Editor’s note: BioWatch is a regular feature on Fridays.ChemCodes has begun looking for a $15 million C round and is seeking an outside investor to join its current investors who are “already committed,” says ChemCodes Chief Executive Officer and President John Didsbury.

Durham-based Intersouth Partners and Atlanta’s Noro-Moseley Partners led the company’s previous rounds.

ChemCodes uses its proprietary chemistry technology to tackle the tough job of building new molecules for potential drug use. It is one of two Triangle companies backed by Durham-based Intersouth Partners that are gaining traction by offering pharmaceutical companies a way to break the chemistry bottleneck in drug discovery. The other is Durham-based Serenex, a “chemo-proteomics” company, where chemistry is just one arm of what it does.

Serenex entered an agreement with GlaxoSmithKline May 5. GSK will use and evaluate the Serenex drug-target and chemical-compound screening process. Serenex closed a $15 million round last summer and keeps adding to its marquee lineup of big name pharmaceutical partners such as Pfizer, Pharmacia, and Chiron Corp.

ChemCodes, which closed an $8.5 million B round last December, inked deals with pharmaceutical giants Wyeth and Roche this year. But that may not be all. Didsbury says, “We have ongoing discussions with others.”

Why are these two firms gaining ground while many companies offering a variety of genomics and proteomics approaches to speeding drug discovery flounder?

Intersouth’s Garheng Kong explains, “You can hire more biologists, but you can’t actually hire more chemists, they don’t exist. ChemCodes and Serenex are getting traction for that very reason. Being where chemistry and biology meets allows them to leverage the limited supply of chemists. Companies can’t hire enough chemists to do everything they want to do.”

Kong says ChemCodes will announce yet another deal shortly.

Revving Up Drug Discovery

Didsbury, a former head of strategy and opportunities for drug discovery at GSK, says ChemCodes can speed up synthesis of new chemical compounds to test as drugs tenfold. “Chemistry is at the heart of pharmaceutical value creation,” he says. He says the company hopes to close the new round by the end of the year.

The deals both ChemCodes and Serenex have with their large pharmaceutical partners produce a staged revenue steam proceeding from fees to milestones and royalties.

Kong pointed out that these types of deals increase in value as their technologies produce results. Serenex CEO Dr. Richard Kent points out, “We expect to create value for our partners and we expect to share in that value.”

Serenex, Kent says, “marries chemistry and biology and depends on both. We unearth drug targets and the chemistry that binds to those targets. Companies have thousands of targets and millions of compounds but a limited knowledge of which compounds bind to targets of interest.”

Many Deals in the Works

Kent says Serenex expects several different kinds of deals in the not too distant future. He says the company expects another large pharmaceutical company to ink a deal and one or two of its current partners to expand their relationships.

Serenex says it also plans one or more deals with complementary companies such its recent agreement with United Kingdom-based MolecularNature, which has an unusual chemical compound library.

MolecularNature hunts for new phytochemical compounds from plants found in the U.K. that have a known therapeutic activity. It has a considerable library of such compounds. The Serenex technology is intended to fast-forward the discovery process of pinpointing those worth commercial development. The companies will share any revenue their finds produce.

“That deal got quite a bit of attention from at least one large pharmaceutical company. Everyone is looking for ways to screen natural products,” Dr. Kent says. “We’ll be quite active for the rest of the year.”

Kent says the company has competition, but also some good reasons for optimism. “We know one of our partners did due diligence on both us and a competitor and chose us. Another had done a small collaborative agreement with one of our potential partners. We believe they’ll find our technology superior.”

ChemCodes: www.chemcodes.com

Serenex: www.serenex.com