By Brady Huggett

Morphotek Inc. raised $10 million in its second round of financing ¿ money brought in to assuage the firm¿s growing pains, but also to fuel further growth.

¿The funds will be used to increase our infrastructure,¿ said Nicholas Nicolaides, CEO and president of Philadelphia-based Morphotek. ¿We¿re hiring to expand our scientific personnel, as well as some senior management and a chief financial officer.¿

Morphotek will allocate some of the $10 million toward a new base, leaving behind the 1,500-square-foot home that it is bursting out of.

¿We¿ll be moving to a [20,000 square-foot] facility,¿ Nicolaides said. ¿It¿s good. We are already now starting to expand our scientific personnel and it¿s getting tight.¿

The company¿s burn rate is difficult to draw a bead on, Nicolaides said, because of the rapid growth Morphotek is undergoing, but the figure is climbing. The funds could last anywhere from 20 months to three years, depending on if Morphotek executes its goals in its business plans, Nicolaides said.

Applied Genomic Technology Capital Funds, of Boston, led the round, with Burrill & Co., of San Francisco, and CB Healthcare Ventures, also of Boston, also participating as new investors. Tonbridge Capital, of England, and Trieste Investment Group, of Japan, re-upped investments for Morphotek¿s second round. Venture funding is scarcer now, but Nicolaides is pleased with his triad of recruits.

¿It was tight, and we were fortunate,¿ Nicolaides told BioWorld Today. ¿We¿ve had a lot of interest by several groups, and we were able to choose three out of a half-dozen or so.¿

Nicolaides said all Morphotek¿s investors have indicated interest in another round of financing when the time comes, for now the company is concentrating on growth and won¿t consider its next financial move until the beginning of 2002.

As of Monday, the company had seven employees, but that number should increase to nine before week¿s end and grow to 19 by 2002. The funding puts Morphotek over $12 million raised since it began operations in May 2000, including a $2 million first round. (See BioWorld Today, June 5, 2000.)

The company has built itself around morphogenics, its technology platform designed to allow cell mutation.

¿Our technology exploits a spell-check¿ function that all evolving host organisms use to ensure that their DNA is the same as the parental genome,¿ Nicolaides said. ¿We shut the spell check off, then allow them to evolve. As the cell divides, it replicates the genome. When the spell check is turned off, it begins to have many mistakes and we select for those that have commercially relevant traits.¿

Nicolaides offered examples of how the technology can be applied.

¿We are using it right now for our antibody therapeutics program,¿ he said. ¿We take an antibody-producer cell, allow it to go through genetic evolution and identify subclones that now produce higher-affinity antibodies and/or higher-producer strains, which are important for manufacturing.¿

Nicolaides said Morphotek is applying the technology in the agricultural field as well, generating commercial crop plants naturally resistant to herbicides or resistant to the ripening effects of ethylene, as well as other traits.

Morphotek has not signed any partners, but is in negotiations with ¿several groups,¿ Nicolaides said, and the company is expected to announce something by the end of the third quarter.

The second-round money, Nicolaides said, puts Morphotek in the game.

¿Bringing in this syndicate of investors brings additional credibility to our business model and our technology,¿ he said. ¿We will now be able to bring in the needed resources to compete in the functional genomics arena.¿