Thursday, November 04, 2010

Financings of the Fortnight Waits For the IPO Parade To Start

Will the recent IPOs of Pacific Biosciences, a cut-rate Aegerion Pharmaceuticals, and a reportedly massive debut by a Chinese drug maker with a huge distribution network unleash a parade of life-science debuts? We don't know the answer to that question, but we thought it would be interesting to check in with the folks at Zealand Pharma, which said Nov. 3 it plans to raise up to $146 million on the Copenhagen stock exchange (yes, Zealand is based in Denmark, not the southwest Pacific).

Let's step back a second. If you abide by the oft-chanted mantra that the IPO is no longer an exit but another round of financing, then the real test of an IPO is how it positions the company. Certainly the most startling post-IPO exit in recent history belongs to another European biotech, Movetis. It debuted on the Euronext in November 2009, raising about $140 million and winning our Exit/Financing of the Year nod; nine months later it was betrothed to Shire in a $565 million deal.

Now here comes Zealand, which tried five years ago to go public. If it meets its fundraising goal, Zealand's coming-out would make it the biggest in Europe since Movetis. Like its Belgian brother, Zealand has a late-stage asset with potential broad market appeal: the Phase III GLP-1 analog lixisenatide, partnered to Sanofi-Aventis. It plans to file for approval in the EU in 2011 and a year later in the US, according to Zealand CEO David Solomon.

Solomon also told our Pink Sheet colleagues that an IPO "isn't a requirement for us." (How nice to have that flexibility.) But it's hard to believe its investors, who've piled $145 million into the company, are blissfully ignorant of the parallels to Movetis. Of course, Zealand doesn't need to go public to be bought at a tasty premium, but once public, it's that much harder for Big Pharma to force a target's shareholders to accept earnouts.

One thing to keep in mind: Zealand's shareholders, which include Denmark's Sunstone Funds and LD Pension, France's CDC Innovation and Allianz Private Equity, and the Netherland's Life Science Partners, will be subject to a 360-day lock-up period following the IPO.

For sheer cash on the barrel head impressiveness, no one will outpace Pacific Biosciences, whose IPO we describe below. But we're leery about correlating enthusiasm for sequencing technology with drug lust, so to speak. So if you want to know which way the biopharma wind is blowing, Zealand is a better place to hoist your sails -- at least until next April, when once again this is the place to be. But don't stay out in the cold, especially since it's not even winter yet. Curl up next to our hot stove with the latest edition of...

Karyopharm Therapeutics: Karyopharm derives its name from karyophrerins, proteins that shuttle from the nucleus to the cytoplasm, and has attracted $20 million in Series A financing to further its work on selective inhibitors of nuclear export (SINE). The Series A came entirely from Cyprus-based Chione Ltd., the investment vehicle for an unnamed wealthy individual, according to Karyopharm director Michael Kauffman, MD, PhD. Newton, Mass.-based Karyopharm started last year with $1 million from angel investors. It's using computational chemistry technology invented by its CSO and acting president Sharon Shacham, PhD, who used to head up drug development at now-defunct Epix Pharmaceuticals. Epix licensed Dr. Shacham the technology before the company filed for bankruptcy in 2009. Both Shacham and Kauffman, the former Epix CEO, helped establish the start-up, which is interested in oncology, autoimmune disorders, inflammation, and viral diseases including HIV. It will soon nominate a lead candidate for cancer and focus on hematological malignancies. To destroy tumors and ensure healthy cells retain tumor suppressor proteins in their nuclei, Karyopharm is developing small molecules that prevent the nuclear export of multiple proteins from the diseased cell, allowing the drug candidates to modulate the activity of key cancer pathways. The company’s platform targets the main culprit: CRM1, the nuclear pore complex that facilitates the import and export of the tumor suppressor proteins between the nucleus and cytoplasm. The 3-D structure of CRM1, which was discovered by Yuh Min Chook, PhD , was published in Nature in 2009. -- Amanda Micklus

Pacific Biosciences: DNA sequencing instrumentation specialist PacBio got the gold in late October, netting $186 million from a 12.5 million share IPO priced at $16. This comes four months after closing a $109 million Series F financing, which included a $50 million investment from strategic partner Gen-Probe as part of the companies’ June 2010 R&D collaboration. With Gen-Probe, PacBio's long-term goal, not to mention that of its competitors, is the clinical diagnostics market as featured recently in IN VIVO. But as is typical for life science tools providers, the company will first target the smaller academic and applied research market. PacBio has received orders for eleven of its instruments including from several of the best-known large-scale sequencing centers in the US and from Monsanto for agricultural research, according to its IPO prospectus. PacBio is also looking beyond DNA sequencing to potential applications for its technology in the study of chemical and structural modifications of DNA and processing of RNA and proteins, and it believes it can provide these additional capabilities through enhancements to software and consumables without the need for modifications to its basic hardware. As the cost of taking sequencing measurements drops due to innovations from PacBio and others, commercial success will depend at least as much on the ability to provide extensive high-quality data analysis as on hardware. Indeed, as noted in our recent discussion of Merck’s intention to utilize the sequencing capabilities of BGI in China, the resources dedicated to sequencing have flipped from the front end to the back end -- from being measurement heavy to being computation and data analysis (bioinformatics) heavy. -- Mark Ratner

Omeros: A year after netting $63.4 million from its IPO, the first for a pure-play U.S. biotech after the market crashed in 2008, Omeros has sealed a $20 million PIPE deal with Microsoft cofounder Paul Allen's private investment firm Vulcan Capital and its affiliate, Cougar Investment Holdings. In tandem with the financing, Washington State’s Life Sciences Discovery Fund (LSDF) also provided a $5 million grant to Seattle-based Omeros. The biotech says it will use the money to advance its G protein-coupled receptor program, aiming to perform high-throughput screening of about 120 “orphan” GCPRs, or those without a ligand. The goal is to identify what it believes could be up to 65 new druggable targets for a broad range of indications. In exchange for their investment, Vulcan and LSDF are eligible to receive tiered net proceeds earned by Omeros from the GCPR program, including product sales and specified partnership arrangements such as milestone payments. Vulcan is better known for its media and technology investments but has a life science track record. A year ago IN VIVO estimated Vulcan made ten times its investment in BiPar Sciences -- it led the Series A and reupped twice -- when BiPar was bought by Sanofi-Aventis. For their Omeros bet, Vulcan and LSDF will receive a blended percentage in the mid-teens on the first $1.5 billion in proceeds from the GCPR program; beyond that threshold, the percentage decreases to 1% of net proceeds. Vulcan also received three sets of five-year warrants, each good for 133,333 shares in Omeros, at exercise prices of $20, $30 and $40. Omeros, which sold its IPO at $10 per share, closed at $8.02 on Nov. 3. -- Joseph Haas

Mind-NRG: Always curious about asset financing strategies, we took notice when Index Ventures on Oct. 27 pledged up to €10 million ($13.4 million) to Swiss start-up Mind-NRG. Index has made a habit of asset-centric financings, backing development of a single candidate, or a small handful of candidates with a single mechanism of action, typically housed within companies with ultra-lean overheads and minimal staff. There are few examples, industry-wide, of success, but Index can point with justification to Abbott Laboratories' 2009 purchase of PanGenetics -- effectively a single-asset acquisition -- as its good-news story in this field. Abbott paid a whopping $170 million up-front for a Phase I antibody targeting nerve growth factor. Mind's asset, NRG-101, is a pre-clinical peptidic neurotrophic factor that crosses the blood brain barrier and may therefore have disease-modifying potential in diseases such as Parkinson's or Alzheimer's. The molecule was sourced from German proteomics group ProteoSys for no cash, just a 38% stake in Mind. Index holds the rest. -- Melanie Senior

Photo courtesy of flickr user Zack Sheppard.

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