BioWorld International Correspondent

MUNICH, Germany - Intercell AG raised EUR30 million in its third round of financing, from a syndicate of venture capital firms led by Global Life Science Ventures (GLSV).

Intercell, of Vienna, Austria, concentrates on therapeutic and preventive vaccines designed to work against both infectious diseases and certain types of cancer. The company, which was founded in 1998, has one product being prepared to enter Phase III trials and another that the company expects will enter Phase III trials in the second quarter of 2004.

"What comes together in Intercell is a mix of world-class experience in the vaccine space and a part of the biotechnology industry - high-technology vaccines - that is seeing a comeback," Werner Lanthaller, chief financial officer at Intercell, told BioWorld International. "We are a leader in this space, and we will continue to be one of the frontrunners."

Hans Kuepper, a partner with GLSV who is joining Intercell's board, told BioWorld International that "Intercell has a very interesting approach to vaccines." Furthermore, "it is one of the more mature companies in terms of management, in terms of their pipeline, and in terms of their very good investor base."

Intercell is developing vaccines against infectious diseases such as hepatitis C and tuberculosis, and against certain types of cancer. The company is working on what it calls "smart vaccines," for which the firm uses proprietary technologies to identify and synthesize antigens.

"We always go back to the human immune system and work with patients who have had an immune response to the disease," Lanthaller said. "Why were they able to get rid of the disease? We undertake a very systematic analysis of the immune response these patients mount. The idea is to stimulate their response in patients who do not have the natural response."

The company's antigen identification program and vaccine improvement program are the two key elements of its technology platform to produce new vaccines. Intercell currently has a therapeutic hepatitis C vaccine that is being tested in a Phase II clinical trial to assess safety, efficacy and dosage. The company also is preparing to begin Phase III trials of a vaccine for Japanese encephalitis.

"The new capital will be used to drive the testing for both the hepatitis C vaccine and the Japanese encephalitis vaccine," Lanthaller said. "We expect to begin Phase III trials for both vaccines in the first half of 2004."

Kuepper said that the two vaccines are important parts of Intercell's revenue stream. "There are other sources of revenue, including new partnerships and advancing products not quite to the market but partnering them," he added.

Existing investors participating in the current round include Apax Partners Funds, Nomura, TVM and NIB Capital. The syndicate also included STAR Ventures, a new investor. Since its founding, Intercell has raised approximately $98 million. The first round, in 1998-99, raised $5.5 million, and the second, in November 2000, raised $30.4 million. More than $28 million in investments outside of these rounds was raised by the Austrian firm Kapital & Wert. Intercell has also received investments from local and national public sources.

"We raised money while we still have a secure cash position," Lanthaller said. "This made the process of evaluating strategic options for the company much more comfortable for all participants. We have made this move strategically, knowing that we can build the company together with the investors the way we all want to build it."

The capital will fund Intercell's operations through at least 2005. "By that time there will be a much clearer picture," Kuepper said, both of the company's results and the overall state of the market. "Eventually the market will be better than now. The fundamentals are still there.

"This financing will bring us to a stage where we can reach profitability on the current business plan," Lanthaller said. "We are following the idea of building a true vaccine company, and we will spend the money smartly."