Friday, January 07, 2011

Financings of the Fortnight's Forecast Calls for Pennies From Heaven

Turn your frowns -- and your umbrellas -- upside down. When the biopharma financial world unpacks its bags in San Francisco next week, instead of raindrops there might be dollars falling from the sky, fluttering in the California sunshine.

OK, let's not exaggerate. The icy biopharma funding climate won't completely thaw overnight. But did you see the rounds announced this week? Even if the big-money flurry can be chalked up to PR maneuvering (shocking!) to get in front of a post-vacation, pre-JPMorgan audience, you can't help but notice the totals: the four private companies highlighted down below, plus two more (TetraLogic Pharmaceuticals, DBV Technologies) account for $265 million in new cash in hand or pledged through future tranches. That's still a lot of pennies, no matter how you sing it.

Still, while larger economic indicators point to a hastening recovery in 2011 in Motown and other places, here in biopharma financing land, we're not ready to call a return to the good old days. (But stick a couple pink tail fins on a Chevy Volt, and maybe we could party like it's 1959.)

For example: biotechs looking for a first round of funding still find their options crimped. As our colleagues at START-UP will tell you soon, 2010 was a dismal year for "A" rounds, with total and average cash raised even worse than 2009. "Worse than 2009" is generally not a phrase you want associated with your industry. Perhaps the $30 million pledged to PanOptica, described below, by Third Rock Ventures and SV Life Sciences will kickstart 2011. (No coincidence that Third Rock and SV were two of an elite group of VCs to raise new funds in 2010.)

One of our JPMorgan tasks this year is to ask every venture-backed company with even a hint of Phase II data if they see IPO on the horizon. And we'll be on the lookout for companies that have taken unusual routes to put themselves in that position, such as the Shire spinout Supernus Pharmaceuticals, which incorporated around Shire's spun-out formulation business in late 2005. On Dec. 23 it filed its intent to go public with a $100 million placeholder target. That figure will almost certainly change, as nearly every biopharma IPO in 2010 ran into investor resistance in the form of giant scissors, with many revising downward their fundraising goals by 30% or more.

A timely IPO would represent a fast exit for its venture backers, who invested $45 million across two Series A tranches, all the sweeter because Supernus supplemented its venture financing with $75 million in debt, a rarity for a biotech. Because it was spun out with formulation technology that had helped create commercial products, Supernus in 2008 was able to turn the royalty streams from those products into upfront cash. It will pay back its debtors with the proceeds from the royalty streams, and the IPO cash would go entirely toward operations. Its leads are two extended-release anti-epileptic drugs, one in Phase III, and the other poised for an NDA filing this quarter.

Clever, yes, but replicable? Ah, well, for fear of tipping our hands too much, that's another question you'll soon find answered in our sister START-UP. Consider this little chat the first tranche of our latest equity issue. That's a print joke, folks. Laugh now, or pay later. And save a few pennies for a rainy-day edition of...

PanOptica: In stealth mode since SV Life Sciences’ seed investment in summer 2009, ophthalmological drug developer PanOptica revealed a $30 million Series A round that also includes Third Rock Ventures. PanOptica also obtained rights from Astellas Pharma to a topical formulation of a vascular endothelial growth factor inhibitor, intended to treat the “wet” form of age-related macular degeneration, that can be administered as an eye drop. Pharmacologically similar to but distinct from Novartis and Roche’s Lucentis (ranibizumab), the standard of care for wet AMD, the compound was originally studied by Astellas for oncology, and is expected to enter Phase I trials next year. PanOptica, whose officials have put much thought into reimbursement issues, says it also intends to license two more compounds for other eye disorders such as glaucoma, dry eye, and the “dry” form of AMD. Astellas received equity in PanOptica as well as a cash payment, and is due milestone payments and royalties as the compound moves toward regulatory approval. Specific terms weren’t disclosed. If approved, the drug would compete with both Lucentis and off-label prescriptions of Roche’s Avastin (bevacizumab), normally a cancer drug that is much less expensive than Lucentis when prescribed for wet AMD. -- Paul Bonanos

NovImmune: Armed with Genentech as its new top partner, Swiss firm NovImmune secured an additional CHF20 million ($20.6 million) in Series B financing from returning investor BZ Bank. Director of business development Luca Bolliger told The IN VIVO Blog this was the third tranche to the B round, which pulled in CHF58 million in October 2006 and another CHF62.5 million in May 2009. Added to the CHF15 million Series A raised in 2000, two years after the company spun out of the University of Geneva, NovImmune has amassed CHF155.5 million ($160 million) in venture funding. In July, Genentech signed on for exclusive worldwide rights to NI1401, an anti-IL-17 antibody in preclinical studies for immune and inflammatory diseases, plus back-up antibodies, in exchange for an undisclosed up-front fee, milestones, and royalties. Genentech becomes NovImmune's most prominent partner, as the firm in May 2009 bought back rights to its lead candidate NI0401 from MerckSerono. (Based on the word at the 2009 BIO conference, Serono was reviewing its pipeline and decided the project didn’t fit in with its strategy.) According to NovImmune CEO Jack Barbut, the new financing will allow the company to complete validation of its DiversityTrap bispecific antibody platform, which has produced seven antibodies so far. The company will now be able to obtain proof-of-concept data for at least two of them. -- Amanda Micklus

Genocea Biosciences: The vaccine maker inoculated itself against a funding drought with a $35 million B round to bankroll Phase I trials of its herpes simplex type 2 vaccine. Apart from the hefty shot in the arm the cash provides, the round was significant for the presence of new investors J&J Development Corp. and MP Healthcare Management, the venture arms of Johnson & Johnson and Mitsubishi Tanabe Pharma Group. Genocea executives were frank with our Pink Sheet colleagues, saying the added corporate venture presence gives Genocea a better chance at exit-by-acquisition at a time when exit-by-IPO is a dicey proposition. GlaxoSmithKline's SR One invested in Genocea's Series A. Glaxo is one of the world's leading vaccine makers, and it had a herpes simplex virus vaccine program that washed out of a Phase III trial in 2010. J&J's own vaccine program lags behind GSK and other major producers, but the healthcare giant has bid €1.75 billion ($2.3 billion) for Dutch vaccine developer Crucell, of which it already owns a 17.8% stake. Genocea is developing both therapeutic and prophylactic vaccines for HSV-2, the strain of herpes more likely to cause genital sores as opposed to lesions around the mouth, but the startup will concentrate its resources primarily behind the therapeutic program. -- P.B.

Symphogen: Danish biotech Symphogen can now lay claim to the largest ever private financing round for a European biotech: €100 million ($131 million), which brings the firm's total cash raised to 208 million since its inception in 2000. Novo A/S and private equity play Essex Woodlands led and each contributed 35 million. The size of the sum meant that previous investor Novo Ventures' parent holding company Novo A/S, which manages the assets of the Novo Nordisk Foundation, made the decision. The difference isn't likely to affect exit strategy or other external considerations, but it's worth noting that when Novo goes big, the holding company makes the investment. In March 2010 it led one of the largest European private rounds, the £65 million ($100 million) raised by specialty pharma firm Archimedes Pharma Ltd. The funds will be used to accelerate development of lead product Sym004, which is just completing a Phase I/II safety trial in patients with advanced solid tumors, and to push additional cancer candidates into the pipeline. Sym004 combines two antibodies without conjugation against epidermal growth factor receptor (EGFR), each of which targets different, non-overlapping EGFR epitopes. Company officials tout '004 as a "me-much-better product than Erbitux." The firm can also put the cash toward the Phase II immune thrombocytopenic purpura candidate rozrolimupab (Sym001) that development Swedish Orphan Biovitrum AB handed back to Symphogen last month. Coincidentally or not, the previous richest European round before Symphogen was Biovitrum's $130 million raise when it spun out of Pharmacia in 2001. -- Melanie Senior

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