With about a month to go before the first Phase III data are due for AST-120 in fistulizing Crohn's disease, Ocera Therapeutics Inc. closed a $35.5 million Series C financing.

San Diego-based Ocera decided to raise the money ahead of the Phase III data to allow more rapid progress with the drug in other indications, explained co-founder, President and CEO Laurent Fischer. AST-120 is in Phase II trials for pouchitis, irritable bowel syndrome, hepatic encephalopathy and gastroesophageal reflux disease (GERD) that has become resistant to treatment with proton pump inhibitors.

Data from the Phase II trials in irritable bowel syndrome, hepatic encephalopathy and GERD are expected later this year. Ocera presented initial Phase II pouchitis data last fall showing that AST-120 led to clinical remission in 44.4 percent of pouchitis patients, and final data are expected in the second or third quarter. At that time, Ocera plans to start a more extensive Phase II program in pouchitis.

The initial positive findings in pouchitis proved that AST-120 could be applicable in multiple gastrointestinal indications and prompted Ocera to begin fundraising last fall, Fischer said. Although the financing environment was "very challenging," the company got "a lot of positive responses" and was able to complete the oversubscribed Series C at a "significant premium" to the last round, he added.

New investor Montagu Newhall Associates Inc. led the Series C round and was joined by a slew of other new investors, including InterWest Partners LLC, AgeChem Venture Fund LP, Wasatch Advisors Inc. affiliate Cross Creek Capital, FinTech GIMV Fund LP and CDIB BioScience Venture Management. Several of Ocera's existing investors also participated, including Domain Associates LLC, Sofinnova Ventures and Thomas, McNerney & Partners LLC.

The closing of the Series C round brings Ocera's total of venture capital raised to date to $62 million, including a $12 million Series B completed in 2006 and a $14.5 million Series A completed in 2005. (See BioWorld Today, July 11, 2006.)

The money should last "well into 2009," Fischer said. In addition to supporting the Phase II programs, some of the funding will go toward a second pivotal Phase III trial of AST-120 in Crohn's disease.

Last fall, Ocera completed enrollment of 240 patients in a double-blind, placebo-controlled Phase III study designed to evaluate the ability of AST-120 to decrease by half the number of draining fistulas in patients with fistulizing Crohn's disease. Data are expected by the end of this quarter, and Fischer said a second pivotal trial with a similar design is scheduled to begin in the third quarter. Following that timeline, Ocera would expect to file a new drug application for AST-120 in Crohn's disease around 2010 or 2011, Fischer said.

For now, Crohn's disease often is treated with anti-TNF-alpha (tumor necrosis factor-alpha) drugs like Remicade (infliximab, Centocor Inc.) or Humira (adalimumab, Abbott). Yet Fischer noted that "less than half of patients have a long-term response" to treatment. He anticipates that AST-120 could be used as a first-line treatment or in combination with currently available drugs.

AST-120 is an oral adsorbent made of carbon microspheres designed to absorb toxins in the gastrointestinal tract. The drug is approved in Japan for chronic kidney disease, and Ocera picked up North American and European rights in gastrointestinal and liver diseases from Tokyo-based Kureha Corp.

For now, AST-120 is Ocera's only drug in development, but Fischer called it a "pipeline in a drug" due to its broad potential across multiple applications. However, he added that the company is "actively looking" at several other products for potential in-licensing and hopes to bring a second drug into its pipeline later this year.

Ocera is also in active discussions with potential marketing partners for AST-120 and expects to announce a deal in the second half.

The company also might consider an initial public offering in the second half if market conditions pick up. Fischer said Ocera is "keeping a close eye on the public markets" and would be open to exploring the option of an IPO later in the year.

As a result of the current financing, InterWest partner Linda Grais will join Ocera's board of directors to represent the Series C syndicate.

In other financing news:

• Heptares Therapeutics Ltd., of London, said seed investor MVM Life Sciences Partners LLP contributed an undisclosed amount of additional seed funding to the company. Heptares was spun out of the UK's Medical Research Council last fall to focus on G protein-couple receptors (GPCRs). The additional funding was triggered by progress made using Heptares' GPCR-stabilization platform to solve the structure of the beta-1 adrenergic receptor.

• National Stem Cell Holding Inc., of Mountainside, N.J., retained Burt Martin Arnold Securities Inc. to provide investment banking services associated with the company's current $3.5 million financing. BMA Securities also may assist National Stem Cell in evaluating business development opportunities.

• Opexa Therapeutics Inc., of The Woodlands, Texas, completed its public offering of 3.5 million shares priced at $2 apiece and 3.5 million Series E warrants to buy shares at an exercise price of $2 apiece, and said underwriters exercised their overallotment option for 525,000 Series E warrants. Net proceeds totaled $6.8 million and are expected to support a Phase IIb trial of Tovaxin in multiple sclerosis. MDB Capital Group LLC acted as sole managing underwriter, while GunnAllen Financial Inc. served as co-underwriter.