Raising money for any company has been difficult in recent years, but specialty pharmaceutical firms like Somaxon Pharmaceuticals Inc., which is raising $65 million in a Series C financing, have certain qualities that investors favor. Namely, a smoother development path and a faster route to sales.

"Investors are trying to mitigate the risk by dealing with products that are closer to the market," said Angela Larson, a specialty pharmaceuticals analyst with New York-based C.E. Unterberg, Towbin LLC. "The window of financing will never be 100 percent closed, because investors are willing to recognize a product if it has a better risk profile in terms of development."

Those investors must like what they see in Somaxon, and its lead product, Silenor (doxepin HCl), for insomnia. The active drug in Silenor has been on the market for years, now as a generic, but originally as a New York-based Pfizer Inc. compound used at high doses for depression. As the company plans to move into pivotal testing, it has in hand a proven safety profile.

"I think it's fair to say that, at least in our experience, investors do appreciate how much risk we've taken out of the process," said Kenneth Cohen, president and CEO of the San Diego-based company. "If you look at the things that cost a lot of money and derail young companies early in life, what is it? It's toxicology, it's safety, uncertainty, and manufacturability. Those kinds of risks we've been able to take out of the process."

According to global data from BioWorld Snapshots, Somaxon's $65 million financing is the fourth largest round this year. With 113 private financings having been conducted since Jan. 1, that figure places the company in the 96.5 percentile for amount raised.

Although that seems impressive, biotech and specialty pharmaceutical companies have all fallen under the same market pressures, Larson said.

"I would say the environment is not the most generous we've ever seen," she told BioWorld Today. "Different parameters are held for the specialty pharma vs. biotech, and what investors are looking for right now are three things: products on the market, products filed at the FDA or products at Phase III studies."

But, Cohen said, there's more to it than that because he has seen some specialty pharma companies struggle.

"I think ultimately what investors have focused on is not the strategy, generally, but the specific assets we have and the data we have and the management we have," he said. "You can have a great strategy but the wrong assets."

Somaxon has been fortunate, Cohen said, and investors have liked what the company has to offer. Having raised $90 million total since its August 2003 inception, the Series C financing is the company's largest round by far.

"We're obviously very pleased because it's enough capital to take us through a series of important milestones," Cohen said. "With our insomnia program, with Silenor, this is enough money to get us through Phase III and it could be all the way to an NDA filing. We do intend to partner this drug, but we want to do it out of good data and the right opportunity, not out of a shortness of cash."

Somaxon expects to start that Phase III program this year; it should have data from the first trial in the second quarter of 2006 and the rest by the middle of the year. The company could file a new drug application by the end of 2006. The insomnia market ranges between $2 billion and $2.5 billion, and is growing about 20 percent a year. There's competition, though; in December, Sepracor Inc., of Marlborough, Mass., received approval of Lunesta in insomnia. Also, Neurocrine Biosciences Inc., of San Diego, in April resubmitted a new drug application for indiplon to treat insomnia in both adults and the elderly. (See BioWorld Today, Oct. 20, 2004, and Dec. 17, 2004.)

An important feature of Silenor is that its active ingredient is not a Schedule IV controlled substance, and it has performed well in Phase II trials.

Aside from Silenor, Somaxon is advancing oral nalmefene for impulse-control disorders. The company's partner, Turku, Finland-based BioTie Therapies Corp., completed a Phase II trial in 2003 of the drug to treat pathological gambling. Somaxon plans to start a double-blind, randomized, multicenter Phase II/III trial in the third quarter in pathological gambling, as well as a Phase II proof-of-principle study to treat nicotine dependency. Data from those trials should be available in the middle of 2006.

Formulation of a third product, Acamprosate, is being conducted to prepare it for clinical trials to treat movement disorders. Approved in Europe for 15 years and in the U.S. since the beginning of this year, the drug is used to help alcoholics abstain from drinking. In that field, Alkermes Inc., of Cambridge, Mass., in April filed a new drug application for Vivitrex to treat alcohol dependence. (See BioWorld Today, April 4, 2005.)

With Acamprosate, "we're talking about a drug that's been around for a while, and is widely used in humans," Cohen said. "A great deal is known of its safety profile, but we have a way to use the drug in a new way."

Boston-based MPM Capital Partners led Somaxon's Series C round, which included investments from Palo Alto, Calif.-based Prospect Ventures and existing investors, Domain Associates LLC, of Princeton, N.J.; BA Venture Partners, of Foster City, Calif.; Montreux Equity Partners, of Menlo Park, Calif.; and CDIB BioScience Ventures, of Taipei, Taiwan.

As a result of the financing, Kurt Wheeler and Ilan Zipkin, both of MPM, joined Somaxon's board.