Senior Staff Writer

BattellePharma Inc. closed its first venture round of funding since coming out from under its parent, Battelle Memorial Institute, and pulled in $22 million that will, in part, be used to further develop the inhalation technology it hopes to one day see in every doctor's office.

The $22 million comes in a Series B round of preferred stock, but CEO and President Chuck Bramlage said, "The parent funded everything to this date. This is our first new money in the company from venture [sources]."

BattellePharma has a fairly short but complex history. It was spun out in April 2000 and then changed its name from Battelle Pulmonary Therapeutics Inc. last April. In December, it promoted Bramlage to CEO and president, replacing Dennis Cearlock, who had left the company to become CEO and chairman of Zivena Inc. That move was structured to specifically spin out the oncology aspect of BattellePharma and therefore make BattellePharma more attractive to the lead investor in the Series B, TL Ventures, of Philadelphia.

"We had an oncology group that was using inhaled doxorubicin," Bramlage told BioWorld Today. "Our lead investor in this round felt that was more risky, even though there is a potential for greater return, but they wanted to work on [our inhalation technology]. So we spun that off and they are out looking for funds."

Tuesday, Zivena said it determined the treatment dose of its lead product, Resmycin (doxorubicin HCl inhalation solution), in a Phase I trial and is starting a Phase II trial in patients with lung metastases from soft-tissue sarcoma.

Other investors in BattellePharma's round were Merlin BioMed Group, of New York; Fletcher Spaght Ventures LP, of Boston; Richardson Ventures Inc., of Winnipeg, Manitoba; and Battelle Memorial Institute. Although the round was Bramlage's first - his previous work experience includes time at GlaxoSmithKline plc - and he has no basis for comparison, he said the effects of the economy could be felt.

"It was very difficult," he said. "We've heard how bad it was out there, but I hear it's the worst ever. We feel confident that the $22 million is significant in these times."

What TL Ventures was most interested in was BattellePharma's Mystic inhalation technology. BattellePharma was spun out from its parent to focus on the technology, and it also is the aspect of the company that sold Bramlage. Based on electro-hydrodynamics, the technology puts a negative charge on a fluid and a positive charge on the inhalation device, thus producing a neutral product. Negatively charged fluids have been used to paint cars, Bramlage said, because the negatively charged fluid attaches to surfaces easily, but in an inhaler, a negatively charged product would "stick right to your face when you used it," he said.

The neutral product from the Mystic inhaler "comes out like a slow fog," Bramlage said, and "bends right down the throat." In this way, 70 percent to 80 percent of the product gets deposited in the lungs. For inhaled powders, which have more trouble circumventing the throat, patients receive 5 percent to 20 percent, he said.

BattellePharma and its 45 employees are working on an asthma product in-house that it expects to launch in 2006 and Bramlage said the anti-infective area is another "clear target." It is collaborating with others interested in the inhalation field. It has agreements with Pfizer Inc., Pharmacia Corp., GlaxoSmithKline plc, Corus Pharma Inc., Abbott Laboratories, Viasys Healthcare GmbH and ViroPharma Inc., in which the companies "have new chemical entities or existing compounds" they are investigating using with the Mystic technology. BattellePharma expects to see milestone payments and royalties downstream from those deals, Bramlage said.

The funding is expected to last until mid-2005, based on current plans, and it brings financial security and validation by investors other than the parent, Bramlage said. Looking ahead, he likened the Mystic inhalation technology to Intel Corp.'s processors, which are used in many brands of computers.

"I'm an asthmatic myself," Bramlage said. "And I know that all companies are looking for better ways to inhale drugs. Our intent is - although each partner would use its own casing on it - for every new medicine that comes out where inhalation is used to have our technology in it."