Friday, January 15, 2010

Financings of the Fortnight: S-1 Storm

After a long drought, Financings of the Fortnight is back with the rain you crave. And after an even longer drought, a drizzle of biotech IPOs in late 2009 has raised hopes for a good crop of newly public companies in 2010.

At the top of the list, Movetis’ IPO took in €97.75 million [$147 million], propelling the GI-focused Belgian biotech/J&J spin-off to easily win this year’s Deal of the Year award in the Exit/Financing category. Some analysts are hopeful (check out our annual review of the industry’s financing environment from this week’s Pink Sheet and be on the look out for our general overview on 2009 biopharma trends in the January issue of IN VIVO), but the truth is there’s still a long way to go, especially given the post-IPO performance of some of these companies (besides Movetis, which is trading above its IPO price).

Omeros for example debuted stock at $10 in early October, but is now selling in the high $6s, tumbling as low as $5.40 (The company, which has a surgical drug delivery platform, has also been fighting accusations from its former CFO that it improperly billed the NIH for grants). So M&A still seems to be the ideal choice for investors looking for an exit, even if capital is hard to come by and disagreements over valuation may delay the transaction.

Nevertheless since our last installment of FOTF we’ve seen Aveo and Tengion file S-1s, bringing the total in 2009 to six biotechs making their first attempts at IPOs, joined by a few--including Alimera Sciences, Aldagen, and Codexis (on December 28)--which are trying for an initial public offering for the second time.

So what does this S-1 class of 2009 look like? Well, with the exception of a few, most of them are fairly young, between 5-7 years old. And a handful of these youngsters have raised close to or at least $100 million in venture capital, so there are likely many hungry backers waiting for a return on their investments. Regenerative medicine firm Tengion, for instance, has brought in $143 million since inception.

None of the 2009 S-1 filers have any products on the market, but rather late-stage candidates in the Phase II-III range. One interesting theme among the 2009 group was in-licensing from Asian partners. Cancer drug company Aveo Pharmaceuticals, Anthera Pharmaceuticals, which is involved in the cardio space, and antibiotics developer Trius Therapeutics have each established their pipelines or built them up through licensing agreements with Asian companies. Anthera, for example, has taken a couple of anti-inflammatory phospholipase A2 inhibitors shelved by Japanese pharma Shionogi and partner Eli Lilly and developed them for cardiovascular indications.

One final note—remember the days when the must have accessory for any IPO hopeful was the so-called validating deal with a Big Pharma? Well, none in the 2009 class has formed a collaboration with a Big Pharma or Big Biotech partner for a drug candidate. Sure Aveo has partnered its Human Response Platform with the likes of Merck and Biogen Idec, and Codexis has provided biomanufacturing services to several of these firms, but none of the biotech IPO filers have out-licensed any drug assets to these major players. --Amanda Micklus

Paul Capital Healthcare/Phase III Development Co.: Known for dozens of uniquely structured deals where it pays cash to a biopharma company--often in need of and having a tough time raising capital--and in return gets the rights to future royalties or revenues on drugs, Paul Capital Healthcare is now making a new venture in alternative financing for drug developers. PCH, which was founded ten years ago and currently manages $1.6 billion in dedicated funds and debt facilities, is staking newly formed Phase III Development Co. SARL (P3D) with up to $100 million. Not much has been disclosed about P3D, which was apparently set up to financially support and manage European clinical trials for pharmaceutical and biotech partners. Despite efforts to provide simplified and unified regulations for clinical trials in Europe, the adoption of the European Union’s Clinical Trials Directive in 2001 has instead caused more confusion, put a burden on research, and increased costs in order to comply. (According to a survey conducted by Applied Clinical Trials, the European clinical trials market was estimated at €20.3 billion in 2008 and will reach €30.4bn by 2012.) In return for its investment, P3D will receive some kind of compensation from its partner, such as milestones or revenue sharing whie it's partners access development capital and hedge development risk. And one firm is already taking advantage--P3D has signed its first deal with an unknown “major” pharma player to conduct studies for additional indications on an approved product.--AM

ZymoGenetics: On January 11, protein drug developer ZymoGenetics netted $90.9 million in a FOPO of 16.1 million shares (including the overallotment) at $6, lower (but not by much) than what the company’s stock has been trading at since late December. Proceeds will likely be directed towards commercialization of Zymo's recombinant human thrombin Recothrom. During 2008, its first year on the market, the drug only had sales of $8.8 million. But Q3 2009 sales alone were $8.5 million and ZymoGenetics estimates Recothrom currently has 15% of the topical thrombin market in the US, so maybe that Citizen Petition it filed with the FDA back in August questioning the safety of main competitor, King’s Thrombin-JMI, did the trick. The FOPO money should help Zymo with its newly procured responsibilities for Recothrom. Effective at the beginning of 2010, ZymoGenetics restructured its 2007 deal with Bayer, which originally had ex-US rights to the hemostat plus co-promote rights in the US post-launch for three years. Under the revised agreement, ZymoGenetics reacquired all geographic rights except in Canada, where Bayer will continue to market. As a result, ZymoGenetics will no longer receive $16 million from Bayer in ex-US regulatory milestones, but the biotech is also not responsible for $20mm in US sales bonus payments to Bayer. ZymoGenetics appears to be in a pretty good cash position. In fact, through the reworking of the Bayer deal as well as reviving a 2002 Novo Nordisk tie-up, ZymoGenetics says it expects to save $40 million. On September 30, the biotech had $91.3 million in cash and cash equivalents, plus it signed a very lucrative deal with BMS exactly a year ago for HCV candidate PEG-interferon lambda. Zymo received $85 million up front plus an additional $20 million fee, and to date has realized $95 million in development milestones.--AM

Regado Biosciences: This privately held biotech focused on developing aptamers as anti-thrombotics completed a $40 million Series D on Dec. 17. The round was led by a new investor, Edmond de Rothschild Investment Partners, with participation from previous investors Domain Associates, Quaker Bioventures, Aurora Funds and Caxton Advantage Life Sciences Fund. Regado said it would use the funds primarily to continue development of its lead program – REG1 for acute coronary syndrome – with an emphasis on completing a Phase IIb study already underway. Like all of Regado’s candidates, REG1 is a two-component drug system, combining an aptamer (RB006) with its complementary oligonucleotide active control agent (RB007), enabling both anticoagulation and then the restart of healthy clotting to avoid therapy-related bleeding complications. Last August, the Basking Ridge, N.J.-based biotech announced that REG1 demonstrated safety and efficacy in a Phase IIa trial comparing the candidate against unfractionated heparin in patients undergoing elective percutaneous coronary intervention. Regado previously raised $23 million in a Series C financing led by Caxton in 2007, and before that brought in $20 million in a Series B round co-led by Domain and Quaker.--Joseph Haas

BIND Biosciences: This largely under-wraps nanotechnology company made news on a pair of fronts recently, landing former Sequus Pharmaceuticals President Scott Minick as its new president and CEO on Jan. 11 and then announcing an $11 million Series C on Jan. 13 led by David H. Koch’s DHK Investment, with participation from prior investors Polaris Venture Partners, Flagship Ventures, ARCH Venture Partners and NanoDimension. As a managing director at ARCH, Minick was serving on BIND’s board of directors when the board asked him to take over as CEO. In an interview from the J.P. Morgan Healthcare Conference, Minick told IN VIVO Blog that his firm plans to use the Series C money to get BIND’s lead candidate, BIND-014 – a formulation of the oncologic Taxotere contained in a nanoparticle shell – into clinical development by the end of 2010. BIND uses its Medical Nanoengineering platform to attempt to develop safer and/or more efficacious versions of oncology, cardiovascular and anti-inflammatory drugs through differential delivery and controlled drug exposure to diseased tissue. “The idea being we get very high concentrations of a known, proven drug to the site of the tumor and, in preclinical models, [we] have demonstrated increased efficacy as well as improved safety,” Minick said. The involvement of Koch, an engineer, businessman and philanthropist heavily involved in the cancer research community, will give BIND access to a network of leading oncology clinicians, he added. “These are leading people that we want to work with as we design and execute our clinical trials, [and] as we consider the next products we want to bring forward,” Minick said. Established in 2006 around research into therapeutic targeted nanoparticles from Harvard and MIT, BIND previously raised $16 million in a 2007 Series B round led by Polaris and Flagship.--JH

image from flickr user millzero used under a creative contents license

1 comment:

Anonymous said...

You're quite right that very little is known about the newly formed "Phase III Development Company"... apart from the fact that it is based at the same physical address as Paul Capital Healtchare, with whom it has just done a "deal". I smell something fishy!