Bucking the trend in a tight-fisted economy, Peninsula Pharmaceuticals Inc. raised $22.1 million in venture capital financing.

"Not only were we raising millions, but the market was declining, which makes it even more difficult," President Paul Truex said. "I guess there are two key elements to our program. One, we have put a strategy together to license in clinical-stage products, and not a discontinued product. The second is that it's a clinical program, so a lot of the risk that's associated with either our development program or our compound in general has already been identified and eliminated."

The privately held company, which focuses on developing and licensing late-stage clinical products, has raised $22.6 million to date since its founding in the past year. Founded by Truex and three others, Peninsula got under way in February with $500,000 in initial investment funds.

The Fremont, Calif.-based company said it would use the Series B round of financing primarily to advance its first product, licensed from an unnamed Japanese pharmaceutical firm. Peninsula confirmed its first license agreement, though the company said it would identify the late-stage clinical product later this quarter.

"The money is really intended to get us into and through some of our late-stage clinical development program for our lead product that we licensed from our partner," Truex said, adding that the product has undergone testing through Phase III overseas. "From a timing standpoint, that will get us into 2004. Some of the additional money will be used to license additional products that we're looking at."

The company follows a business model absent the expense of internal research and discovery, instead focusing solely on licensing candidates from pharmaceutical partners. Truex added that getting involved in ongoing programs helps Peninsula avoid manufacturing expenses. Its first compound, developed to date outside of the U.S., exemplifies this plan.

"Because it is outside the U.S., there are a couple of things we need to do here first," Truex said. "We need to test it in a U.S. population under a U.S. [investigational new drug application], and again because it is from outside the U.S., we need to conduct some smaller, focused clinical studies that allow us to bridge the efficacy between the population where this drug has originally been developed and our own."

The 11-employee firm initially is focusing on antibacterial and antiviral products to treat infectious diseases, due to what Peninsula calls their probability of clinical success following Phase I, low development costs and shorter development timelines.

Down the road, Peninsula said it would pursue therapeutic products to treat gastrointestinal problems and cancer.

"We've stayed out of research and discovery because of the high risk and low probability of success," Truex said. "There are just a number of compounds in other therapeutic areas that are late-stage clinical programs, not developed here in the U.S., that present opportunities for us to expand our portfolio."

The investment was led by Princeton, N.J.-based Domain Associates, and included life science venture capital firms Canaan Partners, of Palo Alto, Calif.; A.M. Pappas & Associates, of Research Triangle Park, N.C; Montreux Equity Partners, of Menlo Park, Calif.; Mitsubishi International Corp., of New York; and Sears Capital Management Inc., of the San Francisco area.