CyDex Inc. raised $17 million in its Series B round from an international syndicate of venture capital investors.

The Lenexa, Kan.-based company said the funds would allow it to move ahead with several new pharmaceutical products that it plans to advance internally and also out-license for further development. Through a couple of arms of its business model, CyDex is developing a pipeline of products based on its delivery technology, Captisol, which it also out-licenses for use in other companies' drug programs.

That element of the business has produced the most tangible evidence of the technology's viability to date - two Captisol-enabled products are marketed by Pfizer Inc. - and a dozen other such drug formulations are in development through partnerships with biotech and pharmaceutical firms.

"That's what really has gotten the attention of the venture capital community," CyDex CEO John Siebert told BioWorld Today. "We're developing products, [and] I think in today's market, unless you have products already on the market and you have a focus on developing products, you're going to have a tough time raising money."

Captisol, a modified cyclodextrin for use in drug development and formulation, is used for delivery to improve a compound's solubility, stability and bioavailability. The technology works by forming complexes with water-insoluble drugs to make them water soluble. Captisol-enabled drugs can be delivered by injection, orally, through inhaled formulations and in ophthalmic applications.

The company's business model generates revenue through up-front license payments, milestone payments from collaborations, royalties and sales of bulk Captisol. Licensees include firms such as Pfizer, of New York, as well as biotech firms like OSI Pharmaceuticals Inc., of Melville, N.Y., and TargeGen Inc., of San Diego.

Siebert said the latest private funds would carry CyDex to the point it becomes cash-flow positive, saying that the firm would consider going public or selling the business at that time. But that remains two or three years away for the company, which has raised $29 million to date. Its Series A round generated $12 million in financing; prior to that, the 11-year-old company sustained operations through angel investment rounds and funding from friends and family.

"I think the key things [before an exit event] will be getting some of our products that we're developing on our own partnered with some pharmaceutical or specialty pharmaceutical companies," Siebert said. "Secondly, I would like to get at least one of our own products into Phase III testing."

CyDex is building its pipeline by applying its technology for formulations of drugs that are off patent or soon to go off patent. Its in-house development includes pulmonary products, solid oral-dose products and products for central nervous system disorders. Down the road, CyDex also plans to develop oncology products.

Products the company has reformulated with Captisol include propofol for anesthesia, amiodarone for arrhythmia and fosphenytoin for seizures. Out-licensing deals for the products are in the works, Siebert said.

CyDex also has begun clinical testing of oral liquid forms of sertraline (Zoloft, Pfizer) and fexofenadine (Allegra, Aventis SA). Clinical plans are in the works to test a nebulizer solution of budesonide (Pulmicort, AstraZeneca plc). The company expects to take one of those forward on its own and partner the other two, though it hasn't decided which to keep.

"CyDex's technology allows us to make true solutions of inhalation steroids like budesonide, fluticasone and mometasone," Siebert said. "So we can do nebulized solutions that are much more effective than current products, which are suspensions. In suspensions, the larger droplets contain the active [pharmaceutical ingredient], but the smaller droplets don't. If you have a true solution, every droplet has the same concentration of active."

CyDex has an exclusive license to Captisol and other modified cyclodextrin technology from the University of Kansas Higuchi Biosciences Center for Drug Delivery Research. The company is developing new cyclodextrins to address a broader range of insoluble products.

"We have found that no one size fits all in the cyclodextrin business," Siebert said. "Captisol provides enabling solubility and stabilization for 25 percent of the insoluble molecules out there. We think some of these new cyclodextrins we're looking at will bring us up to be able to address the needs of 75 percent to 80 percent of all the insoluble molecules."

The life sciences fund of Sanders Morris Harris, a Houston-based investment firm, led the financing round. SR One Ltd., the venture arm of London-based GlaxoSmithKline plc, and Eastman Ventures, the venture capital arm of Kingsport, Tenn.-based Eastman Chemical Co., also participated. They were joined by several existing investors, including Techno Venture Management, of Munich, Germany; Clariden Investment, of Zurich, Switzerland; Private Equity Direct Finance, also of Switzerland; an individual investor named Paul Leach; and members of CyDex's management.

CIBC World Markets Corp. in New York managed the private placement.

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