Thursday, May 31, 2012

Financings of the Fortnight Doesn't See Much To "Like"


Without further ado, we bring you a few IPO notes from the Facebook Fiasco Fortnight. While most market watchers trained their eyes on Zuck, his biotech-veteran CFO, his bankers, and (eventually) his lawyers, a few biotechs made moves of their own. Only one took a step forward: Kythera Biopharmaceuticals filed an S-1 after raising about $100 million through four venture rounds and seven years. The company’s lead product, a Phase III injectable meant to reduce the fat that causes double chins, is fully licensed to a division of Bayer.

Two others took steps back. TVAX Biomedical withdrew its modest $20 million offering, citing poor market conditions. The firm has an autologous immunotherapy platform that has produced a Phase III brain cancer treatment and a Phase II treatment for renal cell carcinoma. And Cancer Genetics, which first filed in late December, postponed a planned $48 million offering, according to Renaissance Capital. No official word yet on a second attempt.

For any small company -- let alone a biotech -- hoping to tap the public markets, the Facebook bungle couldn’t have come at a worse time. The Euro crisis drags on, and the ripple effects of a potential Greek Euro exit loom ever larger in macroeconomic calculations. Then comes Facebook, only the most watched, most anticipated U.S. financial event of the so-called recovery, and instead of a shot of much-needed confidence, it delivered yet another ringing example of American institutional ineptitude at best, criminal venality at worst. Years to prepare, to hire the best and the brightest, and this is the best they could do?

This headline made us chuckle: "IPO activity remains slow despite Facebook offering." Despite? We venture that in sectors like ours, it was more like an extra twist of the knife. Next time an underwriter comes knocking with a fabulous biotech, potentially game-changing science, visionary leadership, blah blah blah, what will happen? Hardcore biotech investors will surely do their own diligence, but what about the “swing voters,” the more general investors who might crack open a window to make a biotech bet or two? Are they going to stick their necks out? Would you?

You don't have to buy our shares, and you don't have to "like" us. Just enjoy another edition of... 

TVM Capital: The international venture firm has raised its seventh life-science fund with a northern twist. Announced May 28, the fund will be based in Montreal and focus mainly on single-product companies in Quebec, part of an asset financing trend that VCs such as CMEA Capital, Atlas Venture, and Index Ventures, as well as non-traditional investors, have tested recently. The new fund also marks the fourth time since November that a Big Pharma has poured cash into a Canadian biotech investment vehicle, including the Merck Lumira Biosciences Fund, which we noted in this column earlier this year. A major chunk of TVM Life Sciences VII, which has C$150 million ($146 million) committed, comes from Quebecois fund-of-funds manager Teralys Capital, with ties to several regional investors. The goal is to fund about 15 projects, mainly but not exclusively in Quebec. Another major limited partner is Eli Lilly & Co., which alongside its investment will open a branch of its Chorus drug development network in Montreal. It’s unclear, however, what ties Chorus Canada has to the Lilly/TVM arrangement. A Teralys managing partner told “The Pink Sheet” that Chorus will not have rights to help develop the assets that receive TVM investments. Other VC investors in TVM Life Sciences VII included BDC Venture Capital, Fondaction and Advantus Capital Management, a subsidiary of the Minnesota Life Insurance Company. Only the size of the investment by Teralys (C$65 million) and that made by BDC Capital (C$20 million) were disclosed. – John Davis

Royalty Pharma: The buyer of biopharmaceutical royalty streams said May 24 that it raised $600 million in debt to fund future acquisitions. That a royalty fund has raised cash is no surprise; RP rival Cowen Healthcare Royalty Partners announced a $1 billion fund, its second, to start 2012. OrbiMed Advisors also got into the game with a $600 million royalty fund in 2011. The funds have recently marketed themselves as alternatives to life-science venture capital for limited partners uneasy with venture’s sallow returns and long fund cycles. But Royalty Pharma prefers bond holders to equity holders, which makes sense given that royalty deals are more like debt than equity investments, with lower risk and return profiles. The $600 million tranche, with a borrowing spread of Libor + 3% and a maturity date of November 9, 2018, brings RP’s total debt load to $3.4 billion. Two other tranches of $850 million and $1.9 billion mature on November 9, 2016 and May 9, 2018, respectively. RP said that strong demand for the debt issue boosted the size from $500 million to $600 million. The firm has bought royalty streams to more than two dozen products including Humira (adalimumab), Remicade (infliximab) and Cimzia (certolizumab). - A.L.

Prosonix: The Oxford, UK firm extended its Series B round with £5.7 million ($9 million) to push forward development of its generic asthma treatment fluticasone propionate (PSX-1001). The firm is banking on its ultrasound drug-engineering technology to convince European regulators to approve its inhaled version of GlaxoSmithKline’s Flixotide/Flixonase. Ultrasound induces the crystallization of drugs from solution and can be precisely controlled, leading to the formation of particles with little variation in size and shape. The particles are stable and do not require formulating with excipients for use in inhalers. In contrast, conventional jet-milling makes inhaled powders that are more unstable and with more variable physicochemical properties, Prosonix CEO David Hipkiss told our "Pink Sheet" colleagues. Pharmaceutical companies that currently dominate the respiratory products sector, such as GSK, AstraZeneca and Novartis have not faced significant generic competition because of the complexity of developing inhaler drug delivery technology, and the difficulty of showing bioequivalence to inhaled powders. Also, in the U.S. there is no regulatory pathway for generic inhaled respiratory products. Belgian investment firm Gimv joined existing investors in the second tranche of the Series B. In the June 2011 first close, Prosonix raised £11.4 million from a European syndicate that included Ventech of Paris; Gilde Healthcare Partners of Utrecht, the Netherlands; Entrepreneurs Fund BV and Solon Ventures, both of London; and Quest For Growth of Leuven, Belgium. Prosonix hopes to start a Phase IIa trial later this year for its second product candidate, a twice-daily inhaled therapy for chronic obstructive pulmonary disease. - J.D.

Sangart: The San Diego firm added $50 million from a previous investor to bring its Series G round to $100 million and its total cash raised to $280 million. Sangart said the cash will help it complete its current Phase IIb trial for its lead product, an oxygenated form of recycled blood meant to treat tissues deprived of oxygen after traumatic injury. It will also aim to complete a Phase Ib for another product that uses carbon monoxide instead of oxygen with the recycled blood to treat sickle cell anemia. When the two trials are done, the company wants to look for a licensing partner for one or both products, or perhaps even a buyer for the company, CEO Brian O’Callaghan told “The Pink Sheet.” The cash comes from Leucadia National Corp., which also contributed most of the first $50 million Series G tranche. Leucadia is a conglomerate with diverse holdings in mining, beef packing, wine, and timber. – Lisa LaMotta

Photo courtesy of flickrer striatic, who gets two thumbs up.

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