Recent Financings of Private Companies (07/1997)

Each month, Start-Up presents a comprehensive review of young, private life science companies that have received venture funding during the month, including companies in the pharmaceutical, medical device, diagnostic and research instrumentation & reagent sectors.

AMBI Inc.(Tarrytown, NY)

AMBI(formerly Applied Microbiology Inc.) has netted approximately $4.2mm in a private placement of convertible preferred stock.

The placement consisted of three investors, including Citadel Investments, AMBI's largest shareholder. The investors also received warrants to purchase 529,000 additional shares of the company at $2.72 per share. Proceeds will be used to assist in the marketing of Cardia Salt Alternative, the development of AMBI's pharmaceutical candidates for the treatment of infectious diseases, and for general corporate purposes. AMBI develops and sells pharmaceutical and dietary products in the areas of infectious disease and hypertension. (May)

Cell Pathways Inc. (W. Conshohocken, PA)

Cell Pathways(cancer therapeutics) has raised $17.5mm in a Series F round of financing to new and existing institutional investors.

New investors included Goldman Sachs, New York Life, Gem Capital Management, Doerge Capital Management, and SenMed Ventures. Original investors Jackson Boulevard Partners, Northwood Ventures, Technology Partners, and Vulcan Ventures also participated. The proceeds of the placement will be used to expand the clinical indications of its lead compound, FGN-1, into sporadic colon polyp formation, cervical dysplasia, and prevention of tumor recurrence in prostate and breast cancer. The drug recently began Phase III trials for precancerous lesions associated with adenomatous polyposis coli. (Jun)

Delta Pharmaceuticals Inc. (Research Triangle Park, NC)

Delta Pharmaceuticals, (founded in 1995—a Glaxo Wellcomespin-off) raised $2.5mm in its second round of financing. The first round, completed in Jan. 1996, was also $2.5mm. All participants in both rounds are individual investors.

The company's lead product is an opiate agonist (licensed from Glaxo) that acts on the delta receptor in the brain. The company says it produces fewer side-effects than morphine. Delta plans to file an IND on the drug this summer and enter clinical trials for surgical pain by year's end. In addition to this compound, which Glaxo took through early development, Delta received a library of 400 delta receptor compounds. (Jun)

ICAgen Inc. (Morrisville, NC)

ICAgenhas raised $5.7mm in a Series D private placement to institutional investors. Included are original investors Medical Science Partners and Betainvest as well as Venrock Assoc., Healthcare Opportunities and the Merchant Bank of Credit Agricole.

The privately-held company plans to use the proceeds to fund its ion channel drug discovery platform and to develop and partner some of its lead compounds, which are focused on treating cardiac arrhythmias, gastrointestinal and CNS diseases. ICAgen currently has agreements underway with ArQuleand Eli Lilly. With ArQule it agreed to develop compounds to modulate ion channels for the treatment of cardiovascular, CNS and immune system disorders. With Lilly, it gains exclusive rights to screen libraries that are developed with Lilly's chemical library technologies to find compunds that interact with chloride, potassium and water channels. Lilly bought a percentage of ICAgen equity that, under the terms of the original agreement, did not exceed a 10% total holding. (May)

The Medicines Co. (Cambridge, MA)

Privately-held The Medicines Co.has raised $25mm in a second round private equity financing. Leading investors in the financing included Warburg, Pincus Ventures LP and BB Biotech AG.

The new equity is being used to finance the development of the company's thrombin inhibitor Hirulogand for future product acquisitions. It acquired exclusive worldwide rights to Hirulog from Biogen in March of 1997 in exchange for $30mm in licensing fees, milestones, payment of commercialization costs and royalties. (Biogen ceased development of Hirulog when it failed Phase III trials on complications associated with angioplasty). Medicine's strategy is to acquire, develop and commercialize late-stage products divested from biopharmaceutical companies. It plans to develop the Hirulog peptide as an anticoagulant for interventional cardiology indications. (May)

Megabios Corp. (Burlingame, CA)

Privately-held Megabios(gene delivery systems), has raised $14mm in a private placement to institutional investors including Lombard Odier. The company has raised $45mm since its inception in 1992.

In 1996, Megabios put off plans to go public due to a down market, but has not ruled out the possibility. As of March 1997 the company had $25mm in cash. Its burn rate is about $5mm per year. The company says that this financing is being used to advance a select number of its preclinical trials into Phase I. It is working on several projects that include partnerships with Glaxo Wellcome(gene-based therapeutics for cystic fibrosis; Phase I trials having just begun), Pfizer (treating solid tumors by inhibiting angiogenesis) and Eli Lilly (treating certain solid tumors using a single gene). Megabios is also working on systems that use direct injection for genetic vaccines, tumors and brain tissue. (Jun)

Metabolex Inc. (Hayward, CA)

Metabolex(diabetes therapeutics) raised $29.5mm in a private placement of equity to John Hancock Mutual Life Insurance—about a 20% stake.

The purchase consisted of units of a common share and a put option; the put is structured so that JH can either put the shares or sell them to Abbott Laboratories—concurrent with the private placement, Metabolex also received $4mm (under 5% of the company) from Abbott as an upfront equity purchase in connection with their recently signed research collaboration. Metabolex hopes the present funding will support operations for three years. The company was founded in December 1991 and is developing treatments for diabetes based on its Intracellular Glucose Transport Signal Transductionpathway. (Jun)

NeuroTech Ltd. (London, UK)

NeuroTechhas raised $3mm (FF15mm) in a private offering, funds of which are to be used for the company's first preclinical development program in brain tumors and to continue its research in new cell-based gene therapies for CNS disorders.

The offering was subscribed by CDC Innovation, Atlas Venture, Sofinnova and Banexi Ventures. The company was established by French and US neuroscientists in 1995 and has 10 employees. Its core technology is based on genetically modifying cells to secrete therapeutic proteins and introducing them into disease sites. Key therapeutic areas the company is targeting besides brain tumors include stroke and age-related macular degeneration. The latter is a progressive disorder of the retina that can lead to blindness. The company says that it is using rat endothelial cells genetically modified to secrete an interleukin to generate an immune response against brain tumors. It aims to begin human trials in about two years. (Apr)

Prolifix Ltd. (London, UK)

Prolifix Ltd.(UK biotech developing small-molecule cell cycle regulators to treat proliferative diseases) completed a second round of venture capital financing, raising $8.8mm (UK5.4mm) internationally.

Returning investors were Atlas Venture, leader of this round, 3i, and Chugai Pharmaceuticals, a Prolifix alliance partner. The new investor this time was Belgian investment firm GIMV. Prolifix will use the new funding to set up a permanent, full time management team and expand its labs, moving them from London to Oxford. Prolifix, wanting to develop a significant drug discovery capability based on its expertise in the cell cycle, is introducing high-throughput assays to identify small-molecule candidates for treating cancer, cardiovascular diseases, viral infections, and psoriasis. The company was established in 1995 to commercialize discoveries about cell division made at the nonprofit Medical Research Council. (Jun)

RTP Pharma Inc. (Montreal, Quebec, Canada)

RTP Pharma's (drug delivery ) Canadian office completed a private placement of $2.16mm (Cnd$3mm) from Societe Generale de Financement du Quebec.

The company will use the proceeds to construct a GMP pilot manufacturing facility to make pharmaceuticals used in its clinical trials. It has two products in Phase I/II trials—an immune suppressant and an anti-cancer drug. Its patented technology, Insoluble Drug Delivery, is a method for delivering water-insoluble pharmaceuticals. (Jun)

Syntiem (Nimes, France)

Syntiemcompleted a private placement of 2mm francs ($345,000); this brings the total money raised by the 1995 start-up to 4.6mm francs ($800,000). In this second round, 600 francs were from founders and the remainder from venture capitalists.

Existing investors Soridec, Sofilaro, Sofimac and Mistral Investissement participated. They now own 58% of the firm's equity, and founders own the remaining 42%. The company has three programs, all centered on its expertise in peptides: a research tools and services program in peptide synthesis; contract research in designing and synthesizing new drug leads; and a therapeutic drug discovery program in metalloprotease inhibitors, which have been linked to tissue degeneration. University partners include Centre de Biochemie Structurale, Centre de Recherche de Biochemie Macromoleculaireand the Dept. d'Ingenierie et d'Etude des Proteins. (Jun)

NetGenics Inc. (Cleveland, OH)

Privately-held NetGenics(bio-informatics) has completed a $6.5mm private financing to investors including Inctye Pharmaceuticals, Oxford Bioscience, Venrock, Edgewater Private Equity Fund II and John Pappajohn.

The proceeds are being used to advance its initial bioinformatics software product, Synergy. The product's software architecture (which combines Web-based Java programming software and Corba, common object request broker architecture) presents gene-based information and analysis tools in a graphical format. It allows members of project teams to work together and to communicate research information using an internet browser. Synergywas designed for the pharmaceutical and biotechnology industries and is considered a cross-platform, client-software bioinformatics information product. (Jun)

Oncocath Inc. (Roswell, GA)

Oncocath(site-specific devices to deliver radiation to tumors) raised $4mm in its series B equity financing led by Hillman Medical Ventures.

Lovett Miller also participated, as well as previous investors, including Catalyst Venture. Biopsys Medical(which is expected to merge into J&J this year) also made an investment as part of their 4/97 breast cancer alliance. Oncocath's system uses a single-use balloon catheter that positions a radioisotope right at the cancer site and delivers a specified dose over several days. Then the device and its radioactive chemical are removed. Localized delivery permits maximum dose to the tumor site while lowering the risk of damaging healthy tissue nearby. Oncocath is directing its early-stage development efforts at treatments for breast and brain cancers, which together account for over 200,000 new diagnoses in the US yearly. (May)

VNUS Medical Technologies Inc. (Sunnyvale, CA)

Vnus Medical Technologies(founded in 1995; minimally-invasive surgical devices) has raised $8mm in a venture round led by Donaldson, Lufkin & Jenrette's Sprout Group, which contributed $5mm.

Menlo Ventures and Bank America Ventures also participated. Vnus is developing catheter-based devices for the repair of vein valves. Use of the devices can replace vein stripping in the leg veins. (May)