Cellegy has had a string of setbacks in its drug-development efforts.
In August, the firm announced it had stopped a Nigeria-based study of Savvy, its vaginal microbicidal gel for preventing HIV infection, because of a lack of convincing evidence that the gel was effective. A similar study in Ghana was stopped in November for the same reason.
A third clinical trial is still under way in the United States to test Savvy as a contraceptive. Cellegy will continue that study, and results are expected early next year.
In July, U.S. regulators informed Cellegy that its Cellegesic ointment was "approvable," but the Food and Drug Administration wanted more evidence - another clinical trial - showing that the nitroglycerin ointment was effective in treating pain associated with chronic anal fissures.
The FDA's decision meant that Cellegy would have to do more testing before its ointment could be sold in the world's largest pharmaceutical market. The product is already sold in Britain, Australia, Singapore, New Zealand and South Korea, and it has been approved to sell in other European countries.
As part of the deal announced yesterday, ProStrakan lent Cellegy $2 million in a secured promissory note that will be repaid when the transaction closes within the next month. The deal is subject to Cellegy shareholder approval.
Cellegy, which had about 13 employees and $651,000 in cash as of June 30, now has $2.2 million in cash and five employees, said chief financial officer Robert. J. Caso, who will remain at the firm.
"We still want to maintain our public-company status," Caso said. "The U.S. contraception trial will be ongoing."
In 2005, Cellegy moved its corporate headquarters from Brisbane, Calif., to Huntingdon Valley - to the Montgomery County offices of Biosyn Inc., which Cellegy bought in October 2004.
To cut costs, Cellegy has scaled back drug research and development, and shrunk from 27 employees in Huntingdon Valley. The company has closed its California office, which had five or six employees, Caso said.
Cellegy shares closed down 2 cents, or 14.3 percent, at 12 cents yesterday in over-the-counter trading.
Contact staff writer Linda Loyd at 215-854-2831 or email@example.com.