Brisbane cancer-drug developer Peplin (ASX:PEP) has announced a renounceable rights offer to shareholders aimed at raising AUD$10.2 million for the first Phase II clinical trial of its lead skin-cancer molecule, PEP005.

ABN AMRO Morgans and Wilson HTM have fully underwritten the issue, which is offering shareholders one new share for every three shares already held, at 42 cents per share -- a 16 per cent discount on Peplin's $0.50c closing price last Friday, or 22 per cent on its volume-weighted average of 54 cents over the past four weeks.

Rights trading is scheduled to begin this Wednesday, November 10, and the offer applies to all shareholdings at close of business tomorrow (Tuesday). The offer will remain open until November 29.

The company announced today it expects to initiate its Phase II trial of PEP005 for the treatment of actinic keratoses (dry, scaly spots caused by ultraviolet radiation) and non-melanoma skin cancers early next year.

Managing director and CEO Dr Michael Aldridge said Peplin planned to issue 24.3 million new shares at 42 cents each, and is already pleased with the strong support from institutional investors. He said several pharmaceutical companies had already approached Peplin with a view to licensing the rights to develop and market PEP005 as a topical treatment for non-melanoma skin cancers and solar keratoses.

The company will hold discussions with these suitors as the trial proceeds, to keep its PEP005 program on its timeline to market, to ensure it gets the most attractive deal with the most capable partner.

The Phase II trial will be held in Australia -- a logical decision, given the high incidence of skin cancer in the nation, and the fact that PEP005 was discovered in Australia. PEP005 is extracted from the milky sap of the tiny garden weed Euphorbia peplis, or petty spurge.