Friday, May 27, 2011

Financings of the Fortnight Puts It In Reverse

LinkedIn? Might as well be in a different universe. From where we sit, it's terribly difficult to go public, let alone do it with investors making the equivalent noise of all those kids who came to see the Beatles in 1964.

There's another way to go public, however. Perhaps you've heard that Radius Health this week merged into an acquisition shell created by life-science venture firm MPM Capital. The new Radius already reports to the SEC and plans to apply directly for a listing later this year, with a goal of transitioning to the Nasdaq by early 2012.

Our Pink Sheet colleagues covered it thoroughly, but the gist is that Radius, spurned by Novartis' decision not to option its anabolic bone-building treatment BA058, now has a financial runway to fund Phase III trials and eventually find a new dance partner. If approved, BA058 would compete directly with Lilly’s Forteo (teriparatide), the only currently approved drug that builds bone mass rather than slowing resorption.

Concurrent with the reverse merger, Radius has raised $91 million in an equity-and-debt Series C round. The first tranche consists of $22 million in equity funding and $6.25 million in debt and includes a doubling-down by MPM, which returned to invest above its pro-rata. MPM's Ansbert Gadicke told our Pinkish colleagues that prostate-cancer developer Cougar Biotechnology provided inspiration for the deal. Cougar reverse-merged into a shell company in 2006; three years later Johnson & Johnson scooped it, and its Phase III drug abiraterone, for nearly $1 billion.

How often does that happen? In the last ten years, never, at least not at that price. At least five others besides Cougar have gone on to reap M&A benefits; the next priciest we could find was Solexa, a genomics company that was acquired by Illumina in 2006 for $600 million in stock.

Of 75 reverse mergers we found in our database since 2001, at least 16 included a round of financing either at the time of the merger or nearly so. Cougar nabbed $47.5 million, for example. Not all are engineered as a way to reach the public markets, of course. (Merck/Schering-Plough was technically a reverse merger, which we had a bit of fun with.) The majority are historical footnotes, as you might expect from companies that can't manage the normal route of attracting public investors.

Then again, the "normal route" doesn't exist anymore for biotech companies. Regarding Radius, the biotech has enough going for it to keep old acquaintances interested; Novartis, through its MPM-managed fund, is a new investor, as is Ipsen, the European drug firm that sold Radius the rights to BA058 in the first place in 2005. Another backer is Nordic Bioscience, a contract research firm with deep expertise in osteoporosis drugs. It's taking equity as part of its CRO fee for BA058; talk about having skin (and bone) in the game.

Spin-outs, reverse mergers, incubators, follow-ons, and A, B or C rounds: Your best bet for boning up on all of them is...

BioCritica: Blockbuster gone bad Xigris (drotrecogin alfa), which was hailed as a new sepsis treatment upon approval in 2001, has a new home. After a decade of minimal sales dogged by serious side effects, owner Eli Lilly & Co. is spinning the drug out to BioCritica, a new firm in Indianapolis that will focus on critical-care medicines. Its backers are Care Capital and NovaQuest Capital, and it also received Indiana state funding and support. No financial details were disclosed, but the NovaQuest connection is interesting, seeing how the firm -- once the investment arm of CRO Quintiles Transnational -- was deeply involved in two of Lilly's Alzheimer's drugs, one of which, semagacestat, failed in late-stage trials. NovaQuest is now operating independently of Quintiles, and as this column reported last December, is raising its own fund. BioCritica, meanwhile, is led by CEO David Broecker, who most recently served at the helm of Cambridge, Mass. biotech Alkermes, but previously worked at Lilly in marketing and product planning. BioCritica will continue Lilly's work to find the best uses of the controversial treatment, which has serious bleeding side effects and questionable efficacy in the broad sepsis patient population, but it hasn't disclosed more detailed plans. Lilly already decided a biotech was best suited for the follow-up to Xigris, a compound Lilly out-licensed to Cardiome Pharma in 2007. -- Lisa LaMotta

GenKyoTex: Edmond de Rothschild Investment Funds led a CHF 18 million Series C for GenKyoTex, a Geneva-based biotech focused on developing small molecule inhibitors of NOX family NADPH oxidases, transmembrane proteins at the beginning of the oxidative stress pathway. New investors Vesalius Biocapital Partners and MH Healthcare Venture Management and existing backers Eclosion, SGAM’s Specialized European Fund for Therapeutic Innovation, and Fondation d’Aide Aux Enterprises chipped in as well. GenKyoTex was incubated at Eclosion, the Canton of Geneva based public-private partnership that helps participating entrepreneurs tap a mix of state, university, and industrial resources. GenKyoTex plans to use the new cash to develop its lead candidate GKT137831, currently on the cusp of going into the clinic, for the treatment of diabetic neuropathy, and to support its preclinical portfolio. GenKyoTex is betting that interfering with oxidative stress by inhibiting NOX will help reduce the formation of reactive oxygen species (ROS) that can contribute to cardiovascular, neurodegenerative and metabolic diseases, cancer, and other conditions. The funding is a coming-out party of sorts for GenKyoTex, which has its roots in a three-way academic collaboration between scientists in -- you guessed it -- Geneva, Kyoto, and Texas. Along with the financing the biotech simultaneously announced a spate of executive changes: Ursula Ney, former Antisoma COO, becomes CEO; Phillipe Wiesel, formerly a medical director at Serono, is CMO; and taking on the role of chairman is PregLem CEO Ernest Loumaye. -- Chris Morrison

SpringLeaf Therapeutics: Start-up SpringLeaf has added $15 million to its coffers through a May 12th Series B venture roundto continue work on a disposable "patch pump" that allows at-home subcutaneous of intravenous biologics, and also to work on a drug , according to CEO Frank Bobe.The cash comes from return investors Flybridge Capital and North Bridge Venture as well as lead and new backer SR One, whose Brian Gallagher, joins the company’s board. (This is SR One’s first participation in a drug delivery-focused firm since Dicerna Pharmaceuticals’ $29 million August 2010 Series B.)MIT spin-off SpringLeaf was founded as Entra Pharmaceuticals in 2007 and two years later filed a patent application entitled “Skin-Patch Pump Comprising a Changing-Volume Electrochemical Actuator.” Gallagher says the firm's “patient-centric” approach will facilitate more cost-effective therapies and the technology overcomes formulation obstacles associated with delivering existing large-volume biotherapeutics, including highly viscous drugs. CEO Bobe declined to disclose any details on the drug SpringLeaf is working on, but he said preclinical results were encouraging. The biotech, which has now raised about $27 million including a December 2008 Series A round, hopes to initiate a clinical trial by the end of 2012.-- Maureen Riordan

ImmunoGen: Best known for its antibody-drug conjugate (ADC) work, ImmunoGen said May 20 it has raised $84 million before expenses in a follow-on offering, selling 7 million shares at $12 per share. The fundraising comes as ImmunoGen's stock has reached its highest levels since the early 2000s amid growing hopes that ADCs, which attach a strong cytotoxic agent to a therapeutic antibody for a more precise attack on cancer cells, are on the cusp of medical success after three decades of frustrating clinical progress. ImmunoGen is part of the optimism; it has contributed the cytotoxin and "linker" technology used in Genentech/Roche's T-DM1, considered the next iteration of Herceptin. Indeed, ImmunoGen's stock run-up is due in part to new top-line randomized Phase II T-DM1 data released in April that showed improvement in progression-free survival in first-line metastatic breast cancer patients. Good news about T-DM1 is more a boon to ImmunoGen's platform than its immediate finances, as the firm would only receive single-digit royalties from any commercial sales. The targeted antibody, aimed at HER-2 positive breast cancer, is also in non-randomized late-stage trials. Underwriters led by Jefferies & Co. have the option to buy up to 1.05 million more shares. -- Alex Lash

Many thanks to Paul Bonanos and Amanda Micklus, who contributed mightily to this week's introduction.

Photo courtesy of flickr user
Rd. Vortex via Creative Commons license.

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