Exit/Financing of the Year Nominee: Radius Pharma

It's time for the IN VIVO Blog's Fourth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

It’s been a transformative year for Radius Health. The biotech is currently developing two formulations of a novel analog human parathyroid hormone-related protein that it hopes will supplant Eli Lilly’s Forteo (teriparatide) as the standard of care in postmenopausal osteoporosis. To finance those ambitions, the Cambridge, Mass.-based biotech laid the groundwork to reach the public markets in May through a reverse-merger with a listed shell, raised $57.3 million of a planned $91 million, three-tranche, cash-and-debt series C round, and eventually floated its shares on the OTCBB. (UPDATE: The rest of that $91 million was raised, the co announced 16 Dec.)

The company's maneuverings also give us a window onto the post-option biotech world, where biotech second-acts are in part defined by second-chance opportunities with once-partnered (or spoken-for) compounds. It's this vantage and the significant capital available for solid clinical opportunities, as much as the company's fundraising efforts, that earn Radius our nomination for financing of the year.

Radius's 2011 was set in motion years earlier, by Novartis’ 2009 decision to opt out of an opportunity to co-develop its hPHrP analog (BA058), an anabolic bone-building treatment that is in Phase III in injectable formulation and about to move into Phase II in a transdermal formulation. Novartis originally took an option to the program -- an early example of the now-common deal structure -- back in September 2007. That deal's financials were never fully disclosed, but future development, regulatory and commercialization milestones would have paid the small company upwards of $500 million. Instead, Novartis walked for what Radius calls "a strategic consideration," despite Phase II data that convinced Radius and its investors that pivotal trials were worth pursuing.

What Radius did next may be a roadmap for other companies who find themselves estranged from option-holding partners thanks at least in part to shifting tastes or strategic upheavals among industry's in-licensors.

Radius merged in May with MPM Acquisition Corp., an acquisition shell created by one of its venture capital backers, MPM Capital, putting its investors on an unusual path to liquidity. (Currently, the company offers stock on the OTC Bulletin Board and plans to apply for a Nasdaq listing in 2012.)

Concurrent with the reverse-merger, Radius raised $28.5 million in the first tranche of its C round from MPM and new investors BB Biotech AG, Brookside Capital, Saints Capital, contract research organization Nordic Bioscience AS (which will manage Radius's Phase III program) and specialty pharma Ipsen Pharma SAS. Then, in November, it raised the second tranche, bringing in $21.4 million from existing backers, and $6.25 million in debt from GE Capital, Healthcare Financial Services and Oxford Finance.

For now, Radius awaits its Phase III fracture data -- expected in 2013 -- and has designs on a new partnership once that's in hand. The other hand just might be holding our DOTY award. — Joseph Haas & Paul Bonanos


flickr photo by dorena-wm, courtesy creative commons license