Saying it has satisfactorily completed a key toxicology study, Incara Pharmaceuticals issued a $5 million convertible debenture and made an initial draw of $1 million on it Wednesday.

The debenture was issued by RTP-based Incara to Goodnow Capital, an investment entity controlled by the Xmark Funds in New York.

The funding provides new life for Incara, which has sold off product, gone through an extensive reorganization and reduced staff in a determined effort to remain in business.

In the fall of 2003, Incara announced the $5 million financing agreement with Goodnow that was subject to, among other conditions, a reorganizational merger, which was completed in November 2003, and the firm’s acceptance of the results as satisfactory of a toxicology study relating to AEOL 10150.

In addition to being a condition of the financing, Incara says it expects completion of the recent toxicology study to allow the company to proceed with filing an investigational new drug (IND) application with the FDA for AEOL 10150 for treatment of amyotrophic lateral sclerosis (ALS or Lou Gehrig’s disease). A Phase I clinical trial could follow.

If the Phase I clinical trial results are satisfactory, Incara says it will initiate a Phase 2/3 clinical trial as early as the first half of 2005.

“We have been very pleased with the progress Incara has made in the last six months since we made our initial investment,” stated David Cavalier, principal at Xmark Funds. “The company completed toxicology studies for AEOL 10150 with favorable results and kept on schedule for filing an IND in the near future. On the corporate front, Incara completed a critical reorganization that resulted in a cleaner, stronger balance sheet.”