South San Francisco is adding another name to its registry of biotech businesses.

Tercica Medica Inc. opened its doors with news of a $21.5 million Series A round of financing, in addition to an in-licensed molecule from Genentech Inc.

Tercica's financing was led by Cambridge, Mass.-based MPM Capital LP with co-investor Prospect Venture Partners, of Palo Alto, Calif. The proceeds will be used for general operations, clinical trials and contract manufacturing of the molecule.

Dennis Henner, a general partner at MPM; Ashley Ledbetter, a principal at MPM; and Alex Barkas, a managing partner at Prospect, joined Tercica's board in the process. Two of the three have ties to South San Francisco-based neighbor Genentech.

Prior to joining MPM, Henner was at Genentech from 1981 to 2001, where he served as the senior vice president of research and as a member of the executive committee. Barkas was the lead investor and founding CEO of Connetics Inc., a Palo Alto-based company founded on programs in-licensed from Genentech.

"We've licensed Genentech's rights to IGF-1 [insulin-like growth factor-1]," Tercica President and CEO John Scarlett said. "Our interests are in pursuing some of the indications for which we have very good intellectual property positions - including growth hormone insensitivity syndrome [GHIS]. That will be the principal orientation of the company's activities to begin with."

Genentech also granted Tercica an exclusive option to acquire rights to the combination of IGF-1 and insulin-like growth factor binding protein-3 (BP3).

"The key parts of the technology we've acquired from Genentech - aside from quite a variety of use patents, including intellectual property in the area of growth hormone insensitivity syndrome, are rights to Genentech's manufacturing process, which is an E. coli expression system," Scarlett said.

He added that Tercica would implement the process through a to-be-determined contract manufacturer.

Genentech received an undisclosed ownership position in Tercica and also could receive downstream payments based on milestones and eventual sales.

Tercica's initial plans are aimed at development of IGF-1 for GHIS. Patients with GHIS have low serum IGF-1 levels due to cellular resistance to the effects of growth hormone in spite of adequate or even elevated levels of growth hormone. IGF-1 deficiency results in short stature, and is also associated with decreased muscle mass, increased fat, poor exercise tolerance and other metabolic consequences.

"It's those patients with low IGF-1 levels but normal or elevated growth hormone levels [for whom] we believe there's a good opportunity to treat them with IGF-1," Scarlett said.

In previous studies of patients with GHIS, IGF-1 stimulated significant skeletal growth and improved many of the metabolic abnormalities observed in those patients.

"There has been a lot of prior evaluation of IGF-1 in the area of growth hormone insensitivity," Scarlett said. "Our first job is to pull all of the available information, including those studies which previously were sponsored by Genentech and which we obviously have access to. We would hope to be talking to regulatory agencies about how to proceed with a development plan certainly by the end of this year. At the same time, we'll be implementing by the end of this year contract manufacturing of the compound."

Genentech's established position with IGF-1 gives Tercica solid ground from which to begin. Scarlett said the in-licensed manufacturing process, which he described as well developed and efficient, offers a potential for commercial advantage.

"In a variety of different areas, including growth hormone insensitivity, we feel like we have a very strong intellectual property position," Scarlett said. "Genentech had throughout the 1990s pursued IGF-1 quite aggressively and had developed not only a very large patent portfolio, but had also done a lot of preclinical and clinical studies. We gain access to all of that information, and therefore believe that we will be in a position to move the molecule forward from a development perspective very quickly and efficiently."