National Editor

Tapping into Japanese venture capital, privately held Acologix Inc. raised $39.6 million in a Series B financing, mainly to push its bone drug into Phase II trials.

The money is enough to last about three years, said Yoshi Kumagai, president and CEO of Emeryville, Calif.-based Acologix - although the company is seeking partners to help with development costs for a pipeline that includes three main projects.

"If possible, we would like to keep [rights to] at least one compound," he said.

The lead drug candidate, Dentonin (AC-100), is a human-derived small peptide that promotes key bone formation events. Target indications are osteoporosis, fracture healing and dental-tissue regeneration.

"Just by injection to the site, this can accelerate the healing of the bone fracture," Kumagai said, adding that the drug has possibilities in periodontal disease and other dental indications, about which data will be published soon.

"We plan to start Phase II [trials] in at least one of these indications this year," he said, but which will be chosen is "a hard question. We cannot run three or four Phase II studies by ourselves, so we need to choose one, or up to two."

In the pipeline behind AC-100 is Ossomar, the first in a class of novel compounds based on the mechanism of seashell formation, for which the company plans to submit an investigational new drug application in 2005.

Ossomar - as tested in a widely accepted postmenopausal osteoporosis model - has shown significant, bone-specific anabolic activities, including increased bone mass and mechanical strength, while retaining normal, healthy bone morphology. It could become the first oral drug with such activity for osteoporosis.

Also expected in 2005 is the IND for Phosphatonin, an endogenous polypeptide hormone that reduces serum phosphate levels and is being developed for hyperphosphatemia in chronic kidney disease. That is the one for which Acologix most likely will try to retain rights, Kumagai said. The drug apparently can normalize serum phosphate, hold off dialysis and cut back on heart-related events caused by vascular calcification.

The trial protocol for Phosphatonin likely will be relatively simple, and "that's why we assume we could develop that one in the U.S. by ourselves," he said.

Started in 1992, Acologix focuses on studying the body's metabolism of minerals and extracellular matrix molecules that form the biological scaffold for bone and connective tissue. The company ran on about $4 million for the first eight years, and then raised about $13.5 million in venture funding to operate from late 2000 through 2003. (See BioWorld Today, Nov. 27, 2000.)

Formerly known as Big Bear Bio Inc., the firm changed its name to a title derived from the Greek word "acology," which means "the science of remedies."

The financing, which relied mainly on Japanese venture capital, was led by $30 million from Nomura Securities Co. Ltd., of Tokyo. Many people are not aware of the active venture capital in that country, Kumagai said.

"I did not know it myself," he said, adding that the financing "was a very short project," which started in October and closed April 30.

"The biotech index [in the U.S.] is still not as good as the other sectors," he noted, whereas the growth in biotechnology in Japan is outpacing other fields, as the Japanese seek a new industry to revive a decade-long economic slump.

"Thinking about the future, although we have raised $40 million, this will not be sufficient to reach our product development goals," Kumagai told BioWorld Today. The company has 10 full-time staffers, but expects to add in the research and development department. By the end of this year, the firm plans to have 15 full-timers and by the end of next year, 25.

So robust is biotechnology in Japan that Acologix is considering a bid to go public there rather than in the U.S., Kumagai said.

"We need to watch the markets carefully and make a decision at the appropriate time," he said.

Kumagai's background includes a stint with Tokyo-based Kirin Brewery Co. Ltd., which diversified into biotechnology in the early 1980s.

"I was one of the first people in the pharmaceutical division," he said. Kirin entered a joint venture with Amgen Inc., of Thousand Oaks, Calif., in 1984 to develop and market erythropoietin, and expanded the deal in 1986 to include human granulocyte-colony stimulating factor. Kumagai came from Japan to work on the joint venture with Amgen, which he did from 1985 to 1992.

"When [Acologix] was started, there was no compound and no research at all," he said. After being involved with EPO, he "wanted to develop more in the kidney disease area, because the kidney is closely related to bone, in terms of biology. I was involved in the osteorenal area from the beginning."

Participating in the Series B round as new investors were a handful of Japanese firms, including Nomura Research and Advisory Co. Ltd., Softbank Investment Co. Ltd., SMBC Capital Co. Ltd. and Tokio Marine and Fire Insurance Co., as well as previous investor AquaRIMCO. JAIC America, of Palo Alto, Calif., also took part.