Psychiatric Genomics Inc. raised $17 million in the initial tranche of its Series B financing round, which will remain open until the end of the year for additional funds.

"It was important for our investors to understand how a genomics approach was different and advantageous in the field of psychiatry," PGI CEO Richard Chipkin said. "Investors grasp pretty quickly the pharmaco-economics space of psychiatry - it's a very big space, and compounds that are successful tend to be blockbusters. So they grasped right away the idea of working in this area to gain compounds that could be very lucrative."

He added that drug discovery in polygenetic disorders of mental illness require a multigenomics approach, which allows research of multiple targets simultaneously.

Chipkin said the Gaithersburg, Md.-based company, which has raised $29 million to date, hopes to close the round at $25 million to $30 million. He said the financing could carry the company into 2005, to the point of another IPO window.

PGI said it would use the money to fund its efforts to find next-generation compounds to treat psychiatric diseases. The company is basing its discovery efforts on postmortem human brain samples, which it analyzes with microarray technologies to identify their gene expression patterns, which are known as disease signatures.

"We create a large genomic database about a psychiatric disease," Chipkin said. "In addition, we do genomic profiling of drugs used to treat the disease, so we get a pharmacologic genomic database as well."

Using human neuronal cell culture systems, PGI then identifies drug signatures - the genomic effects of clinically relevant therapeutics. This information, combined with the knowledge of disease signatures, allows the company to select a set of genes used as the endpoint for its robotic system for drug discovery - the Multi-Parameter High Throughput Screen (MPHTS).

The MPHTS determines the action of new chemical entities on the function of multiple genes at the same time.

"It enables us to look at novel compounds and how they affect those specific genes in a high-throughput mode," Chipkin said. "Then we are able to test the effects of drugs on those select genes."

PGI said drugs developed through its approach have potential for improved efficacy, reduced side effects and earlier onset of action. He said the company has developed a few lead series in bipolar disorder, adding that PGI hopes to move a compound from its bipolar disorder program toward an investigational new drug application in the first quarter of 2004.

Another program might progress a candidate at a similar pace, he said, involving treatment of autism. But that program differs slightly in that PGI is exploring a small-molecule approach.

"But we do have a very active program in genomics for autism," Chipkin said, "so the next generation after that would be a genomics-based compound."

To further its discovery process, PGI plans to seek partners for development and commercialization of some of its products.

"In our partnering goals, we seek to find interested partners at all stages of development," Chipkin said, though he added that the company plans to keep compound rights through the marketing stage for the autism indication.

Most of the company's partnerships to date have been technology-based collaborations. As part of an existing collaboration with the Stanley Medical Research Institute in Bethesda, Md., Psychiatric has gained access to the institute's collection of tissue samples from patients suffering from bipolar disorder, schizophrenia and depression. Stanley joined Psychiatric Genomics' lineup of new investors, and as part of its investment gained a seat on PGI's scientific advisory board for Michael Knable, the medical director at Stanley. During his five-year tenure at the institute, Knable has worked to develop its schizophrenia and bipolar research programs.

"We're very gratified that the Stanley Research Foundation has not only been willing to share its tissue resources with us, but also thinks so highly of the work we're doing with the tissue resources they're willing to share financial resources," Chipkin said.

The round was led by Catalytix LDC, a Cayman Islands-based investment fund. Returning Series A investors included Oxford Bioscience Partners, of Boston; GIMV NV, of Antwerp, Belgium; Emerging Technology Partners, of Rockville, Md.; CIBC, of New York; the Maryland Department of Business and Economic Development in Annapolis; Alexandria Real Estate Equities LP, of Pasadena, Calif.; and an unnamed private investor.