NEW YORK: Is a pharmaceutical company whose biggest-selling drug is considered as dangerous as heroin or LSD a good investment?

Jazz Pharmaceuticals, along with the private equity firm Kohlberg Kravis Roberts and some of Wall Streets most prestigious investment banks, is hoping investors think so.

Jazz, based in Palo Alto, California, has filed to sell as much as $180 million in stock Thursday. Its main product is gamma hydroxybutyrate, or GHB, a fast-acting anesthetic with a history of use in date rape and serious risks of overdose, including coma and death. Jazz sells it under the brand name Xyrem to treat narcolepsy.

The U.S. Drug Enforcement Administration lists GHB as a Schedule I drug, the most dangerous kind, in the same category as heroin. But the Food Drug Administration has approved Xyrem for narcolepsy, and when dispensed by prescription the drug can be used legally.

The European Commission has approved Xyrem for the treatment of narcolepsy with cataplexy in adult patients.

Because of its risks, Xyrem can be distributed only under very strict rules, and Jazzs promotion of it is currently the subject of a U.S. criminal case in New York that has resulted in one felony guilty plea by a former Jazz employee. The narcolepsy market is small, and Xyrems sales were just $29 million in 2006.

Meanwhile, Jazz posted a loss of $82 million last year and has lost almost $200 million since it was founded in 2003. Its auditors have warned that its losses raise “substantial doubt about our ability to continue as a going concern,” according to the offering prospectus Jazz filed with the Securities and Exchange Commission.

In plain English, Jazz, which had $67 million in cash as of March 31, is running out of money, and if it does not get more it could go broke as early as the end of this year.

Jazz is hoping to solve that problem by selling as much as 6.9 million shares to the public at $24 to $26 a share. The offering, which values Jazz at about $600 million, could be completed as early as Thursday. Morgan Stanley, Lehman Brothers and Credit Suisse are leading the deal.

Aside from Jazz itself, the biggest winner in the public offering would be Kohlberg Kravis and other private equity firms. Since 2003, they have sunk $265 million into Jazz. If the company cannot go public, they will have to choose between putting more money up or potentially losing their entire investment.

Matt Fust, Jazzs chief financial officer, declined to comment about the offering or Jazzs prospects. A spokeswoman for Kohlberg said the firm could not comment because the offering was imminent.

Jazz hopes to vastly expand Xyrems potential market by winning approval to promote it for fibromyalgia, a vague and poorly understood pain disorder whose symptoms are often treated with antidepressants. Jazz is conducting two late-stage clinical trials to prove that Xyrem reduces the pain of fibromyalgia, with results expected in the one trial in the second half of 2008.

In an earlier trial, about 30 percent of people who took Xyrem reported improvement in their fibromyalgia symptoms, compared to 13 percent on placebo. Whether that figure will be enough to convince regulators to approve Xyrem, whose label warns that abuse of GHB can cause “seizures, respiratory depression and profound decreases in level of consciousness,” is not clear.

In addition, much bigger drug companies, including Pfizer and Forest Laboratories, are also researching fibromyalgia treatments and have medicines further along in development. Meanwhile, Jazz is still trying to finalize a settlement in the criminal case in New York.