The same day Kemia Inc. reported positive Phase I data on its anti-inflammatory compound, KC706, the company added $31 million to its cash reserves through a Series C round.

That money will be used to fund upcoming Phase IIa studies of KC706, an allosteric p38 MAP kinase inhibitor developed by the company's internal chemistry platform for a number of inflammatory indications, starting with rheumatoid arthritis.

Funding should "take us into 2008," said Lew Shuster, CEO of the privately held San Diego-based firm, which has raised a total of $84 million to date. Kemia's last financing was in March 2004, when it brought in $33.5 million in a Series B round. (See BioWorld Today, March 30, 2004.)

"It's a tough environment out there," Shuster said of the venture capital market. "I think the key for us is that we have excellent Phase I results with a very promising oral compound."

KC706 has been administered to a total of 79 healthy volunteers in three Phase I studies demonstrating safety, tolerability and bioavailability of a capsule formulation to be used in future trials. An assay conducted as part of the Phase I program confirmed that the compound provided a long-acting, dose-dependent anti-inflammatory effect.

The p38 MAP kinase was identified about a decade ago as a molecule that plays a role in the inflammation-signaling pathway, which is related to diseases such as rheumatoid arthritis and psoriasis, as well as neurodegenerative diseases, diabetes and heart disease. That pathway is regulated by a number of inflammatory mediators, including the TNF-alpha and IL-1 beta targeted by existing injectable biologics, such as Kineret (anakinra) and Enbrel (etanercept), both sold by Thousand Oaks, Calif.-based Amgen Inc.

However, in spite of encouraging early data, p38 inhibitors have proved to be a challenge in the clinic for many biotech and pharma companies over the years, Shuster said.

"Seventeen have gone into Phase I, and most of those never make it to Phase II," he said. "None are in Phase III."

The problem, Shuster noted, is a lack of selectivity due to the fact the drugs often mimic ATP, which interacts with kinase.

"There are hundreds and hundreds of proteins in the body that interact with ATP," he added. "So it's very hard to make your drug selective for only p38 MAP kinase and not the ATP-binding pocket."

What Kemia has done is developed a p38 inhibitor that's designed to bind to the kinase allosterically, or outside of the ATP-binding pocket.

"It has better selectivity," Shuster told BioWorld Today, adding that data indicate the "protein stays bound [to the kinase] for about 20 hours," which would allow for once-daily dosing.

Kemia will begin its Phase II program with a 150-patient Phase IIa study of KC706 in rheumatoid arthritis, expected to begin by the end of September. That trial will evaluate the safety and efficacy of two doses of the drug over a 12-week dosing period in patients who have evidence of active RA despite ongoing treatment with methotrexate.

A second Phase IIa is planned, though the company has not yet disclosed an indication.

Pending positive Phase II studies, Kemia hopes to expand KC706 into multiple indications, and different formulations, such as a topical version for psoriasis and eye drops to treat dry eye syndrome.

For the indications with larger markets, Kemia will "probably partner, though we'll wait until after Phase IIa studies," Shuster said.

Beyond its p38 inhibitor program, the company is in early stage work on a CCR5 antagonist in HIV, a program Kemia definitely plans to partner, and an amylin receptor agonist program aimed at obesity.

The Series C financing was led by Aberdare Ventures, of San Francisco, joined by new investors MedImmune Ventures, of Gaithersburg, Md., and Red Abbey Venture Partners, of Baltimore. Existing investors were Alta Partners, of San Francisco; Forward Ventures, of San Diego; Hamilton Bioventures, also of San Diego; JPMorgan Partners, of New York; Novartis Bioventures, of Cambridge, Mass; Novo A/S, of Bagsvaerd, Denmark; and Texas Pacific Group, of Menlo Park, Calif.

Kemia also named three new directors - Dan Kisner, Wayne Hockmeyer and Bonnie Hepburn - to its board.