Financings of the Fortnight Checks the Rime of the Ancient Mariner

Water, water everywhere / And all the boards did shrink.

That's a line from Samuel Taylor Coleridge's poem about a crusty old salt with terribly poor judgment, but it might also describe the perplexing state of private biotech financing these days. Water, of course, signifies money -- unless you're Sigmund Freud. And for certain folks, there's plenty of it. Just ask the general partners of OrbiMed Advisors, who closed a $550 million venture fund in late February. Or ask the VC placement agent whom you'll meet in the upcoming issue of START-UP: "The dollars are still there but the number of managers getting it is shrinking." And he wasn't even quoting Coleridge.

So if Sammy Taylor were an eternal capitalist-optimist in sour times, he might have written this: Water, water everywhere / But at long last those who don't deserve it can't have any.

And indeed all the boards did shrink. Or more specifically, the number of boards, given public biotechs dropped like flies during the recession and no private start-ups bounded o'er the IPO main to replace them. And if you consider the ongoing shakeout in the venture world, that pool of board members will shrink, too. Perhaps corporate venture investors who tend not to take board seats will rethink that stance if they continue to take a bigger role in early-stage venture rounds. But that's a topic for another epic poem.

The real albatross for late-stage private biotechs right now is the IPO market. Is the window open? Just a crack, perhaps, as evidenced by the debuts of Ironwood Pharmaceuticals on Feb. 3, Anthera Pharmaceuticals on Mar. 1, and as we write this, perhaps AVEO Pharmaceuticals. But be careful what you wish for. None of the above three have been clean debuts, and another on the calendar, Trius Therapeutics, said Mar. 4 it would postpone because murky F.D.A. guidance on antibiotic non-inferiority trials forced it to modify a Phase III trial. (Note that some of Trius's peers say the regulatory situation hasn't delayed their trial timelines, as we reported here in "The Pink Sheet.")

Anthera and Ironwood got out thanks to the largesse of their venture backers, who bought about 40% of each issue. They still had to take haircuts; Ironwood wanted $270 million but "settled" for $188 million, and Anthera dropped its target of $64 million ($14 a share) down to $42 million ($7 a share). Meanwhile AVEO, with its triple-VEGF inhibitor tivozanib entering Phase III trials for kidney cancer, was aiming for $98 million but delayed pricing yesterday.

If this is really a window, where's the rush to file? In fact, there hasn't been a fresh registration this year (the sole filer, BG Medicine, is hoping the second time's a charm after it withdrew in January 2008). Perhaps private biotechs and their investors have squinted through the dank mist and glimpsed the IPOs hanging around the necks of the becalmed souls who've gone public in recent years. (See our previous edition for the ugly truth.)

Then curse ye, public investors! We're here to tell you about those needing financial shelter and finding any port in a storm, from massive European venture rounds to creative royalty deals. Now wherefore stopp'st thou me? It's time for...

Archimedes: UK-based specialty pharma firm Archimedes Pharma on March 2 scooped up £40 million from new investor Novo Growth Equity and got a new leader, to boot. The money was part of a whopping £65 million ($100 million) private round, one of the largest in European biopharma in the last 15 years. Archimedes will use the funds to establish a US presence and commercialize recently-filed fentanyl nasal spray PecFent -- until recently known as NasalFent -- for breakthrough cancer pain, both in the States and Europe. The company, which was founded in late 2004 by former Shire exec Richard de Souza, hadn’t planned to jump into the US on its own. But according to Novo managing partner Ulrik Spork, PecFent can capture maximum value across the most lucrative markets; certainly Warburg Pincus, the long-time private equity investor in Archimedes (which put up the remaining £25 million in the round) isn’t complaining. Archimedes’ investors hope that new CEO and president Jeffrey Buchalter's ride at Archimedes is smoother than his previous gig at Enzon Pharmaceuticals, where activist investors drummed him out of office in February after a long fight and the dismantling of the company. -- Melanie Senior

NPS Pharmaceuticals: NPS’s transaction with DRI Capital, announced March 2, uses a different structure than many royalty deals of the past couple of years. Typical agreements have been structured as loans backed by royalty streams (see our write-up from last September on Xoma’s $55 million deal with Goldman Sachs using royalties from the sale of Raptiva, Lucentis and Cimzia). But NPS will receive $38.4 million from DRI in exchange for cumulative, capped royalties from the sale of Regpara (cinacalcet HCl), which is licensed and sold in Japan and other Asian markets by Kyowa Kirin Pharma for secondary hyperparathyroidism associated with kidney dialysis. DRI receives any royalties from the drug from July 1, 2009 forward, but only until they reach $96 million or 2.5 times the purchase price. DRI gets a guaranteed (albeit capped) return on investment, unless Regpara absolutely tanks, while NPS, without debt or stock dilution, gets money to fund its pair of Phase III programs: Gattex (teduglutide), a glucagon-like peptide analogue for short bowel syndrome, and NPSP558, a hormone-replacement therapy for hypoparathryroidism. NPS received $10 million upfront and the potential for up to $175 million in milestones by licensing ex-North American rights for Gattex to Nycomed in 2007, but it hasn't done a major fundraising since a 2005 follow-on public offering that netted $78.5 million. -- Joseph Haas

Optimer Pharmaceuticals: On March 1, infectious disease company Optimer Pharmaceuticals netted $51.5 million in a follow-on public offering of 4.89 million shares (including full exercise of the overallotment) at $11. This is the first time the biotech has taken to the public markets since it completed its IPO three years ago -- one of the few successful in the IPO class of 2007, as we highlighted here. Follow-ons boomed in 2009, totaling $5.6 billion for the year, and more biotechs are queued up: Ablynx, Lexicon, and Micromet. The FOPO cash will help Optimer put together US and European filings for its lead antibiotic fidaxomicin, an RNA polymerase inhibitor for Clostridium difficile-associated diarrhea, in the second half of this year. With fidaxomicin, Optimer is looking to compete against ViroPharma’s Vancocin (vancomycin), a warhorse antibiotic and the only FDA-approved treatment for CDAD. Last month Optimer announced top-line data from its second pivotal Phase III trial showing fidaxomicin performed better than Vancocin in patients achieving clinical cure (91.7% vs. 90.6%) and had significantly lower recurrence rates and higher global cure rates. Could fidaxomicin’s success make Optimer an acquisition target or attract a big-pharma partner? So far the biggest alliance in the CDAD space is Merck’s exclusive worldwide deal for Medarex and Massachusetts Biologic Laboratory’s Phase II combination antibody treatment last year: $60 million up front and $165 million in pre-commercialization milestones. Optimer has already tried dealmaking with fidaxomicin, granting Par Pharmaceutical North American rights in 2005 only to have them returned two years later because Par was looking for a more near-term drug to launch at the time. -- Amanda Micklus

Ubiquigent: From small beginnings come great things, or so U.S. biotech Stemgent hopes with its three-year £3 million ($4.5 million) investment in Dundee, Scotland-based start-up Ubiquigent. The new firm will develop reagents for ubiquitin pathway drug development, using discoveries handed off from the newly formed protein ubiquitylation unit of the Scottish Institute for Cell Signaling (SCILLS), a government-funded lab at the University of Dundee that has fostered successful industry link-ups related to its protein phosphorylation (kinase) research. The ubiquitin pathway is a dimly understood cell signaling system, but the proof of concept for drug development is out there in the form of Millennium's proteasome inhibitor Velcade (bortezomib). The pathway regulates the lifetime and intracellular distribution of proteins and a variety of signal transduction and other physiological mechanisms, which certainly invites therapeutic intervention, but mapping the possibilities has also been likened to the vast complexity of the Human Genome Project. (The ubiquitin pathway also led to the 2004 Nobel Prize in chemistry.) Stemgent/Ubiquigent CEO Ian Ratcliffe helped establish the European division of reagent firm Upstate Group to exploit discoveries from the University of Dundee in 1999, so he knows the territory. Upstate was acquired in 2004 by Serologicals, which in 2006 was bought by Millipore, which this month was acquired for $7 billion by Merck KGaA. Perhaps Ratcliffe is at the beginning of another long roll-up. -- Shirley Haley

Photo courtesy of flickr user johnnyr1.