West Coast Editor

To push its multiple sclerosis drug from the preclinical stage into Phase II trials, Virogenomics Inc. spun off Artielle ImmunoTherapeutics Inc. and nailed down an agreement for $11 million in venture capital funding.

Portland, Ore.-based Virogenomics gets $4 million for Artielle in the first closing, with the remainder in two subsequent closings upon the achievement of certain milestones.

"[The closings are] based upon showing that the drug can get into trials," said Andrew Goldstein, vice president of product development at Virogenomics.

The first of the closings would relate to work on chemistry, manufacturing and controls, plus filing an investigational new drug application, Goldstein said. Designing trial protocol and proving the drug is safe in Phase I trials would earn the second closing.

At the center of the deal is RTL1000, which emerged from technology licensed from Oregon Health & Science University (OHSU) and has been granted orphan drug status by the FDA. RTL stands for "recombinant T-cell receptor ligands," and Virogenomics believes the new company, Artielle - the name is derived from RTL - can deploy the university's methodology against a wide range of autoimmune diseases, such as rheumatoid arthritis, as well as MS.

Proceeds from the financing will be used over an expected three years to complete preclinical trials, manufacture RTL1000 under current good manufacturing practices and advance the drug to the first Phase II study.

Proving RTL1000's efficacy is not part of the current deal, but if Artielle manages to do so, "then we're quite confident we'll be able to get additional financing to move further ahead," Goldstein said, and "by that time the platform itself should be applicable to other diseases." Privately held Artielle, like its privately held parent, Virogenomics, will be based in Portland.

Virogenomics was founded in 2001 by Oregon Life Sciences LLC to snap up rights to early stage technologies, develop them and spin them into new firms. Artielle is "our first success, if you will, in taking one of several technologies that Virogenomics licensed to the next step," Goldstein said, adding that another such spin-off is "probably a year and a half away."

From shareholder OHSU, Virogenomics also has licensed methods for identifying genes that appear promising as drug targets in areas such as HIV, cardiovascular disease and cancer.

"It's quite a broad spectrum," he said. "More recently we have licensed other technologies having to do with treating various kinds of stroke."

Sanderling Ventures, of San Mateo, Calif., led the financing, and was joined by UV Partners, of Salt Lake City; Tenex Greenhouse, of Burlingame, Calif.; and Northwest Technology Ventures, of Portland.

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