Proacta Inc. completed a $35 million Series B financing to drive two Phase II trials with lead drug candidate PR-104 and advance a second contender from the company's pipeline of prodrugs targeting hypoxic tumors into the clinic.

Led by new investor Clarus Ventures, the financing included participation by new investor Delphi Ventures as well as all of Proacta's existing investors: Alta Partners, GBS Ventures, Endeavour i-Cap, NO8 Ventures, Genentech Inc. and F. Hoffmann-La Roche Ltd.

"We didn't shop this deal widely," said David Mack, director of Alta Partners. "We showed it to a few good friends of the firm who really get oncology, and pretty much everyone . . . was excited about it."

PR-104 is a prodrug of a DNA alkylator. While alkylators have known toxicities, PR-104 and other drugs within Proacta's pipeline are designed to remain inactive until they enter tumor cells with hypoxia, or low levels of oxygen. The hypoxic environment activates cleavage of the prodrugs, producing a powerful yet targeted cytotoxic reaction.

Proacta has "nearly completed" a Phase I single-agent trial with PR-104 and will use existing funds to "get that to the end," Mack said. The existing funding refers to an $8 million Series A, closed in 2004, that was topped off with a $4 million investment by Alta in early 2006.

The new funding will be used to start a single-agent Phase II trial in multiple solid tumor cancers during the third quarter. In the meantime, the company plans to start a Phase Ib trial that will progress to a Phase II combining PR-104 with chemotherapy.

The rationale for the combination trial is based on the fact that most traditional cancer drugs, including chemotherapy, target the high-oxygen, rapidly dividing cells within tumors. The pockets of hypoxic cells that exist within most tumors largely are ignored by those treatments.

Even after chemotherapy, there a "still a significant number of hypoxic cells within the tumor," said Paul Cossum, president and CEO of Proacta. The ability of these hypoxic cells to survive is widely recognized as a factor in relapses from remission, he said.

In addition to potentially complementing chemotherapy, Proacta's drugs also diffuse from the hypoxic sections of tumors into the surrounding cells, providing a basis for the single-agent trials.

Cossum expects the Series B financing to support the two Phase II trials through their anticipated completion in the second half of 2008.

The trials will include patients with several types of cancers known to have high hypoxia, such as prostate and ovarian cancer, and which respond well to DNA-alkylators. By the end of the trials, the company will determine the optimal indication for a Phase III registration trial.

The funding also will be used to conduct a Phase I trial of PR-104 in combination with Avastin (bevacizumab, Genentech Inc.) as well as advance a second compound to IND filing.

All of Proacta's preclinical candidates are hypoxia-activated, but are based on different prodrugs that may be applicable in different types of tumors.

As clinical activity ramps up, Proacta plans to expand the staff at its San Diego headquarters, where drug development and financing activities are based. Yet the company, which was founded on technology from the University of Auckland in New Zealand, maintains a wholly owned subsidiary, Proacta Therapeutics Ltd., also of Auckland, to stay close to the university's research efforts.

Other University of Auckland-affiliated biotechs such as Protemix Corp. and Neuren Pharmaceuticals Ltd. have followed a similar dual-facilities strategy, maintaining operations in both the U.S. and New Zealand.