Lake Bluff biotech company Neopharm Inc. said Thursday that it had narrowed its losses in both the second quarter and first half of this year and reported progress in clinical trials for its breast, pancreatic and prostate cancer drugs.

But Aquilur Rahman, president and chief executive officer, warned that with cash dwindling to $1.8 million as of June 30, the company needs new funding to continue.

“We continue to be satisfied with the advancement of our drug candidate portfolio, as we continue to move toward our ultimate goal of commercialization,” Rahman said. “However, the success of all these clinical programs depends on obtaining additional funding resources which continues to be management’s top priority.”

In a release, the company said it “ss currently exploring various alternatives to continue its operations for the rest of 2010 and beyond, but no assurance can be given that such efforts will be successful.”

NeoPharm lost $800,000 in the second quarter versus a deficit of $1.9 million during the same period a year ago. That brought the company’s loss for the first half of the year to $2.2 million compared to last year’s $4.2 million through June 30.

The company said the improved results are primarily due to a reversal of all unrealized losses on its investments in auction rate securities. One June 30, the company exercised a put and sold the auction rate securities at par value and paid off its loan related to the investment. It also cut expenses by 42 percent.

Cash outlays decreased to $1.3 million in the second quarter from $1.9 million in the first. But the company said that spending would have to increase if it wants to keep funding its clinical programs, meaning it has to raise new money to keep operating.