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Durham, N.C.-Based Drug Maker Raises $30 Million in Venture Capital

Posted on: Friday, 7 October 2005, 00:00 CDT

By Vicki Lee Parker, The News & Observer, Raleigh, N.C.

Oct. 7--Serenex, an unprofitable drug-development company that was in danger of running out of cash by the end of year, has raised $30 million in venture capital, enough to keep it afloat through 2007.

The Durham company also announced that it acquired the rights to a promising experimental drug that treats painful mouth sores that often accompany chemotherapy.

Most of the $30 million will be used to finance additional clinical studies of the drug, said Ian Howes, chief financial officer of Serenex. Early tests of the compound, known as SNX-1012, have shown it to be safe and effective.

Serenex has been trying to move beyond its business of providing drug screening and research for large pharmaceutical companies to developing its own portfolio of medicines. In buying SNX-1012 from Mucosal Therapeutics of Wellesley, Mass., Serenex gets a drug that is relatively far along in the development pipeline.

"We wanted to jump start the process," Howes said.

Serenex joins a growing list of local companies that have obtained sizable investments this year as lenders loosen their purse strings.

Biolex, a Pittsboro company that produces experimental drugs with the help of small, leafy plants commonly found on the surface of ponds, announced in late August that it had raised $36 million. Earlier this year, Durham wireless technology company Motricity received $30 million.

Venture capitalists invest in small, private companies they believe have strong growth potential. The money is important to the local economy because it allows those companies to expand, develop new products and hire new workers.

SNX-1012 is being tested to treat oral mucositis, which affects about 450,000 people who undergo chemotherapy or radiation treatment. The symptoms include inflammation and ulcers in the mouth and throat. The pain often becomes so severe that patients can't eat or drink and doctors are forced to interrupt cancer treatments.

There is now no treatment for about 90 percent of the affected patients, Howes said. The potential market for the drug exceeds $1 billion a year, he said.

But winning regulatory approval for an experimental drug isn't easy. For SNX-1012 to receive approval from the Food and Drug Administration, it will require several rounds of successful clinical trials -- and time. If the drug meets all goals, it could be on the market by 2010, Howes said.

Serenex will use part of the money to continue development of another drug, called Hsp90, which inhibits the growth of cancer cells. The remainder of funds will be used to hire at least six clinical developers, Howes said.

When Serenex was started in 2001, it provided drug screening and research to help large pharmaceutical companies discover new drugs. In 2003, it expanded to include developing its own drugs.

As the company shifted its focus from early-stage development, it reduced the number of researchers, cutting its work force to 27, from 41.

The latest venture-capital funding brings the total amount the company has raised to $55 million.

Ritchie Capital led the latest round of financing, which included existing investors Intersouth Partners, Lilly Ventures, Mediphase Venture Partners, Takeda Research Investment and Seaflower Ventures.

Devin Hosea, director of Ritchie Capital's Biotechnology Venture Group, will join the Serenex board of directors.

"Serenex is an exciting opportunity for us," Hosea said, in a prepared statement. "The company has a very experienced management team and we see SNX-1012 as an asset in a large and underserved market."

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Source: The News & Observer

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