West Coast Editor

Computational-design firm Locus Pharmaceuticals Inc. closed a $30.2 million round, its first financing in five years, that will help push more programs into the clinic and advance LP-261, an oral compound in Phase I for cancer.

LP-261 binds at a new site on tubulin, targeted by many drugs already marketed. Preclinical studies showed the compound works in cells resistant to Taxol (paclitaxel, Bristol-Myers Squibb Co.) and those resistant to vinca, both of which also target tubulin. Locus' drug also shows activity in primary leukemia cells isolated from patients resistant to Gleevec (imatinib mesylate, Novartis AG).

"We were in patients in late fall, and we would certainly expect to be through [with] the study by late this year," said Robert Dickey, chief financial officer for the Blue Bell, Pa.-based firm, adding that exact times are difficult to predict in a dose-escalating trial.

In the inflammation space, Locus has created what the firm calls "exquisitely selective" p38 inhibitors that bind at an allosteric site and do not involve the ATP site, which has caused other p38 programs to falter because of side effects. Locus said it believes the low selectivity of those ATP inhibitors led to the clinical failures.

"The most advanced [p38] compounds have gotten to Phase IIa and have shown a variety of different side effects," Dickey noted. "You're talking about some sort of off-target things that are happening." Locus plans to file an investigational new drug application for a p38 compound around this time next year. "There's still a lot of interest out there" in p38 inhibitors, he said.

Other programs are expanding on Locus' core competence in kinases for the development of angiogenic inhibitors and other targeted therapies. Dickey said Locus' internal work makes a strong case for the power of computational technology, which has provided drug design for clients.

"They have a protein target of interest, and they either want an in vivo lead, as with our Amgen and Lilly collaborations, or they come to use and want IND leads, which is an Ono-type of collaboration," Dickey said. The agreement with Eli Lilly and Co., of Indianapolis, was disclosed at the end of January 2006; the deal with Thousand Oaks, Calif.-based Amgen Inc. began last June; and the pact with Ono Pharmaceutical Co. Ltd., of Osaka, Japan, started in July. (See BioWorld Today, July 10, 2006.)

"As the company has matured, there has been benefit in using the technology in a variety of targets, which is one of the things these collaborations have done for us," along with generating revenue, Dickey said.

Novartis Bioventures Ltd., Prism Venture Partners and HBM BioVentures (Cayman) Ltd. - all new investors - co-led the latest financing, with S.R. One Ltd. and L Capital Partners SBIC LP also taking part, along with other existing shareholders. Novartis, HBM and L Capital Partners and S.R. One are new investors to Locus, and Prism is Locus' founding investor.

Joining Locus' board are Markus Goebel of Novartis Bioventures, Erich Platzer of HBM, Joyce Lonergan of S.R. One and Ting Pau Oei of L Capital.

In other financing news:

• Bio-Bridge Science Inc., of Oak Brook, Ill., closed a private placement of 4 million shares of Series A convertible preferred stock and 3 million warrants to certain investors for aggregate gross proceeds of $3 million. The warrants are immediately exercisable at $1 per share and are exercisable at any time within three years from the date of issuance. Proceeds, if investors exercise all the warrants, also will be $3 million. The financing will be used to continue to fund Bio-Bridge's strategic initiatives, including vaccine development activities and acquisition moves in China. The company's stock (OTCBB:BGES) closed Tuesday at 90 cents, unchanged.

• Bruker BioSciences Corp., of Billerica, Mass., closed its public offering of 11.96 million shares of its common stock, of which 2.53 million were sold by the company and 9.43 million by four selling stockholders at $7.10 per share. Total shares sold include 1.56 million of common stock (330,000 shares from the company and 1.23 million from the selling stockholders), sold pursuant to the underwriters' exercise in full of their overallotment option. Bruker will use net proceeds for general corporate purposes, potential acquisitions and for the repayment of debt, and the company did not receive any of the net proceeds from the sale of the common stock by the selling stockholders. Bruker's shares (NASDAQ:BRKR) closed Tuesday at $7.99, up 12 cents.

• Favrille Inc., of San Diego, received commitments from investors, including Federated Kaufmann Fund and MPM BioEquities Adviser LLC, to buy 3.3 million shares of the company's common stock at a price of $3 per share pursuant to an effective shelf registration statement, for net proceeds of $9.9 million. Favrille develops targeted immunotherapies for the treatment of cancer and other diseases of the immune system, and has FavId in a pivotal Phase III trial against follicular B-cell non-Hodgkin's lymphoma and in Phase II clinical trials in other B-cell NHL indications. The offer was expected to close yesterday.

• Illumina Inc., of San Diego, said it would offer, subject to market and other conditions, about $325 million principal amount of convertible senior notes due 2014 through offerings to qualified institutional buyers. Upon conversion, holders will receive cash up to the principal amount, and any excess conversion value will be delivered in shares of Illumina's common stock. Illumina also expects to grant the initial purchasers an option to buy up to $50 million of additional notes. The interest rate, conversion price and other terms of the notes will be determined by negotiations between Illumina and the initial purchasers of the notes. The firm expects to use up to about $200 million of the net proceeds from the offering to purchase shares of its common stock in privately negotiated transactions concurrently with the offering, and plans to use a portion of the net proceeds of the offering, and of the warrants that Illumina expects to sell to one or more of the initial purchasers and/or their affiliates, to pay the cost of the convertible note hedge transactions that the company expects to enter with them.

• MethylGene Inc., of Montreal, entered into an agreement with a syndicate of underwriters led by Canaccord Capital Corp., under which the underwriters have agreed to buy on a bought-deal basis, 5.5 million common shares from MethylGene and sell them to the public at a price of $3.65 per share, representing an aggregate issue amount of about C$20 million (US$17.3 million). The company has also granted to the underwriters an overallotment option to purchase an additional 825,000 common shares (worth about C$3 million) at the same price, exercisable by the underwriters for a period of 30 days from closing, which is expected on or about March 2. MethylGene's stock (TSX:MYG) closed Tuesday at C$3.62, down 38 cents.

• Trellis Bioscience Inc., of South San Francisco, raised $10 million in a Series B preferred stock venture capital financing. New investor Novartis Bioventures Ltd. led the round, with the participation of additional new investors Pac-Link Bio Venture Investment Corp. and Sagamore Bioventures LLC. Previous investors, Easton-Hunt Capital Partners LP and Morgenthaler Partners VII LP also participated in the financing. Proceeds will be used to develop Trellis' product candidates, as well as its corporate partnering product candidates and for general corporate purposes. Novartis Bioventures's Goebel also will join Trellis' board.