Financings of the Fortnight Checks in on the A-List

Our colleagues at Start-Up do a little thing every year they call The A-List, in which they slice, dice, julienne and slow-cook the year's biopharma and med-tech Series A venture rounds as a way to gauge the health and direction of the industry. If the annual A-List is a three-course meal, consider this post a snack to tide you over.

Four months into 2010, we take a step back and ask: "How are biotechs faring as they try to tap into crucial early-stage funding?"

Not so great, according to Elsevier's verison of the Magic 8-Ball, the Strategic Transactions database. Early-stage biotechs raised $163 million via 15 A rounds through April 30, with the average financing pulling in $10.9 million. (If a deal was tranched -- and many were -- we only count the tranche raised, not previous or future tranches included in the same round. For example, Flexion Therapeutics raised $9 million from Pfizer as part of a much larger A round, but only the Pfizer money was announced this year.)

At this pace, biotechs will raise $652 million in Series A money in 2010. In 2009, the figure was $842 million, and in 2008 it was $709 million. Filter out the massive $145 million A round pulled in last year by Clovis Oncology, and 2009 is still ahead of this year's pace. Paces can change, of course, and last month was one of the busiest for Series As in the past two years.

And that must mean momentum, except that... sigh... it doesn't. So far in May we've seen just one biotech Series A, the low-key Swedish cardiovascular play Cardoz (more on them later).

One trend carrying over from last year is the involvement of corporate venture investors. Last year, about 20% of all venture deals included corporate cash, and 40% of the top-dollar Series As had at least one corporate investor. This year, three deals have had a corporate element. Pfizer leads the Series A corporate pack so far with the aforementioned $9 million funneled into Flexion.

It's early to make grand prognostications on four months worth of data. Still, the numbers are worth monitoring as an indicator of VC health. It boils down to this: Will venture capital rebound to previous norms as the economic wheel turns to the good, or will we emerge from the cave of the global recession squinting at a fundamentally changed landscape in which traditional VC is no longer the dominant source of funding for early-stage R&D? There's a case to be made we've been headed that way for a while, even before the financial crisis. We're curious to see how 2010 eventually fits into the grander of scheme of things. Meanwhile, life goes on, and life requires cash, not to mention long walks, fresh air, and feta cheese. What else can you not live without? How about...

Ikaria & NuPathe: A funny thing happened on the way to this year's IPO window. Ten biotech issues that registered last year have gone public this year, ranging in size from Ironwood’s $203 million take in February to Australia’s CBio, which garnered a tiny $6.2 million. But until the past fortnight, no biopharma had filed an S-1 in 2010 -- how's that for enthusiasm? That is, not until Ikaria, which filed its S-1 on May 13, and NuPathe on May 14. Neither has set terms, though Ikaria used the rather ambitious placeholder of $200 million, while NuPathe went for the more typical $86 million. Haircuts have been the rule not the exception in this year’s IPO market, so don't be surprised if they are extra cautious as their bankers gauge the market. One positive for both companies: their assets are in late-stage clinical trials. Ikaria’s Lucassin is entering Phase III in hepatorenal syndrome, and NuPathe already has advanced its migraine drug, Zelrix, through Phase III and hopes to win approval and launch by 2012. Also of note: Whether Ikaria goes public or not, it will distribute a $130 million dividend to 12 company officials this quarter, payable from a new $250 million loan. Ikaria says the payout is a one-time deal. Prospective investors should also note that Ikaria's top investor New Mountain Partners will continue to run the show post-IPO, controlling as many as three board seats. -- Joseph Haas

Cardoz: After a boffo April for early-stage funding, only one biotech reeled in a Series A round this past fortnight. Spotlight, then, on Cardoz, a low-profile Swedish startup working on repositioned drugs. It doesn't have a Web site, so its investors announced a SEK 100 million round (about US $13 million), which Cardoz will receive in two tranches that aren't tied to milestones, Cardoz CEO Carl-Johan Dalsgaard told IVB. The funding comes from a European syndicate led by Dutch firm Forbion Capital Partners. YSIOS Capital Partners of Spain and Sweden's HealthCap, where Cardoz was incubated and Dalsgaard is a partner, also joined. Its lead compound, the origins of which Dalsgaard declined to reveal, is already in the clinic, and the cash will help push it through Phase II to treat abdominal aortic aneurysms. Cardoz also has a preclinical program to develop novel inhibitors of leukotriene A4 hydrolase. -- A.L.

Sequenom: Look who's back. In April 2009 the diagnostic firm Sequenom admitted employees mishandled data from its Trisomy 21 Down syndrome test, resulting in the dismissal of CEO Harry Stylli, among others, federal investigations, and accusations of insider trading. But new management has recouped enough investor confidence to boost the stock -- if not quell skepticism in other corners -- and raise $51.6 million in a private placement announced on May 12. It was much-needed cash, as Sequenom reported only $30 million in the bank at the end of the first quarter. There's a caveat to the comeback: Sequenom sold the 12.4 million shares at $4.15 each, a 23 percent discount to the previous day's close. On its May 6 earnings call the new management team detailed a clinical development plan using outside data and also, for the first time, clarified that the Trisomy 21 test will be DNA-based (it is now being run on Illumina’s sequencing platform). Whether a Trisomy 21 diagnostic gets to market -- as a laboratory developed test (LDT) by the end of 2011, to be followed by a PMA application for regulatory approval by the end of 2012 -- remains a question, but the company is at last giving details. That, plus the significant discount to its stock price, certainly helped complete the financing. -- Mark Ratner

NeuroTherapeutics Pharma: The B-list needs some attention, too. This Chicago-area startup said May 20 it pulled in a $43 million Series B, notable not just for its size but for its participants, which include corporate funders GlaxoSmithKline and Pfizer. NTP's lead molecule, NTP-2014, has potential applications across numerous diseases, including epilepsy, pain and other CNS indications, according to the company. The drug is still in preclinical development with an IND filing planned for later this year and trials planned in pain and epilepsy. As noted in our intro, corporate funders played an ever-larger venture role last year. We also take note of the presence of GSK's SR One fund. This is the first SR One deal we've heard of since the big re-org, or should we say, the latest big re-org, with ex-Sirtris chief Christoph Westphal taking the reins as he also tries to launch a separate fund that reportedly has cash from GSK. Meanwhile, it's Pfizer's second venture deal this year. NTP officials told "The Pink Sheet" they did not give away any rights, such as right of first refusal or options, in order to secure the financing. NTP chairman Heath Lukatch, a partner at Novo Ventures, said the Series B cash should see the firm through three years and three "robust" Phase IIa trials in pain and epilepsy. -- Jessica Merrill

Photo courtesy of flickr user cheesy42.