By Mary Welch

Ambryx Inc. raised $12.2 million from the sale of Series A preferred stock in one of the larger initial rounds of financing for a biotechnology company this year.

The San Diego-based company sold approximately 8.6 million shares at $1.42 each.

"After we first started out as a company, we intentionally went under the radar scope for four to six months while we put together the pieces of our intellectual property, got our financing in place and started collaboration discussions before coming out with more news," said Paul Grayson, president and CEO.

"One of the great challenges when you're a little different is that it takes a while to get comfortable with the company. But at the end of the day, we're so differentiated that they [financial backers] really like it. There's not too many companies like this so they want to get involved."

Although Ambryx's aim was in the $7 million to $9 million range, the company could have raised even more, he said.

"In the end we decided to cut it back down," Grayson said. "We could have raised $18 million but the challenge is dilution. The success of our financing acknowledges the potential for proprietary discovery technology to profoundly impact how people experience the world through chemosensation, particularly taste and olfaction."

The private placement was led by Bay City Capital, of San Francisco. Other participants included Domain Associates, of Princeton, N.J.; Prospect Venture Partners, of Palo Alto, Calif.; Kingsbury Capital, of San Diego; and Rho Management Co., of New York, as well as individual investors including the company's founders, Lubert Stryer and Grayson.

The company will use the cash infusion for general research and business purposes, including hiring staff and building onto a facility.

Ambryx bills itself a "consumer-tech" firm rather than a biotechnology company but it uses a new group of G protein-couple receptors (GPCRs) to discover and develop modulators of the "chemo-sensory" experience. GPCRs are well-known mediators of cellular function throughout the body, and as a result are targets for many drugs in development.

The TR1 receptor is believed to respond to sweet stimuli, and the TR2 receptor to bitter substances.

"We are looking at fragrance and flavor in non-regulated applications," Grayson said. "We had been so oriented on taste but in the past four to five months we have learned a great deal about olfactory applications."

For instance, the company is looking at antagonists that block smells and agonists, which enhance fragrances. "Obviously this is of great interest to the fragrance industry," he said. "We really are talking about bringing biotechnology to Madison Avenue."

Ambryx would be "foolish" not to take advantage of currently available branding and infrastructure of other companies, Grayson said, but noted that it would "want to have the opportunity to participate ourselves. Consumers expect more and more out of their products and using molecular biology of olfactory action to make new discoveries is going to be very important."

In other company news, Stryer took a leave of absence from Stanford University in Palo Alto, and joined the company as its chief scientific officer. He will continue as chairman.

Stryer, the first president and scientific director of Affymax Research Institute, also of Palo Alto, discovered the light-triggered amplification cycle in vision and developed new flurorescence techniques for studying biomolecules and cells. He also was a co-inventor of the light-activated parallel chemical synthesis technology.

The company also just signed an exclusive agreement with Johns Hopkins University regarding enabling technology and molecules related to chemosensation and olfaction, and with Harvard University regarding a family of chemosensory receptors.

The Johns Hopkins technology includes methods for functional expression of an olfactory receptor library used for ligand identification. The novel set of molecules is implicated in the processes of taste and smell through the binding and presentation of olfactants and tastants.

Harvard's technology includes the DNA sequences and related proteins of a large multigene family encoding novel mammalian pheromone receptors.

"We're trying to stay away from implying clinical benefit," Grayson said. "We're more consumer-oriented. But we're using biotechnology to get to that point and it's not trivial. It's no small challenge."