary delivery system for Biogen's Avonex, a drug used to treat multiple sclerosis. It also has an agreement to develop another pulmonary delivery system for an undisclosed protein for Eli Lilly and Co., of Indianapolis.

Inhale posted second-quarter 1999 results showing a net loss of $6 million, compared to $2.9 million for the same quarter last year. Six-month 1999 totals showed revenues of $17.7 million compared to $10.5 million for the first six months of 1998. For the first six months of this year, the company reported a net loss of $11.2 million, compared to a net loss of $7 million the year before. The company had about $58.3 million in cash and short-term investments on June 30.

Inhale's stock (NASDAQ:INHL) closed Wednesday at $32.375, down $1.