Two early stage companies finding it difficult to arrange financing bythemselves found a solution through a merger.IDUN Pharmaceuticals Inc. and Apoptech Inc. said Monday theycompleted a merger, and also raised $7.2 million in venture capital.The merger was accomplished through a stock swap of the privatelyheld companies, both of which were formed to develop drugs based onapoptosis, or programmed cell death.Apoptech gained a 20 percent interest, before the financing, in thecombined company, which will be called IDUN Pharmaceuticals andlocated in La Jolla, Calif."There's only a limited supply of capital out there from venture sourcesand later-round public financing," Lawrence Bock, founder of IDUNand general partner at Avalon Medical Partners, told BioWorld. "We'rein a situation where we have 300 biotechnology companies competingfor public financing money. That tells the venture industry they have toactively consolidate these companies prior to public financing."Costa Sevastopoulos, formerly with Delphi BioVentures, whichprovided seed financing for Apoptech, will be IDUN's chairman andacting CEO."We were both at an early stage in the same area of programmed celldeath," Sevastopoulos told BioWorld. "We had some importanttechnology which I knew IDUN would eventually need, and they hadtechnology Apoptech would need. The combined company can exploitall the possibilities."The venture financing was led by Accel Partners and VenrockAssociates. Also contributing were Avalon, Delphi, ARCHDevelopment Corp. and Institutional Venture Partners. Bock said thefinancing should fund the company for two years, while Sevastopoulossaid "we're working hard to get corporate collaborations."Several Different ApproachesIDUN is involved in three research programs, each inhibiting the celldeath process at a different point. One is at the level of cell deatheffectors, one at the area of cell death inhibitors and one at the level ofcell death stimuli, involving various external triggers of cell death.Apoptech has focused on developing small molecule drugs to modulatethe activity of bcl-2, an anti-apoptosis protein. The company hastechnology licenses for cell death genes and related technologies fromthe La Jolla Cancer Research Foundation, a spin-off from Apoptech,and the Wistar Institute, including three issued patents on the bcl-2gene.IDUN recently licensed the cell death gene bax from WashingtonUniversity in St. Louis, and licensed the rights to the gene bcl-x fromthe University of Michigan and ARCH Development. IDUN also haslicensed from MIT the cell death genes ced-3, ced-9 and rpr.The cell death effector program involves the interleukin convertingenzyme (ICE) superfamily. The stimuli program is related to anundisclosed proprietary enzyme involved in free-radical generation,and the inhibitor program involves the bcl-s superfamily, whichincludes the bcl-2 and bax genes. Bock said the goal is to file aninvestigational new drug application in the stimuli area within twoyears, and find corporate partners in the other areas.Two other companies, LXR Biotechnology Inc. and ApoptosisTechnology Inc. are involved in the field of apoptosis."We felt in order to gain a dominant position, a merger with Apoptechmade sense," Bock said. "The valuation of the combined company washigher than the valuation you could get from the sum of the parts." n

-- Jim Shrine

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