Just three years after it began building a pipeline of small-molecule candidates, Kalypsys Inc. garnered $29 million in a Series B financing to advance its products into the clinic.

The San Diego-based company focuses on the areas of oncology and inflammation, but also has targeted activities in metabolic and cardiovascular diseases.

The financing will enable it to continue its early stage research and drug discovery, said its co-founder and chief business officer, Pratik Shah.

"It really allows us to accelerate our plans to build the organization and move the pipeline forward," he told BioWorld Today.

In total, the company has raised $72 million since its 2001 inception. As it continues to discover new small molecules, it plans to do early preclinical and some clinical work in-house, then partner its products down the line.

"The partnering strategy for us is to move programs forward to a meaningful value point," Shah said. "That could be proof of concept in man. It could be pre-IND for specific molecules."

Kalypsys is a spinout of the La Jolla, Calif.-based Genomics Institute of the Novartis Research Foundation. It was created with ultra-high-throughput screening, chemical, biological and informatics technologies meant to improve the drug discovery research process and generate clinical candidates for Kalypsys and its partners. As it builds its pipeline, it has preclinical small molecules for various indications advancing toward the clinic.

The company has grown from about 25 employees two years ago to just less than 100 this year. It has licensed out the use of its technology to companies like CV Therapeutics Inc., of Palo Alto, Calif., and Merck & Co. Inc., of Whitehouse Station, N.J. (See BioWorld Today, March 27, 2003.)

Shah said Kalypsys is unique from other biotech companies that focus on protein therapeutics or RNAi products, as well as those that provide tools or solutions for research.

"There's the few that do novel small-molecule research," he said, "so we fall into that category, and we are doing it in a way that doesn't rest the fate of the company into a handful of programs, but creates an organization that can produce sustainable candidates year in and year out."

Kalypsys' drug discovery process begins by developing assays using pathway-based models of human disease and toxicity. The company then conducts drug screening with its Discovery Ultra-High-Throughput Screening System.

In June, Kalypsys entered an agreement potentially worth $30 million with the National Institutes of Health in Bethesda, Md., providing access over four years to its technology. The NIH's Chemical Genomics Center is using Kalypsys' platform as it produces chemical tools to better understand the function of human genes. Any data generated would become freely available to the scientific community. (See BioWorld Today, June 10, 2004.)

The deal might have sparked the interest of investors and helped raise the Series B financing, but Kalypsys intended to raise the funds regardless, Shah said.

"Good news always helps, but I think we were well on our way toward doing the round," he said, "and this was something that while investors weren't really counting on it, it was terrific to have entered into that significant relationship and it kind of got the company on the national map."

Invemed Catalyst Fund LP, of New York, led the Series B financing, which included investments from The Sprout Group, of Menlo Park, Calif.; Tavistock Life Sciences, of Windermere, Fla.; Novartis BioVenture Fund, of La Jolla, Calif.; CMEA Ventures, of San Francisco; Aravis Ventures, of San Francisco; 5AM Ventures, of Menlo Park, Calif.; Invemed Associates, of New York; and KT Venture Group, of San Jose, Calif.

The new lead investor gains a board seat in connection with the financing. Invemed Associates' president, CEO and chairman, Kenneth Langone, joined the Kalypsys board. Unrelated to the financing, the company also promoted John McKearn to president and chief scientific officer, and appointed Al Heller to its board.

Several of the Series B investors also participated in the company's $43 million Series A round conducted in 2002. (See BioWorld Today, April 3, 2002.)

"There was strong participation from existing investors, which I think was a vote of continued confidence and support," Shah said.

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