Two years after it was spun out of a Seattle-based incubator group, VLST Corp. raised $20 million in the first of three tranches in a $55 million Series B round.

The remaining funds would be invested based on the company's progress in developing drugs for autoimmune and inflammatory disorders, though VLST has not disclosed specific milestones. First-tranche dollars will be used to move the lead program into preclinical models, and total Series B funding should advance that program through Phase II proof-of-concept studies and bring two additional programs to investigational new drug filings.

The round is expected to sustain operations for about three to four years, said Martin Simonetti, president and CEO of VLST.

"From my perspective, this is really a great structure for a Series B," he said, "because it guarantees us money based on success so we can focus on moving forward without having to focus on fund raising."

The $55 million potential round is pretty substantial, particularly for a company that's still in the very early stages of development. But, Simonetti said, there were several factors that attracted investors.

"We worked with investors to develop the tranche approach, which not only mitigates the risk for them, but also provides long-term funding for us," he told BioWorld Today.

The company also has a "proven approach" with its technology platform and solid management and scientific teams that include VLST's co-founders, Craig Smith, who helped develop Enbrel (etanercept) while at Immunex Corp., (later acquired by Thousand Oaks, Calif.-based Amgen Inc.) and Steven Wiley, who was one of the discoverers of Trail (TNF-related apoptosis-inducing ligand) in oncology indications.

"I think if you add all those things up, this is an opportunity that allows for an efficient use of capital," Simonetti said.

Prior to the Series B, VLST lived off a $4.5 million seed round. That money allowed the company to prove the original hypothesis of its technology.

The complex platform is based on the use of bioinformatics and proteomics to identify virulence factors, which are secreted by viruses to regulate the immune system of a host by seeking specific targets. VLST has identified successfully a number of targets and is working to develop therapeutics - monoclonal antibodies or human homologues of the virulence factors - to mimic the virulence factors' ability to control the immune system for treating autoimmune and inflammatory diseases, such as lupus, multiple sclerosis, arthritis, psoriasis and asthma.

What's most important about this approach, Simonetti said, is that the viruses provide prevalidated drug targets, "so the chance of clinical success is much higher."

VLST hasn't disclosed the focus of its lead program, though "we have a pretty good idea where we think it might be most effective," Simonetti said.

"The first big goal for us is to get our preclinical models up and running," he added, anticipating preclinical data around the end of this year or early next year. As the company moves into 2007, "we'll go into clinical and regulatory operations and start the pathway toward our first IND."

Money from the Series B also will be used to expand the company's staff, which is expected to grow from 12 employees to between 25 and 30 over the next 12 months.

VLST was one of the first two companies launched by the Accelerator Corp., a privately held Seattle-based firm dedicating to investing in and developing biotech start-ups. Along with VLST, Accelerator started a handful of other companies, including VieVax Corp, a firm developing cancer vaccines. (See BioWorld Today, May 20, 2004.)

Accelerator's business model "really allowed the company to accomplish in two years what might have taken double that time to do on its own," Simonetti said.

In addition to providing scientific, business and technical support, Accelerator helps companies gain funding with support from "tier-one venture capitalists," he said.

VLST's operations also are housed at Accelerator's research facility, at least until next month, when the company plans to move into its own Seattle headquarters.

"Accelerator's model is really to get a company started, not to maintain it once it's up and running," Simonetti said. "So this is graduation for us."

San Francisco-based Texas Pacific Group Ventures led the Series B financing, which included participation from existing investors Boston-based MPM Capital, Seattle-based ARCH Venture Partners, Seattle-based OVP Venture Partners and San Diego-based Amgen Ventures. New investors included MedImmune Ventures Inc., of Gaithersburg, Md., and WRF Capital, the venture investment arm of the Washington Research Foundation in Seattle.