In easily the largest venture capital round disclosed this year, according to BioWorld Industry Snapshots, Kalypsys Inc. raised $100 million in Series C funding to advance its preclinical and early clinical-stage pipeline of small-molecule drugs.

The San Diego-based firm, which has brought in $172 million to date, expects the financing to provide "sufficient funds for multiple years," said John McKearn, Kalypsys president and CEO, long enough for the firm to "deepen our developmental reach."

The round was led by Tavistock Life Sciences, which invested $89 million. The VC firm's involvement in Kalypsys dates back to 2002, when it participated in the company's $43 million Series A round. (See BioWorld Today, April 3, 2002.)

Joining Tavistock in the Series C round were other existing investors, including New York-based Sprout Group, San Francisco-based CMEA Ventures and San Jose, Calif.-based KT Venture Group.

At a time when many VCs are shying away from early stage ventures, Tavistock Life Sciences, a division of the Tavistock Group, prefers to focus on building "a small number of exceptional private companies" and "financing them to successive scale," said Shehan Dissanayake, CEO of Tavistock Life Sciences.

"What we've tried to do," he told BioWorld Today, is provide Kalypsys with "the opportunity to move the five or six assets it has toward the clinic and beyond."

"Drug discovery companies are really limited by the fact they can never seem to grab substantial sums of money to move all of their assets forward," he added.

Small private firms end up having to make choices, often dictated by funding, regarding which products to advance. In the past, those with multiple programs or drug candidates would "typically go public to access capital," Dissanayake said, "but the public markets aren't receptive today."

He described Tavistock's model as a "bit of a hybrid" between VC and private equity, with the dual goal of providing early funds to start-up companies and providing more substantial support for long-term growth.

"Small companies suffer from financial uncertainty from year to year," Dissanayake said, but "when you remove the specter of financings, you get a number of examples where productivity and focus and quality of the business just blossoms."

Consider Kalypsys' financing specter removed, and the company hopes to advance its pipeline and put to rest any doubt that the firm's focus is on development, as much as its research.

"We are not a screening company or an IND mill," Kalypsys' McKearn said. "We are intent on taking compounds to proof [of concept] in research and development."

The company recently completed a Phase I study of its lead compound, KD3010, an oral, small-molecule peroxisome proliferators-activator receptor (PPAR)-delta agonist. That single- and multiple-dose escalation study was designed to test the safety, tolerability and pharmacokinetics of the compound vs. placebo in healthy patients. A 28-day safety trial in obesity is expected to begin early next year, though the compound also might have implications in a number of other metabolic disorders, as well.

"The world is still scratching its head trying to figure out what [PPAR]-delta is best for," McKearn said, adding that the firm has reported "some exciting data in dyslipidemia, and we're seeing activity that could be important in diabetes."

Following KD3010 is Kalypsys' second product, KD7040, a topical agent designed to inhibit inducible nitric oxide synthase, in neuropathic pain. Beyond that, the firm has early candidates in oncology, including KD5170, an oral non-hydroxamate inhibitor of histone deacetylase for hematologic and solid tumors, as well as several other prospects that "are looking pretty attractive," McKearn said.

Once a compound has proof-of-concept data, Kalypsys likely will look for partners in those indications "that require mass marketing," but might consider taking some compounds to the market on its own, he said.

Kalypsys has signed drug discovery deals with Palo Alto, Calif.-based CV Therapeutics Inc. and Geneva-based NovImmune SA. Early this year it agreed to a four-year strategic alliance with eye care company Alcon Inc. to develop ophthalmic drug candidates using Kalypsys' drug discovery technology. In that deal, Alcon also retains the option to partner compounds from Kalypsys' internal pipeline. (See BioWorld Today, Jan. 5, 2006.)

In other financings news:

• Arena Pharmaceuticals Inc., of San Diego, plans to offer 8 million shares of its common stock, with a 30-day option to underwriters to purchase up to an additional 1.2 million shares to cover overallotments. Proceeds are expected to be used for clinical and preclinical development of the company's product candidates, as well as for discovery research and for general corporate purposes. CIBC World Markets Corp. is acting as sole book-running manager, with Cowen and Co. LLC and Piper Jaffray & Co. serving as co-lead managers. Needham & Co. LLC, Leerink Swann & Co. Inc., Fortis Securities LLC, Morgan Joseph & Co. Inc. and Oppenheimer & Co. Inc. are acting as co-managers. Shares of Arena (NASDAQ:ARNA) closed at $13.41 Wednesday, down 68 cents.

• Merrion Pharmaceuticals Ltd., of Dublin, Ireland, concluded an €8 million (US$10.5 million) funding round led by principal investors Tony Ryan and Merrion Chairman Declan Ryan. Merrion is a specialty pharmaceutical firm focused on the development of improved oral dosage forms of drugs that are poorly absorbed, including injectable drugs, certain existing oral drugs and large-molecule drug candidates.

• Nymox Pharmaceutical Corp., of Hasbrouck Heights, N.J., secured a commitment for $13 million in private equity financing to support general corporate purposes. The company will privately place common stock with institutional investors who have participated in previous financings and will receive a 3 percent discount to the market price. Nymox is developing NX-1207, a drug for benign prostatic hyperplasia, and is working on other drugs for E. coli infection, Alzheimer's disease, oncology and infectious disease. Shares of Nymox (NASDAQ:NYMX) gained 6 cents Wednesday to close at $3.46.

• Protox Therapeutics Inc., of Vancouver, British Columbia, completed its previously announced offering of 18.3 million units priced at C50 cents per unit for gross proceeds of C$9.2 million (US$8.1 million). Each unit comprises one common share and one-half one common share purchase warrant. Protox is working to advance its Phase II program, PRX321, in cancer, as well as to complete a Phase I trial of PRX302 in prostate cancer and begin Phase I testing in benign prostatic hyperplasia. The private placement was led by Jennings Capital Inc. and Canaccord Capital Corp.