By Debbie Strickland

In the last 12 months, Magainin Pharmaceuticals Inc. has successfully steered its lead product, the topical antibiotic Cytolex, through pivotal Phase III trials and secured SmithKline Beecham P.L.C. as a marketing partner.

Now the Plymouth Meeting, Pa., company is seeking $26.9 million through a public offering of 2.5 million shares at an assumed price of $10.75 per share.

The underwriters — Hambrecht & Quist L.L.C. and Cowen & Co., both of New York, and BancAmerica Robertson Stephens, of San Francisco — have an overallotment option of 375,000 shares, which could add $4 million to the gross.

At the assumed offering price, Magainin would net $25.1 million, or $28.9 million if the overallotment option is fully exercised. Net proceeds have not been earmarked for specific projects.

The cash infusion, combined with existing resources, is expected to see the company through 1999. As of Sept. 30, Magainin had $25.1 million in cash and investments, following a net loss of $8 million for the first nine months of 1997.

Much of the company's research focuses on host defense drug discovery, a program that mines potential therapeutics from the host defense systems of animals and which has generated lead drug candidates Cytolex and squalamine.

Nearing a new drug application to the FDA, Cytolex is a 22-amino-acid, synthetic magainin peptide. In two pivotal Phase III trials for the treatment of infection in diabetic foot ulcers, the one percent topical cream antibiotic's benefit was statistically equivalent to the most widely used drug for infections related to diabetic foot ulcers — ofloxacin — a quinolone antibiotic whose side effects include insomnia.

In February, Magainin inked a deal for North American marketing rights with London-based SmithKline Beecham, which agreed to pay royalties plus up-front payments and milestones of up to $32.5 million. Magainin already has received $10 million of the payments.

Isolated from the skin of the African clawed frog, magainin peptides were first discovered in 1987. They attack pathogens such as bacteria by puncturing their cell membranes.

Magainins twist into helices in the presence of a cell membrane rich in acidic phospholipids and poor in cholesterol. One side is soluble in the cell membrane, the other in water. Individual magainin peptides then aggregate and line up to form a channel in the membrane of a pathogen. The aggregate punctures the cell membrane and kills the pathogen.

The company's second most advanced potential drug, squalamine, is an anti-angiogenic aminosterol compound found in the body tissues of the dogfish shark. Squalamine combines a steroid and a polyamine and appears to stop capillary formation by blocking the function of a sodium proton exchanger in the cell membrane of certain endothelial cells.

In August, the company submitted an investigational new drug application to begin testing squalamine in patients with solid tumors.

In the field of asthma genomics — the company's second major technology platform — Magainin has identified Asthma Associated Factor 1 and 2, genes that could be used as targets for asthma and allergy drugs.

Magainin's stock (NASDAQ:MAGN) closed Tuesday at $10, down $0.25. *

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