With $10 million in additional funding, Neurogenetics Inc. closed its Series B round of financing, more than a year after raising $9 million to open it.

"We are pretty happy that our internal investors stepped up to the plate," said Kumar Srinivasan, Neurogenetics' director of corporate development. "It's a Series B extension, even though our first tranche was June [2001]. It's a flat valuation, and considering the feedback I'm getting from venture capitalists, that's a big accomplishment."

The latest placement of Series B preferred stock raises to $27 million the total amount of funding raised by privately held Neurogenetics. The initial Series B funds were used for target screening and hiring additional personnel. (See BioWorld Today, June 26, 2001.)

The terms of the follow-on financing are the same as the first tranche, Srinivasan said, adding that if Neurogenetics' burn rate does not increase, it would not need to raise additional funds for at least a year. Proceeds will be used to advance various ongoing research programs, establish additional preclinical development capabilities, as well as pursue in-licensing opportunities for La Jolla, Calif.-based Neurogenetics.

Participants included existing investors Alta Partners, of San Francisco; Advent International, of Boston; GIMV Venture Capital, of Antwerp, Belgium; Novartis Venture Fund, of Basel, Switzerland; and S.R. One Ltd., of Philadelphia. New investor Eisai Co. Ltd., of Tokyo, also participated.

Neurogenetics' newest investor also is its longest collaborator. With a relationship dating to April 2001, Neurogenetics has received significant financial backing from Esai in its efforts to find small-molecule drugs to treat Alzheimer's disease. They further expanded their relationship with an agreement last month focused on Neurogenetics' late-onset Alzheimer's disease gene discovery program.

"That included substantial cash up front in the form of licensing, a signing fee and equity and equity investment, plus [research and development] support for three years," Srinivasan said. "So it's a much bigger commitment from Esai. We feel it's an affirmation of our relationship, which is also an affirmation of the overall approach that we take and the progress that we've made in that particular program."

In exchange, Esai gains first negotiating rights, as well as the right to reject resultant biologically validated targets.

Under the original agreement signed a year and a half ago, Neurogenetics granted to Eisai rights of first negotiation to collaborate on selected Alzheimer's disease programs. A March extension agreement, which provided Neurogenetics an undisclosed amount of cash, enables Eisai to retain its rights of first negotiation for another year, ending March 31.

In addition to the target and gene discovery program done in collaboration with Esai, Neurogenetics has a small molecule designed to lower the levels of peptide buildup in plaques found in Alzheimer's disease patients.

"We believe that the pathology precedes dementia, so we want our compounds to slow its progression by going after the pathology of the disease," Srinivasan said.

While all programs remain in preclinical development, Neurogenetics also is looking beyond its current Alzheimer's disease programs.

"We're looking at a range of things, a few in Alzheimer's disease and a few in the broad CNS area," Srinivasan said. "What we're looking at is complementary to our approach. We are realistic in terms of the sentiments among investors and their requirements with the whole market turning toward products. We are looking at opportunities that, for the near term, could give us a clinical candidate."