Spherics Inc. completed a second round of financing, raising $10 million to develop its bioadhesive drug delivery technologies.

"I think our investors view our technology as being unique and very promising, and having a very large target market for our products," Spherics President and CEO David Livingston said. "They also took the time to really familiarize themselves with the technology and understand it. It was that potential that I think created an excitement and enthusiasm about investing in our B round."

The company raised its initial funds - a $4 million Series A round - in January 2000. Two investors in the latest round, Zero Stage Capital, of Cambridge, Mass., and Boston-based CB Health Ventures, were Spherics' first-round investors. Additional second-round investors included PODHolding Inc., also of Boston, and Kingsport, Tenn.-based Eastman Ventures.

"We think this gives us a lot of leeway for the next two years," Livingston said of the $10 million.

Founded as a virtual company in 1997, Lincoln, R.I.-based Spherics develops bioadhesive encapsulation technologies to improve the oral absorption of small-molecule drugs and to enable oral administration of biopharmaceuticals.

Its MacroSphere oral delivery system is designed to increase a drug's gastrointestinal residence time, prolonging the release of medications that treat systemic diseases or diseases of the digestive tract. Unlike other sustained-release approaches that prolong drug exposure in the colon, MacroSpheres does its job in the small intestine. The region's larger surface area makes it more suited to uptake, requiring reduced doses.

Spherics' second oral delivery system, Phase Inversion Nanoencapsulation NanoSpheres, is comprised of minute drug carriers for systemic absorption of small-molecule drugs and proteins that otherwise would not be orally absorbed.

Touting its science as versatile in use with small-molecule drugs as well as proteins, peptides and other biopharmaceuticals, Spherics has applied its technology in preclinical studies with examples of various types of compounds, including paclitaxel and insulin.

"Both of them are compounds that are not orally available in their own right," Livingston said. "But we've been able to use our polymer encapsulation technology to create oral bioavailability."

There is a chronic need for orally available insulin, he said, but oral delivery also is often more convenient.

"There is a very large market for alternative drugs to insulin that can be taken orally, but there is also a large number of diabetic patients for which those drugs are not sufficient," Livingston said. "Any time you can replace an injectable therapy with a more conveniently dosed therapy - namely oral - this is a very large potential market, estimated in various quarters to be over $1 billion."

In the case of paclitaxel, a small-molecule synthetic compound, oral delivery could be valuable as an outpatient form of chemotherapy.

Spherics said the financing provides it with funding to advance its initial programs toward the clinic, aiming to begin Phase I trials for the MacroSphere and NanoSphere delivery systems within the next two years. Also, the funds will be used to expand lab facilities and to increase its 20-person staff.

Spherics recently expanded its headquarters and operations by leasing 15,000 square feet of laboratory and office space, a facility that accommodates its formulation and preclinical activities, and also will house its pilot scale production of clinical-grade formulations. At the same time, Spherics also closed on a $1 million equipment and tenant improvement loan.

Livingston said Spherics plans to capitalize on its technology by partnering with pharmaceutical and biotechnology companies to develop oral formulations of existing drugs in return for research, milestones and royalty payments. The company also plans to internally develop its own molecules, absent of a partnership.