Ardana, the small-cap pharmaceutical company, yesterday put itself up for sale amid a potentially crippling cash crunch, marking what could be the second blow to the Scottish life science sector in less than a week.

The Edinburgh-based operation, an unprofitable maker of treatments for human reproductive health, yesterday announced its intention to "sell or merge the company" to "maximise" the value of its product pipeline.

However, at the same time, Ardana also appeared to be running out of money. It said its cash pile at the end of January had dwindled to £6.1m, compared with £17.4m the previous January. The company also revealed that cash burn in 2007 was £10.4m.

Asked if £6.1m was enough to keep the company going during 2008, Huw Jones, Ardana's chief executive, yesterday told The Herald: "We have enough cash to pursue an orderly merger.

"The company has spoken at length with its investors, and we concluded that this is by far the strongest option available to us."

He declined to say if Ardana, founded by chairman and former tour-manager of the 1980s pop group The Human League, Simon Best, was yet conducting any negotiations.

Jacob Plieth, an analyst at Edison Investment Research, said there was a concern that "as Ardana runs out of money, it will have its back to the wall", placing it a weakened negotiating position.

However, he added: "Bioscience companies usually don't go into administration. They tend to be bought, because someone usually comes along who can make something of their products - either a company or an investor.

"It is still a reasonably attractive takeover target. But there is the issue of price, which will decrease as the company's cash position weakens."

Shares in Ardana yesterday closed down 1.8%, or 0.5p, at 27.5p, giving it a stock market worth of around £17m.

Ardana's announcement comes in the wake of news at the end of last week that Stem Cell Sciences, the pioneering Edinburgh University spin-out whose technology has put Scotland on the global frontline of medical and pharmaceutical research, is to quit the country because its rent had been hiked by almost 50%.

Stem Cell Sciences revealed a "comprehensive restructuring programme" that included the closure of its Edinburgh site, and the consolidation of its operations and senior management into facilities in Cambridge.

Plieth yesterday said: "It's a difficult time now for small bioscience companies that aren't beautifully funded, because the market has been very bad for fund raising."

Asked if a merger or sale meant that Ardana - once one of brightest hopes in the bioscience sector north of the border - was also likely to leave Scotland, Jones said: "It's way too early to talk about that."

In December, Ardana ann- ounced the outcome of a strategic review aimed at conserving its remaining cash resources, and said it had placed some of its clinical development programmes on hold to focus on projects closest to generating commercial returns.

That announcement capped what had been a tough 2007 for the company, with former chief executive Maureen Lindsay stepping down before lacklustre half-year results in October.

At that time, the company also signalled it did not have enough money to continue with its plans for the next 12 months.

High-priority projects identified by the review include prostate cancer treatment Teverelix, Ardana's testosterone cream for hypogonadism, and ARD-07 for adults and children requiring growth hormone treatment.

ARD-07's use in the diagnosis of growth hormone deficiency in the US will also be pursued, although a similar programme in Europe will be shelved because it would require additional research to break into this relatively small market.

Other projects now on hold include development of the terbutaline vaginal gel, and development of a fizzy tablet platform technology.

Jones added: "The strength of Ardana is in its portfolio of products, its product development pipeline, and its people. We are pleased with the progress of our compounds in development, which we believe will have significant commercial advantages in their respective markets.

"Successful execution of our strategy to sell or merge the company will enable the potential in the pipeline to be maximised."