Ziopharm Inc. raised $18.1 million in a Series A round to fund ongoing clinical studies of its two small-molecule cancer therapeutics modified from existing treatments.

Paramount BioCapital served as the lead placement agent for the convertible preferred stock offering, with net proceeds also going toward licensing fees, working capital and general corporate purposes.

Founded in January 2004 with a $5 million seed round, the Charleston, Mass.-based company focused on in-licensing drug candidate families that have shown prior efficacy in humans and developing therapeutics with greater activity against a range of cancers, said Ziopharm CEO Jonathan Lewis.

Employing a "lean and mean" approach, the company operates as a semi-virtual organization to "leverage the skill and experience of industry veterans to do it right the first time around," he told BioWorld Today. Ziopharm's strategy is to take drugs that have been shown to work against cancer "and make them a whole lot better."

The lead product, Z10-101, is from a family of organic arsenic molecules licensed last year from the University of Texas M.D. Anderson Cancer Center and Texas A&M University. Two Phase I trials, one in blood cancers and one in solid tumors, are under way at M.D. Anderson, and results are expected at the end of the year. Meanwhile, the company is gearing up to begin Phase II studies. Preclinical studies are scheduled to begin this year with a second organic arsenic compound, ZIO-102.

"It's been found that inorganic arsenic has a very strong anticancer effect," Lewis said, adding that it has been used to treat a certain type of leukemia. The problem with inorganic arsenic is its toxicity, but Ziopharm hopes to eliminate that by relying on the organic molecules linked to arsenic.

"We believe we can get up to 50 times higher in terms of dose because it is less toxic," he said.

In the Phase I trials, dosage levels are starting out at 14 times higher than the inorganic dose.

Though Lewis said the company will present more details on the drug's mechanism of action at the American Society of Hematology meeting in December, he said ZIO-101 appears to kill cancer cells by causing apoptosis and cell-cycle arrest, using several cell-signaling pathways.

Most important, Lewis said, the small molecule has shown in animal studies, even at extremely high doses, "to have no effect on normal cells, but a strong effect on cancer cells."

Ziopharm's second clinical-stage product, ZIO-201 (isophosphoramide mustard-lysine), is in Phase I studies in patients with late-stage cancers, and Phase I/II trials and two Phase II trials are expected to begin during the second half of the year. That small molecule was licensed from DEKK-Tec Inc., of New Orleans, which worked with the Southern Research Institute to create soluble and stable compounds using active metabolites of existing cancer drugs, primarily ifosfamide and cyclophosphomide, which have been used for the past 10 to 20 years, Lewis said.

"The difficulty with those two [drugs] is that, when activated or metabolized, they have one active part that kills cancer," he said, "and then other parts that have no anticancer activity but cause a lot of toxicity."

He added that ZIO-201 also appears to work in cancer cells that are resistant to ifosfamide and cyclophosphomide.

Proceeds from the Series A round are expected to carry the company into the middle of 2006 and progress ZIO-101 and ZIO-201 through Phase I and proof-of-concept trials.

"We are also looking for a third product," Lewis said.

The company, which outsources much of its work, has nine employees, though that number is expected to increase to 15 by the end of the year as the lead products move deeper into clinical development.

"We have a huge network of people," from academic institutions to cancer specialists that work on those products, he added. And developing molecules built upon previously established data "offsets a lot of the risk of drug development and gives us a much better understanding of how to best develop these drugs."