Gaining a public listing through a reverse merger, start-up Raptor Pharmaceutical Inc. completed a $5 million financing to support research and development of drug candidates based on its receptor-associated protein (RAP) technology.

Established last year, Raptor is a "literal start-up," said co-founder and CEO Christopher Starr, adding that the company's lab is being built "even as we speak" in Novato, Calif., not far from BioMarin Pharmaceutical Inc., the last company co-founded by Starr.

In fact, Raptor's intellectual property was acquired from BioMarin earlier this year. It's a technology "that [co-founder] Todd [Zankel] and I knew a lot about," Starr said. "It was no longer of any interest to BioMarin, but we felt it had some real serious potential in a number of therapeutic areas."

The technology is based on RAP, a known chaperone protein, and will be investigated by Raptor as a potential stand-alone oncology therapeutic, as well as a possible transport system for moving other therapeutics across the blood-brain barrier to treat neurodegenerative diseases.

The science behind the RAP platform has attracted interest, Starr said, but the company's early stage status - Starr hopes to have a plan for clinical development in about 24 months - made it difficult to entice private investors. That led Raptor to seek an alternative funding strategy, hence, the reverse merger.

"We spent some time looking for venture capital money and found that, in today's world, most [VCs] are looking for companies with products ready to go into the clinic," he told BioWorld Today. Though Raptor could have brought in a small seed round, it really wanted cash "to get to the next milestone."

So Raptor merged with Highland Clan Creations Corp., a company that produced and sold nutritional drinks for kids through a wholly owned subsidiary, Bodysentials Health & Beauty Inc., until it failed to secure needed financing earlier this year. Highland sold its Bodysentials subsidiary last month, and agreed to reincorporate as Raptor Pharmaceutical. The name change is expected to become effective June 9, and Raptor will be assigned a new ticker on the Over-the-Counter Bulletin Board.

Also last week, San Francisco-based Osteologix Inc. merged with public shell New York-based Castle & Morgan Holdings Inc. For Osteologix, the move was made to gain a public listing on a U.S. market. Raptor's needs were a little different. (See BioWorld Today, May 26, 2006.)

"We're probably the earliest stage company to go this way," Starr said. "It's usually done as an alternative to an [initial public offering], but in our case, it was really a way of tapping into public money."

Simultaneous to the merger, Highland raised $5 million through the sale of 8.3 million units - each unit consisting of one share of common stock and a warrant to purchase one common share - priced at 60 cents each.

Net proceeds were about $4.5 million, bringing the company's total cash and cash equivalents as of May 25 to $4.8 million.

Funds are expected to last about two years, during which Raptor will explore the potential of its RAP technology to see whether the protein, when administered intravenously, can recognize and bind to receptors on cell surfaces. If that research yields successful results, the company aims to develop a RAP-based molecule against certain epithelial cancers, such as breast and prostate.

The company also intends to investigate the RAP molecule as a drug delivery platform to transport other therapies to the brain.

"The estimate is that 95 percent of potential drugs that could be used to treat brain diseases aren't developed because they don't enter the brain normally and don't get past the blood-brain barrier," Starr said.

But it's possible that a therapeutic could be fused to Raptor's RAP molecule. The RAP molecule would then attach itself to the "professional transport receptors," which routinely carry serum proteins from one side to the other, and carry the therapeutic across the barrier and into the brain, he said.

Once in the brain, the therapeutic's own mechanism of action would take over to treat the disease.

"We've had some very early animal data suggesting this may work," Starr said. "It's a challenging area," he added. "There's a lot of roadkill along the highway over the last 15 years of biotech companies that have tried and failed" to develop a blood-brain transport system. "But it's a very important area. To be able to treat diseases like Parkinson's, Alzheimer's and genetic diseases, you need to get your therapeutic into the brain."

In addition to product development, Raptor also intends seek in-licensing opportunities for complementary technology to the RAP platform and related proteins.

Part of Raptor's work is being conducted in university labs, and part in-house by the company's five-member staff, all of whom are BioMarin alumni.

"It's great, because we've worked together and know each other very well," Starr said, "and that will help us in our plan to move quickly and evaluate where we are on an opportunistic and strategic basis."