Just a few weeks after announcing that lead drug DIO-902 significantly reduced cholesterol levels in a Phase IIa diabetes trial, DiObex Inc. closed a $24 million Series B financing.

New investor Inventages Venture Capital SA, of St-Prex, Switzerland, led the geographically diverse syndicate, which also included new investors Mitsui Ventures, of Tokyo, and Pac-Link BioVentures, of Taipei, Taiwan. Existing U.S.-based investors Domain Associates LLC, Pequot Ventures and Sofinnova Ventures also participated.

The Series B follows a $9 million Series A raised in April 2004 and should carry DiObex through the next 12 to 18 months, according to President Daniel Green. During that time, the San Francisco-based company expects to complete Phase II trials with both DIO-902 for Type 2 diabetes and DIO-901 for Type 1 diabetes.

Green noted that there was "no deliberate effort to be international" with the Series B round. "We have two very different products; they can appeal to different investors," he explained, adding that it was "not uncommon" during the fund-raising process to find investors who liked one product but were not as interested in the other.

Although both DIO-902 and DIO-901 are diabetes drugs derived from already-marketed products, they represent different indications, formulations, mechanisms of action and development pathways.

DIO-902 was licensed from Gothenburg, Sweden-based Cortendo Invest AB. The drug is an oral, small-molecule cortisol synthesis inhibitor created from one of the two enantiomers contained within the marketed antifungal ketoconazole. A side effect of ketoconazole is inhibition of glucocorticoid synthesis, which has prompted its off-label use in Cushing's disease and provided the "first clues the drug could be used to treat diabetes," Green said. (See BioWorld Today, April, 12, 2005.)

A Phase IIa clinical trial with DIO-902 completed last month in Type 2 diabetes showed significant reductions in total and LDL cholesterol, as well as trends toward an improvement in glycemic control. Green said DiObex will be filing protocols "imminently" for the 16-week Phase IIb dose-ranging trial slated to begin in mid-2007.

DIO-901, on the other hand, is a very low dose version of glucagon designed to prevent the excessively low blood sugar associated with insulin intensification during the treatment of Type I diabetes. In three early-stage trials conducted using infusion pumps, DIO-901 was well-tolerated and reduced or prevented insulin-induced hypoglycemia.

DiObex now is conducting preclinical work with an extended-release injectable version of the peptide, which is slated to complete a pharmacokinetic bridging study and then begin Phase II trials before the end of the year.

Green said the formulation of DIO-901 is "very different" from glucagon products on the market. While those products have a short half-life and are used in emergency treatment of acute hypoglycemia, DIO-901 is designed to have a longer duration of action for use in a preventative capacity.

Since most hypoglycemic attacks occur during the night, DIO-901 would be administered before bed and would "keep working through the night" to prevent or reduce hypoglycemia, Green said. The idea for the product was "conceived of and put into practice" internally, he added.

As of now, neither DIO-902 nor DIO-901 is partnered. Green said the company will need "deeper pockets" before conducting a Phase III trial for DIO-902. DIO-901 also may get partnered at some point, he said, although DiObex could "conceivably" complete its development solo.

DiObex is also seeking additional diabetes and metabolic disease products to in-license. "We have superb development capabilities and plan to keep putting them to good use," Green said, citing a core group of nine employees with extensive endocrine expertise and a wide-ranging network of advisors, consultants and subcontractors.

In other financings news:

• AVAX Technologies Inc., of Philadelphia, is raising $10 million through the sale of 80 million shares of common stock to certain accredited and institutional investors, who also will receive warrants to purchase an additional 80 million shares. Funding will be used to support a Phase III trial of cancer vaccine M-Vax in melanoma as well as earlier programs in non-small-cell lung cancer and ovarian cancer. AVAX's shares (OTC BB:AVXT) rose 15.8 percent, or 4 cents, to close at 29 cents on Monday.

• Viragen Inc., of Plantation, Fla., raised $3 million through the private sale of 30,000 units at $100 per unit to London-based institutional investor RAB Capital plc. Each unit consisted of one share of Series K cumulative convertible preferred stock and five-year warrants to purchase 500 shares of common stock at 10 cents per share. The $2.9 million in proceeds will be used to fund manufacturing, licensing and regulatory programs for Multiferon (multi-subtype, human alpha interferon), which is approved in several countries outside of the U.S., and to support development of other drug candidates including the anti-cancer antibodies VG101 and VG102.

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