West Coast Editor

To finish the Phase II trial with its lead anti-HIV gene therapy product, VIRxSYS Corp. closed a Series F financing to raise about $31 million through the sale of preferred stock.

"We have a number of initiatives going on, and we're trying to pick and choose them so we can have this money last most, if not all, the way through the Phase II" study, said Gerard Fleury, chief financial officer and interim president and CEO of Gaithersburg, Md.-based VIRxSYS.

The first Phase II patient "has just been dosed," said Gwendolyn Binder, director for scientific affairs at VIRxSYS, and earlier closings of the round were used to complete Phase I.

Founded in 1998, the privately held firm uses an approach in-licensed from Johns Hopkins University that modifies a patient's own CD4 T cells with VRX496, a lentiviral vector with an anti-HIV gene that blocks replication by targeting the disease's genetic envelope. Researchers at the company believe HIV cannot develop resistance to the drug, which was the subject of a report last year in Journal of Virology.

"Basically, we've developed a delivery platform for biologicals," said Binder, adding that the "potential for gene therapy is huge - the problem is enabling it," and lentiviral vectors are "the leading edge. We constantly have people calling us asking to use our clinical delivery platform."

Because the method allows researchers to "swap in any type of payload," it may be useful against cancer, hemophilia and infectious disease, among others. VIRxSYS has a collaboration with the National Cancer Institute to use the platform against glioblastoma, and "we should be in the clinic within a year," Binder said.

"It's antisense, but it's delivered in a completely novel way," she said. Autologous T-cell transfer has been tested in the past, but the lentiviral and antisense aspects of VIRxSYS' approach are new.

The company has material transfer agreements with "dozens and dozens" of other firms wanting to use the platform, Fleury said, though the business is not like Carlsbad, Calif.-based Invitrogen Inc., which has made a name for itself by providing "a standard lentiviral vector for research purposes only. The ones that are coming to us have serious interest in advancing their therapies into the clinic in a fairly short period of time."

This spring, the Phase I trial with VRX496 against HIV showed that a single dose of the gene-based immunotherapy was safe and well tolerated, and patients still are being monitored annually. To date, no safety concerns have arisen, and several patients have shown declining or stable viral load levels compared to baseline values, and they had elevated or stable T-cell counts.

The Phase II study at six sites in New York, Florida, Illinois and Kentucky will enroll about 20 patients and evaluate the safety and tolerability of repeat doses of autologous VRX496-modified CD4 T cells and their effect on viral load, CD4 counts and immunity. Eligible patients must have failed at least one anti-HIV cocktail treatment due to drug resistance or unacceptable side effects. The company expects data by the third quarter of 2006.

With this round - the first to attract "institutional and quasi-institutional investors," Fleury noted - privately held VIRxSYS has raised a total of about $63 million in equity financing since its founding in 1998. The company also has been awarded $1.5 million by the National Institutes of Health, earmarked for getting the firm's cell-processing facility under way. About another $800,000 came from the NIH for its participation in another HIV trial with VRX496, to be done in collaboration with the University of Pennsylvania.

"There are precious few antisense products that have been successful," Fleury acknowledged, but impressive results from the Phase I trial with VRX496 and fast-track status from the FDA apparently were enough to impress deep-pocket investors in the latest round.

If the Phase II trial is positive, VIRxSYS plans to go directly into Phase III.

"It would be foolish of us to presume that we, of our size and scale, could go into Phase III and commercialize something [on our own] that could be this enormous," he said, adding that the firm is having "preliminary conversations with a variety of companies out there" to find a partner.

"We'd be much better off having somebody help us get through Phase III," he said, but "if one of those does not pan out, we're doing the internal groundwork to raise money in a year or so."