As part of a deal to merge operations, Tranzyme and Quebec-based Neokimia have received $6 million in new capital in the form of convertible notes.

The two companies say they will use the financing from new and existing investors in North America and Japan to join forces to form a fully integrated drug discovery and development company.

Tranzyme says it will maintain its existing facility in RTP as the “focal point” for the new company’s functional biology program, and will continue its drug discovery operations at the chemistry facility in Sherbrooke, Quebec, where Neokimia is located.

Vipin Garg, president and chief executive officer of Tranzyme, will keep his title at the new company. The president and CEO of Neokimia, Caroline Fortier, will step down and depart the company.

The new company will combine Tranzyme’s proprietary functional biology with Neokimia’s novel chemistry platform. In addition, the new company will have a portfolio of drug candidates in late-stage lead optimization and anticipates having two compounds in clinical development in 2005.

“We are very excited about this merger as it will allow the new company to expand into areas in which each has already built considerable value,” said Garg. “We will instantly graduate from individual biology and chemistry platform companies to an integrated product-based company capable of developing novel drugs. Our new Canadian operation will provide us immediate access to high quality chemistry and drug discovery capabilities.”

The $6 million in funding for the new company’s research and development operations will come from Research Triangle Ventures; S.C.O.U.T. Healthcare Fund and Redmont Venture Partners, both of Birmingham, AL; BDC Venture and Desjardins Venture Capital, both of Montreal; Medtech Partners of Ottawa, Canada; and Pacific Rim Venture of Tokyo.

“This merger validates the vision of Pacific Rim Ventures as one of the earliest investors in Tranzyme,” said David Drutz, chairman of Tranzyme and general partner at Pacific Rim. “Our new investment reflects our continuing belief in the management and direction of this company. We are excited to see the evolution of these highly synergistic biology and chemistry platform companies into the drug development space, which is the value proposition that is driving life science investment today.”

The company will use the proceeds for optimization and preclinical development of its lead product candidates in gastrointestinal disorders and metabolic diseases. Although the financing will be sufficient to take the combined company into 2006, the new company says it intends to seek additional funding in 2004 in order to accelerate the development of therapeutic candidates into Phase II clinical trials.

“We are delighted with the strong endorsement we have received from our investors,” added Garg. “Over the past 12 months, we have been working diligently to assemble the elements for a successful drug discovery and development company, which includes our recent strategic partnerships with major pharmaceutical companies,” including its recently expanded collaboration with NeoGenesis Pharmaceuticals of Cambridge, MA.

Over the next six months, Garg says his goal is to raise an additional $6-8 million from new investors and position the company for successful drug development.