LEAD Therapeutics of San Bruno, CA announced a $17 million Series A financing that will underwrite the beginning stages of the company, which promises to leverage the strengths of the US and China in pharma. LEAD has two early-stage projects underway, one in infectious diseases that began in June, and the other in oncology which is just getting started.

“We have an experienced team here in the US at the San Bruno office,” said CEO and Chairman Peter Myers in an exclusive telephone interview. “That is now complete.” But the company will conduct the majority of the development work in China. “We are currently working with one or two CROs in China,” he continued.

LEAD could have leased a facility and built its own staff, but in the interests of getting underway quickly, the company took a different path. “We are working towards establishing a strategic relationship with an existing CRO to use 20 to 30 of their chemists exclusively, which we will manage from the US,” said Myers.

Myers said that the US suffers from a shortage of qualified chemists. Most medicinal chemists already work for big pharma and are comfortable in that environment. Importing foreign-born chemists is difficult because of visa problems. And China, traditionally, has not emphasized small-molecule research, though that situation is being reversed.

For LEAD Therapeutics, those factors dictate that the chemical work will be done in China, but managed in the US to ensure that US standards are met. “China is not just a source of cheap labor,” said Myers. “The odds of developing a successful drug are low, so LEAD wants to develop a number of drug candidates, rather than putting everything into a single molecule.” As Myers explains, the most efficient use of capital is to develop multiple candidates, while doing much of the research in China to keep expenses down. In the interest of greater diversification, LEAD expects to eventually start work on a third program.

The financing was led by Pappas Ventures and ProQuest Investments, joined by Mustang Ventures, a VC firm focused on China. Pappas and ProQuest will have board representation.

As Myers points out, LEAD is led by an experienced team of industry veterans:

Peter Myers, Ph.D., Chairman and CEO of LEAD, has held senior positions at Glaxo (NYSE: GSK), where he headed the chemistry team that discovered Avodart, and at Onyx Pharmaceuticals (NSDQ: ONXX), where he initiated the program that led to the discovery of Nexavar. Dr. Myers, one of LEAD’s founders, was also VP Research at SGX Pharmaceuticals (NSDQ: SGX) and COO/CSO at Combichem/DuPont Pharmaceuticals (NYSE: DD).

Sofie Qiao, Ph.D., President, Chief Operating Officer and Director, formulated the business plan for LEAD and assembled the initial team. Previously, she was Director of Business Operations at Discovery Partners International and, before that, Director of Business Development at Syrrx. Dr. Qiao was a medicinal chemist at Genzyme (NDSQ: GENZ) before joining McKinsey & Company, where she worked with pharmaceutical and biotech clients.

Leonard Post, Ph.D., Chief Scientific Officer and Director, was previously Senior Vice President of R&D at Onyx Pharmaceuticals where he led the development of Nexavar from IND through FDA approval for renal cell carcinoma. Dr. Post is also a founder.

Charles Hsu, Ph.D., who will act as business advisor to the company, has over 20 years of life science industry experience, including 15 years as an entrepreneur and venture capitalist, dedicated to investments in early-stage life science and healthcare companies. Dr. Hsu is another founder of the company.

LEAD has the potential to break the paradigm of current drug development and free up at least a portion of the current log jam in big pharma.  This will be an interesting company to watch in the future.

Disclosure: none.