Through a $20 million financing and an acquisition, BioStratum Inc. picked up program funding, gained pipeline material and made itself more attractive for partnering.

The stock-for-stock acquisition of BioCrine AB, an affiliate of the Karolinska Institute in Stockholm, Sweden, gives Research Triangle Park, N.C.-based BioStratum a research team in diabetes one of two areas that will make up its core in the years ahead.

“We decided, in the coming years, to focus on cancer and diabetes,” said Claus Kühl, president and CEO of BioStratum. “In particular, we have strength in diabetes, and we have been looking for a company with a strong discovery engine in diabetes.”

Which is what they got, Kühl said. BioCrine is “a pretty sizable group,” consisting of a “50-plus research team.” The company’s founders, Per-Olef Berggren and Suad Efendic, are personal acquaintances of Kühl’s. He worked with Efendic when both were employed by NovoNordisk A/S, of Bagsvaerd, Denmark, several years ago. BioStratum now has access to BioCrine’s insulin secretion, insulin resistance and pancreatic beta cell function expertise.

Also, Kühl pointed out, in Sweden (and other Scandinavian countries) professors and scientists have rights to their discoveries one reason BioCrine’s employees won’t be moving across the Atlantic to North Carolina.

“We really [want] these scientists to stay in Stockholm, because whatever they discover they will own,” Kühl said. “It’s much better to have them there.” Now acquired, whatever BioCrine scientists own, BioStratum owns, as well.

The $20 million is expected to be used “to mainly fund the programs that are the most advanced Pyridorin and Angiocol,” Kühl said. Investors in the round were HealthCap, of Stockholm; MP Bio hf, of Reykjavik, Iceland; Equity Resources Group Inc., of Cambridge, Mass.; and BankInvest, of Copenhagen, Denmark. The funds should take the company through about the next two years, if it is able to attract the partners it wants, Kühl said.

Pyridorin is a small-molecule product designed to treat diabetic kidney disease by inhibiting the formation of advanced glycation end-products, which are created in diabetic patients’ bodies. It is in a Phase II trial now at 45 centers. About 100 patients are enrolled and the trial has a target of 160 patients, half with Type I diabetes and half with Type II diabetes. If all goes well, the company could start Phase III work in 2004. BioStratum has an Asian partner for that product Kowa Co., of Nagoya, Japan through a potential $25 million deal signed in February 2001. But there is the rest of the globe and BioStratum wants a partner for that, too. (See BioWorld Today, Feb. 7, 2001.)

“We think we will have a partner for Pyridorin this year,” Kühl said. “That’s the intent and we are in advanced discussions with a couple of potential partners. And we think we’ll have a partner for Angiocol early next year.”

Angiocol, an anti-angiogenesis cancer drug, has been cleared by the FDA for Phase I studies, slated to begin in a week or so.

“We were holding out until we got this financing,” Kühl said. “But we’re ready to go.”

Privately held BioStratum has considered the public markets in the past and was “ready to file an S-1” about a year ago, Kühl said, but the markets simply haven’t been where BioStratum wants them. If and when they turn around, BioStratum has the intent of testing the waters.

“The market is not back full steam,” Kühl said. “We want to see a few [companies] go out and stay up there and then we’ll be ready to go.”