BioStratum Inc. raised $9.5 million in a bridge financing to fund Phase II development of its lead product, Pyridorin, which has proven efficacious in clinical diabetic kidney disease.

"I think [the financing] has been driven primarily by the results from our first Phase II study," BioStratum President and CEO Robert Schotzinger told BioWorld Today. "We believe we have hit the first of several key milestones at a biotech company - demonstrating that our lead product is efficacious in humans. That's going to put us in a different realm relative to other biotech companies out there, both in terms of private financing and, hopefully in the future, public financing. We view this as a turning point in the company's history."

The private round remains open as BioStratum expects to tack on additional investments from other shareholders before the end of next month. The company has raised about $71.5 million to date in two prior venture capital rounds and the latest financing, and Schotzinger said it would begin to pursue a Series C round in the fall.

The bridge funding involved four current investors: HealthCap, of Stockholm, Sweden; BankInvest, of Copenhagen, Denmark; Liftaeknisjodurinn hf, of Reykjavik, Iceland; and Equity Resources Group Inc., of Cambridge, Mass.

Schotzinger, who was recently promoted to his current position following a 10-month stint as BioStratum's president and chief operating officer, said the latest funding would "provide a sufficient runway to close on a Series C financing as well as complete a corporate partnership for Pyridorin." He originally joined BioStratum in November 2000 as its vice president and chief medical officer.

Privately held BioStratum plans to use the funds to complete its Pyridorin Phase II program in diabetic kidney disease and to accelerate its development of second-generation inhibitors of advanced glycation end-product (AGE) formation. The company said AGEs are believed to cause diabetic complications such as nephropathy, blindness (retinopathy) and nerve damage (neuropathy).

Clinical results from a trial of its lead drug support such thinking.

Findings from the first of three six-month Phase II trials of Pyridorin point to the product's safety and efficacy in treating diabetic nephropathy. More specifically, data from the randomized, double-blinded, placebo-controlled study showed a statistically significant decrease in the rate of rise in serum creatinine, a marker for the progression of diabetic nephropathy, in Pyridorin patients compared to those receiving placebo.

"Certainly other companies in the past have looked at inhibiting AGEs as a method of treating diabetic complications," Schotzinger said. "We are focusing on a very unique and, we think, very relevant target. We believe that the latest data validate that we have focused on the right target moving forward."

He said the company would report more detailed study results at the November meeting of the American Society of Nephrology in San Diego.

The product is partnered in Japan with Tokyo-based Kowa Co., which is funding the program's development in that country and eventually will pay sales royalties to BioStratum. Schotzinger said discussions are under way to construct a similar arrangement in the rest of the world, including the U.S.

Beyond Pyridorin, BioStratum's earlier-stage AGE inhibitors include a series of small molecules that have been shown in vitro to be more potent than Pyridorin. Its lead compound from the program, BST-4997, has shown in preclinical rat models to be effective in diabetic neuropathy.

"Pyridorin has been shown to have the same effect," Schotzinger said, "but this product was effective to the same extent at a 10-fold lower dose. So it is more potent than Pyridorin both in in vitro and in vivo animal models."