Metabolex Inc. can check off yet another item on the list of exit strategy prerequisites.

The Hayward, Calif.-based company already boasted a late-stage lead product, a validating big pharma partnership and a robust pipeline. With the close of a $32 million Series D financing, Metabolex now has a solid cash balance as well.

"This is a company we believe can go public or look at other strategic exits in the next 18 months," said Kurt von Emster, general partner with MPM BioEquities, which led the round.

Several crossover funds joined MPM as new investors in the Series D, namely AllianceBernstein, Deerfield Management and T. Rowe Price. A bevy of existing investors also participated, including Alta Partners, Bay City Capital, Biotech Turnaround Fund, Birchmere Ventures, Johnson & Johnson Development Corp., KBC Funds, Lombard Odier Darier Hentsch, Pictet Funds (LUX) Biotech, Merlin BioMed Group, Novo Ventures, VantagePoint Venture Partners, Venrock Partners and Versant Ventures.

Much of the investor interest in Metabolex can be attributed to lead candidate MBX-102, an oral insulin sensitizer that partially agonizes the PPAR-gamma receptor.

Marketed drugs Actos (pioglitazone, Takeda Pharmaceutical Co. Ltd. and Eli Lilly and Co.) and Avandia (rosiglitazone maleate, GlaxoSmithKline plc) are full PPAR-gamma agonists from the thiazolidinedione (TZD) class. Although they rake in more than $5 billion in annual sales collectively, both drugs are associated with weight gain and edema. "You have to balance the side effect profiles of those drugs against the efficacy," von Emster said.

MBX-102, previously known as metaglidasen, is a novel formulation of halofenate rather than a TZD. In a Phase II trial, MBX-102 demonstrated a comparable reduction in hemoglobin A1c (HbA1c) to the marketed drugs without the dose-limiting side effects of edema or weight gain.

"We've been very successful in understanding the science behind PPAR," said Harold Van Wart, president and CEO of Metabolex. He added that MDX-102 has the potential to become a "best-in-class insulin sensitizer."

The Phase II data certainly got the attention of Johnson & Johnson subsidiary Ortho-McNeil Inc., which signed a $548 million deal with Metabolex last year for MBX-102 and follow-on compound MBX-2044. Van Wart said he expects to achieve two milestones this year that will result in payments under the deal. (See BioWorld Today, June 27, 2006.)

Metabolex is conducting a Phase II/III trial in Type 2 diabetes with MBX-102, as well as carcinogenicity studies. When those wrap up in the first quarter of 2008, the partners will hold an end of Phase II meeting with the FDA and map out a plan for pivotal trials, which will be funded and executed by Ortho. Responsibility for MBX-2044 also will transition to Ortho when Metabolex completes an ongoing, Ortho-funded Phase IIa trial in the third quarter.

Van Wart said the partners expect to commercialize both versions of the drug, since MBX-2044 may prove to be more potent. Metabolex retained U.S. co-promotion rights and will get double-digit, tiered royalties, which could make the company an acquisition target for its big pharma partner, as has recently been the trend.

In the meantime, the funding from the Series D financing is earmarked for MBX-8025, a PPAR-delta agonist acquired from Ortho, and several preclinical programs.

MBX-8025 has demonstrated the ability to reduce low-density lipoprotein (LDL) and triglycerides in a Phase I trial, and Van Wart said it also may increase high-density lipoprotein (HDL). Metabolex plans to start a Phase II dyslipidemia trial with the drug in the third quarter, looking at two monotherapy doses and a combination with a statin.

The company also hopes to advance at least one of its preclinical programs into the clinic within the next year or two. Candidates include programs in insulin resistance, insulin secretion and beta cell function as well as a late preclinical obesity program also acquired from Ortho.

Metabolex has raised $117 million since it recapitalized in 2003 through a $75 million Series B, a $10 million Series C investment by Ortho in conjunction with the partnership, and the current $32 million Series D. With Ortho picking up the tabs on future development of MBX-102 and MBX-2044, Van Wart said he expects the money to last "well into 2009."

In other financing news:

• Genitope Corp., of Fremont, Calif., plans to offer 5.5 million shares of its common stock in an underwritten public offering, with an option to the underwriter to purchase up to an additional 825,000 shares to cover any overallotments. Punk, Ziegel & Co. is serving as the underwriter. Genitope, which focuses on immunotherapies for cancer, is developing MyVax, a personalized immunotherapy based on the genetic makeup of a patient's tumor that is designed to activate the patient's immune system to identify and attack cancer cells.

• Cell Therapeutics Inc., of Seattle, closed its previously announced $37.2 million offering. Rodman & Renshaw LLC acted as the placement agent for the deal, which involved the sale of 3 percent convertible stock and warrants. Proceeds will be used to run Phase III trials of cancer drugs Xyotax (poliglumex paclitaxel) and pixantrone as well as for possible strategic acquisitions. (See BioWorld Today, April 13, 2007.)

• Ambrilia Biopharma Inc., of Montreal, raised $5.4 million through the sale of 2.2 million shares at $2.42 per share, a slight discount to Wednesday's close of $2.65. The offering is scheduled to close no later than May 18. The company also said President and CEO Hans Mader has resigned but will continue as a consultant for one year. Stephen Sudovar, current chairman of the board of directors, will serve as interim CEO until a replacement is found. Ambrilia develops cancer and HIV drugs, including the Phase I protease inhibitor, PPL-100, which was partnered to Merck & Co. Inc. last year. (See BioWorld Today, Oct. 13, 2006.)

• Xechem International Inc., of New Brunswick, N.J., raised $7 million in convertible debt financing. Proceeds will be used to pay down a loan from Alembic Ltd., of Baroda, India, as well as to complete construction of a Nigerian production facility for the anti-sickling drug Nicosan and for general working capital purposes.

• Sirtris Pharmaceuticals Inc., of Cambridge, Mass., set a price range of $9 to $11 per share for its previously announced initial public offering. The company anticipates selling 5 million shares and will make an additional 750,000 shares available for overallotment. Underwriters include JPMorgan, CIBC World Markets, Piper Jaffray, JMP Securities and Rodman & Renshaw. The company, which has applied to list on the Nasdaq as "SIRT," is conducting a Phase Ib trial with SRT501, a novel formulation of resveratrol for Type II diabetes. (See BioWorld Today, March 2, 2007.)