Adenosine Therapeutics LLC drew the first investment from the Novartis Option Fund, and with it Novartis gained an option to technology targeting the adenosine A2B receptor.

The newly launched Novartis Option Fund was the lead investor in Adenosine's Series C financing, the first closing of which totaled $8 million. The other portion of that investment came from angel investors. The Charlottesville, Va.-based company plans to add $6 million more to the round, bringing it to $14 million.

Novartis, of Basel, Switzerland, in a separate deal gained an option to the A2B receptor antagonist program, which is focused on developing oral drugs for treating Type II diabetes, asthma and other disorders. That program in January 2005 was the subject of a one-year option agreement with Johnson & Johnson unit Ortho-McNeil Pharmaceutical Inc., which chose not to exercise its rights.

"We've made a lot of progress in that program," said Robert Capon, CEO and co-founder of Adenosine, or ATL. "We're using different compounds than we were a year and a half ago."

Capon told BioWorld Today the program now is at the late preclinical stage. Terms of the option deal with Novartis were not disclosed.

"We are excited about our relationship with Novartis," Capon said. "We envision a very robust collaboration. Novartis is going to contribute a lot to the scientific and clinical progress of this class of compound.

"The option was fully valued," he added, "so the financial terms are ones that ATL is very pleased with."

The option covers ATL's A2B antagonist program, which ATL will continue to develop. In addition to the ATL compounds, Novartis also gained an exclusive option to a patent covering the use of A2B receptor antagonists for treating diabetes and related diseases.

Adenosine, which has 25 employees, was founded in 1999 and had not needed to raise much money to get to this point. It had brought in about $3.5 million in its Series B round in early 2005 and about $1 million in a Series A round before that.

The company, however, has been the recipient of more than 20 grants, most of them Small Business Innovative Research awards from the National Institutes of Health and affiliates. It also got funding from the earlier J&J deal, and from a larger collaboration with Bristol-Myers Squibb Co.

BMS in 2000 has licensed rights to ATL's lead program, Apadenoson, a selective A2A agonist being developed for use as a stress agent during cardiac imaging. Capon said that ATL for the first time is publicly disclosing that relationship has ended. The program is moving forward, however, and now is in Phase III trials, he said.

ATL also is testing a different formulation of Apadenoson in Phase Ib trials, which are being run as bridging safety studies to take the product into further development in therapeutics indications. Potential therapeutic uses include heart attack and sickle cell applications.

Adenosine also has lead-discovery and preclinical programs in cancer, chronic obstructive pulmonary disease, arthritis, Parkinson's disease, ophthalmic indications and other cardiovascular, CNS and inflammatory conditions. Its programs target three of the four known adenosine receptor subtypes.

"We're doing a lot of product development," Capon said. "The big transition we're making now is from being a discovery company to a development company. This financing enables the company to become more clinically active next year, and that's what you should see."

Following the deal with Adenosine, the Novartis Venture Fund participated in the $9 million Series A financing round of Cequent Pharmaceuticals Inc., a Cambridge, Mass.-based firm developing products to deliver RNAi-based treatments. In a related deal, Novartis got an option to an inflammatory bowel disease program at Cequent.

The Novartis Option Fund is a $200 million fund that is part of the Novartis Corporate Venture Funds, which is managing more than $550 million in committed capital and is invested in more than 50 private companies. The Option Fund was set up to provide early stage funding as parts of deals that are coupled with an option to specific therapeutic programs.