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Scynexis Snares $29M
Friday, June 21, 2002

Recent corporate spinoff SCYNEXIS Inc. said Thursday, June 20, it raised $29 million in a second round of funding - nine months after its first round and almost two years after securing its freedom from French pharmaceuticals giant Aventis SA - to advance the drug discovery company's decidedly unsexy but solid revenue-generating contract drug compound production business.

The Research Park Triangle, N.C.-based company expects the money from the new round to boost a business that has been generating revenues since the day it began operating. San Francisco's Alta Partners led the $29 million round, which included Burrill & Co. of San Francisco, EuclidSR Partners of New York, CDC Innovation Partners of Paris and KBL Healthcare Ventures of New York.

Helping to close the round is the anticipation that Scynexis, which already boasts 25 so-called fee-for-business research customers, including seven of the world's 10 largest pharmaceutical companies, will soon announce its first partnership with a major pharma to share interest in joint products in development. Scynexis vice president of business development Terry Marquardt declined to identify the new partner.

Nor would Marquardt disclose a valuation for the current round, though he said the company got a bump from its previous round. The company was initially capitalized with about $1 million from founders at the time of its spinoff in July 2000, then raised $15 million in October in its first institutional round led by Paris-based Genavent, joined by SG Asset Management and Ventech, both also of France.

Investors in the current round said those relationships led to their decision to help take the company to the next level. "Chemistry is an important component of biological drug discovery and a lot of biotech developers have had to deal with that as the industry is evolving," said Alison de Bord, an associate with Alta Partners. "With the advent of so many biological targets, it is not just a matter of identifying them, but efficiently developing small molecule compounds to address them."

Advances in genomic science and bioinformatic data analysis have made it much easier for drug discovery companies to identify potential drug candidates. But those advances have reversed the traditional order of drug research, requiring pharmaceutical companies to produce many sophisticated chemical compounds to test against therapeutic targets, and taxing their internal chemistry departments.

Scynexis grew out of that environment. As the primary chemistry lab for Rhone Poulenc - which has since merged with Aventis - it developed proprietary technology to accelerate and improve results in compound production. After Rhone Poulenc was absorbed into Aventis and the parent threatened to move the lab to Frankfurt, Germany, researchers, led by chief executive Yves Ribeill, convinced Aventis to release the group and its technology in exchange for stock in the company. Ribeill then set out to expand its scope by serving other pharmaceutical companies in addition to Aventis.

The executive at Alta in charge of leading the most recent round, managing director Farah Champsi, said he was introduced to Scynexis by portfolio company Plexxikon Inc. of Berkeley, Calif., a structure-based drug discovery company focused on families of proteins. Plexxikon has worked with Scynexis to develop compounds to address its drug discovery targets.

Due diligence discussions with Plexxikon and other undisclosed partners of Scynexis convinced Champsi that the company had not only demonstrated an ability to generate strong contract research revenues, but also unique chemistry expertise to lead to proprietary partnerships.

"We evaluated a variety of companies both public and private but found this to be unique in that the team has been together for years," Champsi said. "They have developed relationships with corporate partners where they have shown enough added value that they increasingly will have more meaningful upside."

Marquardt said the company expects to announce the first of such relationships next week, with one of the world's top five pharmaceutical companies. Scynexis will provide all the chemistry for a new drug project and reap royalties based on milestones to take it to the clinical testing phase. That new money will give the company greater freedom to establish additional partnerships, he added.

"The fee-for-service business is attractive because it helps mitigate burn rate," he noted. "But the strategic plan is to develop more partnerships and eventually even develop our own drug programs."

Clifford Carlsen, The Daily Deal

©Copyright 2002, The Deal, LLC. All Rights Reserved.

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