Thursday, December 22, 2011

Financings of the Fortnight Wraps Up The Year With Rare Gifts

We here at FOTF holiday headquarters (not pictured above) can't think of a better Hannukwanzamas present than a treatment for a rare disease whose patients previously had few or no options to help them. One of the big stories this year in our neck of the woods is that many in the biopharma industry are thinking the same thing, too. Of course, motivations for some are fueled in part by premium pricing and favorable regulatory pathways, terms that don't exactly invoke the holiday spirit. But if remedies come to market, we won't quibble. Capitalism is the worst of all pharmaco-economic systems except for all the others.

We've already noted several fundings, including the new companies Ultragenyx and Orphazyme, in this column this year; in the upcoming issue of START-UP, the Capital Matters team will examine a new NIH program, dubbed Therapeutics for Rare and Neglected Diseases, or TRND, that helps both academics and biotechs bring rare-disease programs across the valley of death. TRND has already helped push treatments for sickle-cell anemia and relapsed chronic lymphocytic leukemia into the clinic, with hopes for two more clinical programs in 2012. (TRND's full roster of programs is here.)

Now Atlas Venture and the specialty pharma firm Shire, which has aggressively built a rare-disease business to complement its ADHD franchise, are teaming to vet rare-disease programs and, if considered worthy, house them in entities co-financed by the two partners. 

The arrangement is a spin on an idea Atlas has already implemented and that other VCs are working on, as well: Since acquisitions these days are practically the only way to exit an investment, bring the potential buyer in early, preferably as a funding partner. For every project Atlas and Shire fund upfront, Shire gets an option to purchase down the road within a pre-negotiated time frame. Shire already has had notable success in the rare diseases arena, as its human genetic therapies unit continues to lead its sales and revenue growth. In 2010, the HGT unit generated 64% sales growth over the prior year, thanks to strong sellers such as Elaprase (idursulfase), Vpriv (velaglucerase alfa) and Replagal (agalsidase). 

Atlas has its Atlas Venture Development Corp. (AVDC), a group that's looking to in-license compounds, develop them quickly through proof of concept, and if possible sell them back to the original licensee. Its first deal was for an Eli Lilly & Co. migraine drug, now housed in an LLC called Arteaus Therapeutics

Versant Ventures also likes the find-the-buyer-early approach. It recently launched a cancer genomic analysis firm Quanticel Pharmaceuticals with $45 million from Celgene, which gets exclusive use of Quanticel's technology and exclusive rights to buy Quanticel, including any pipeline candidates Quanticel develops on its own, within three and a half years. 

With Shire, Atlas might find rare-disease programs that lend themselves to an asset-financing, virtual-development approach, but it could take a "platform approach" and perhaps build a more substantial stand-alone operation, as Atlas principal Ankit Mahadevia told our colleagues at "The Pink Sheet".

If you haven't noticed, both Atlas (for Arteaus) and Versant (for Quanticel) are nominees for our Deal of the Year in the exit/financing category, and voting just started. Cast your vote, please; it's all we want for Christmas, other than a little less unmet medical need in the world. Have safe, peaceful holidays, and we'll see you in 2012 with the next edition of...

Ember Therapeutics: Third Rock Ventures launched Ember Therapeutics Dec. 15 with a $34 million Series A round. As Ember’s lone investor right now, Third Rock will seek another backer that can offer the right expertise in the relatively new field of targeting brown fat augmentation to fight obesity, as well as insulin sensitivity, an approach to diabetes that has been plagued by safety problems. Ember's programs are currently in the preclinical stage. Louis Tartaglia, a Third Rock partner and interim CEO of Ember, told The Pink Sheet that a new investor could be a traditional VC or a venture arm of a pharmaceutical company "with which we do a large R&D alliance." If the latter, the corporate venture investor would likely be brought into the A round, Tartaglia said. Ember will be Third Rock’s third entry into the metabolic health arena, following Zafgen, which is working on methionine aminopeptidase 2 (MetAP2) inhibition to treat severe obesity, and Rhythm Pharmaceuticals, which is focused on MC5 agonists to treat obesity and type 2 diabetes. Ember is Third Rock's fifth publicly disclosed Series A investment in 2011. -- Joseph Haas
Aviir: The Irvine, CA company and Stanford University spinout disclosed it has raised $10 million of a planned $30 million Series B round to push its TruRisk cardiac risk diagnostic test to market. The round was led by Merck Global Innovation Fund, the fund's first disclosed investment as parent company Merck looks to put venture cash to use both directly and indirectly. (The January IN VIVO has a Q&A with Merck's new top dealmaker, Roger Pomerantz, which you can read here.) Previous Aviir investors New Leaf Venture Partners, Aberdare Ventures, and Bay City Capital joined Merck in the B round. Those three also contributed more than $11 million to a planned $25 million round disclosed in regulatory filings in 2007, but it's unclear how much more Aviir raised in that round -- which documents also classified as a Series B -- or how much venture funding total the firm has brought in. A company spokesman did not return requests for clarification. TruRisk measures a patient's blood level of seven proteins associated with arterial plaque at risk of breaking off and causing heart attack. -- Alex Lash

Covidien: Diversified life-science firm Covidien said Dec. 15 it would spin out its pharmaceutical business into a standalone publicly traded company and keep its medical devices and supplies, which currently contribute 83% of sales to the US-Irish firm. (Covidien was formerly TycoHealthcare.) The pharma unit, which consists of generic and branded drugs, active pharmaceutical ingredients and imaging agents, posted a compound annual growth rate of zero between 2007 and 2011. It accounts for about $2 billion in annual sales of products such as bulk acetaminophen, generic methadone for opioid addiction, and the painkiller Exalgo (hydromorphone). There were no immediate estimates of the amount Covidien could raise in the spin-out of the unit. Executives say they've been planning the move for years. The pharma unit has been without a president for about a year, but executives said recently that they have hired someone to run the unit before the spin-out. The hire will come on board in early 2012, and the pharma unit will be prepared for a sale in September, Covidien CEO Jose Almeida said last week. Abbott Laboratories is another diversified firm that plans to divest pharma holdings, but unlike Covidien, Abbott will keep its generic drug products under the same roof as devices and diagnostics.  -- David Filmore

Ariad Pharmaceuticals: Cancer drug developer Ariad said Tuesday, Dec. 20 it had finalized its $243 million secondary offering, selling 24.7 million shares at $10.42 each, as it prepares for life as a commercial company. A marketing application for its mTOR inhibitor ridaforolimus has been submitted to authorities in the US and Europe by its partner Merck & Co., with an FDA decision expected in mid-2012. Ariad plans to co-promote the sarcoma treatment in the US. Next year, the firm could submit pan-BCR-ABL inhibitor ponatinib for leukemia. It is currently in a pivotal Phase II trial, with interim results released earlier this month. The perils of first-time launches for biotechs are legion as they shift resources away from R&D and into sales and marketing, all while investors typically shun the company's stock in a habit known as "shorting the launch." Those that manage to stay independent for the long haul tend to outperform their peers, although giving up some of their marketing rights can cloud the picture, as this analysis in July's IN VIVO shows. Meanwhile, Ariad's stock price is trading above the offering price. Shares closed Wednesday, Dec. 21 at $11.60 a piece. Underwriters bought their full extra allotment of 3.2 million in the deal. J.P. Morgan, Cowen and Co., and Jefferies & Co. were the lead underwriters. -- A.L.

Thanks to Joe Haas for his contribution to this week's intro. 

Photo courtesy of flickr user Howard Dickins.  

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