Ardana, the Scottish drug development firm which put itself up for sale in February, may run out of money by the end of July, a spokeswoman admitted.

However, she said directors remain confident of selling the firm or some of its products before its funds are exhausted.

In a strategic update accompanied by news of a setback in the development of a key drug, which sent the shares plunging 17.5%, Ardana said it only had £4m cash and equivalents at the end of the latest financial year in March.

As the company used £13m cash during the year, the spokeswoman said it was correct to infer that the cash pile might be sufficient to last just four months from the year end.

However, while Ardana appears to face a race against time, the spokeswoman said directors expected to be able to achieve a solution to its apparent ills.

After announcing in March that it had received a number of approaches which may or may not lead to a takeover offer, Ardana said yesterday that it continued to be in discussions with a number of potential bidders, without giving details.

The company also continues to have talks with potential licensing partners for products.

In February, Ardana said that it had received "significant interest in potential licensing opportunities for one or more products".

However, yesterday Ardana said talks were at an early stage for products other than a testosterone cream that it is developing.

Efforts to sell this product have been complicated by a setback during clinical testing in the US.

"The company believes it would be prudent to assume that a further study may be required for regulatory approval of the Food and Drug Administration," said Ardana.

It is assessing what the update on the Phase III trial will mean to interested parties.

In the update Ardana said it continued to manage its cash resources "prudently in light of the varying restructuring initiatives that have been announced and the various M&A and licensing discussions that are ongoing".

However, in a sign that directors may be prepared for further difficulties, the com-pany has been in talks with some investors about providing bridging finance. The latest announcement may spark unease among investors who have had a bumpy ride over the last year or so.

In December, Ardana announced 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.

Former chief executive Maureen Lindsay stepped down before lacklustre half-year results in October.

Shares in Ardana closed down 2.75p at 13p.