In the biggest start-up financing in biotech history, AriadPharmaceuticals Inc. today was to announce that it has raised$46 million in a private placement of common stock.

Ariad -- the name comes from Ariadne, daughter of King Minosof ancient Crete -- was formed in early 1991 to develop smallmolecules that can affect processes inside cells.

"It was clear to me that developing orally active smallmolecules targeted within cells was the future of the industry,"said Dr. Harvey Berger, founder, chairman and chief executive.Berger was formerly president of the research anddevelopment division of Centocor Inc.

Berger was already setting up a company and hadcommitments from New York investor David Blech to help fundit when he was approached by Avalon Ventures.

"We decided to pool our resources," said Berger, who broughtAvalon and Blech together. Blech provided $1.8 million in seedfunding.

Blech has done several large start-up financings, including $33million in funding for Icos Corp. (NASDAQ:ICOS) and $19 millionin net funding for Texas Biotechnology Corp.

"I figured that to achieve what I wanted to, to build a majorcompany, the best financing strategy was to use Blech'sapproach," Berger told BioWorld. "Traditional venture capital --raising a few million dollars in a series of rounds -- is a goodway to build a company based on a single invention out of aprofessor's laboratory. But if you have a broad technologystrategy led by an experienced management team, then I thinkthere's nothing to match the private placement."

A strong bank balance should also allow Ariad to negotiate anycorporate partnerships from a position of strength. TheCambridge, Mass.-based company also plans to go public fairlyquickly, possibly within the next two years.

Ariad's technology is aimed at developing drugs that affectsignal transduction from the surface of the cell through thecytoplasm to the nucleus, and protein trafficking, the regulationof naturally occurring proteins within the cell.

Intervention at this level is a promising strategy becauseintracellular signal transduction pathways integrate all theinformation that comes to cells, said Lawrence Bock, a partnerat Avalon Ventures.

For example, said Bock, at least five different receptors areinvolved in inflammation, but all share a common signaltransduction pathway. Turning off that single pathway requiresonly one compound.

On the flip side, a receptor binding to a cell may send outsignals turning on multiple genes. Intervention at the receptorlevel would turn off all those genes, but intervening at theintracellular level turns off only the target gene, Bock said.

In general, signal transduction pathways begin with thebinding of a ligand to the cell surface receptor, followed byactivation of a transducing protein found in the plasmamembrane. This activates a membrane enzyme that producessecond messenger molecules, which in turn active cytoplasmicenzymes called kinases and phosphatases. These finally eitheractivate proteins that switch on genes within the nucleus oralter the activity of existing metabolic processes.

Protein trafficking can be viewed as the return path to the cellmembrane. Once a protein is expressed, it may become a cellsurface protein, such as a receptor; it may remain in the cellhelping other proteins be processed and folded correctly; or itmay be exported out of the cell.

Ariad intends to develop immune response inhibitors targetingindications such as autoimmune diseases and organ transplantrejection; inflammatory response inhibitors aimed at diseasessuch as arthritis, asthma and sepsis; and allergic cascadeinhibitors to treat diseases such as hay fever and celiac disease.The company also has a program aimed at certain cancers andhyperproliferative diseases such as psoriasis, and a program totreat genetic disorders such as cystic fibrosis.

A sixth program, unrelated to intracellular signallingtechnology, is in animal studies to develop semisyntheticplatelets.

In addition to Berger, key personnel include Dr. Edgar Haber,Joan S. Brugge and Manfred Weigele. Haber, Elkan R. Bloutprofessor of biological sciences at the Harvard School of PublicHealth, is vice chairman and director of Ariad's division ofbiological sciences. He previously was president of the Bristol-Myers Squibb Pharmaceutical Research Institute.

Brugge, senior vice president-biology and scientific director,has been professor of microbiology at the University ofPennsylvania School of Medicine and an investigator at theHoward Hughes Medical Institute.

Weigele is senior vice president of chemistry. He was vicepresident and group director of chemistry research forHoffmann-La Roche Inc.

Other companies focusing in the general intracellular area areSugen Inc., Tularik Inc., Onyx Pharmaceuticals and SphinxPharmaceuticals Corp. (NASDAQ:SPHX). Except for Sphinx, whichraised $75 million in a January offering, all are start-ups.

"All four are going after different targets than we are, withdifferent approaches," Berger said.

Wertheim Schroder & Co. Inc., Hambrecht & Quist Inc.,Prudential Securities Inc. and D. Blech & Co. Inc. served asplacement agents for the offering. Investors bought unitsconsisting of 37,500 shares of stock at $75,000 per unit.

-- Karen Bernstein BioWorld Staff

(c) 1997 American Health Consultants. All rights reserved.