Friday, June 15, 2012

Financings of the Fortnight: Less Talk, More Rock

Third Rock Ventures has topped itself. One of biotech’s few ready sources of early-stage capital, the firm has announced its backing of three firms in the past week, and all of them one way or another fly in the face of the caution so many life-science VCs move with these days. One of those investments, announced Thursday, June 14, is Third Rock’s largest solo Series A funding to date, which is saying something. This is a firm that has previously flown solo in launching companies such as SAGE Therapeutics ($35 million), Blueprint Medicines ($40 million), Ember Therapeutics ($34 million), and Lotus Tissue Repair ($26 million).

Now it's making a big bet -- no, a huge bet -- of $40.7 million on Global Blood Therapeutics, and our colleagues at "The Pink Sheet" have all the details. The company will seek to develop orally available small-molecule drugs that affect blood disorders; its first target is sickle-cell disease. GBT believes it can use allosteric modulation to overcome the single mutation in hemoglobin that causes the misshapen, sticky clusters of red blood cells, and help patients produce healthy, round ones.

No syndication? No problem. GBT CEO and Third Rock’s newest partner, Mark Goldsmith, says “there are significant advantages [in acting] as a single investor.” A few other VCs will sometimes launch a firm solo with seed or early-A money – check out this profile to read how Avalon Ventures does it – but not with the firepower Third Rock brings to bear. Formed by former Millennium Pharmaceuticals executives, the firm is now investing from its second fund, which closed at $426 million in 2010.

The Third Rock proposition of big bets on ambitious biomedical science hasn't proven itself out with knockout exits. Then again, they've only been at it for five years. And knowing many of their investments will require the patience of life-science saints, they've also built in clearer, perhaps faster, paths to exits in a few cases, such as Sanofi's equity stake and two-way options in Warp Drive Bio; or the LLC structure for antibody platform firm Ablexis that makes license fees and milestone payments more easily distributable to investors.

As we saw this week, Third Rock doesn’t always work alone. The firm re-upped in a $25 million Series B round for Rhythm Pharmaceuticals, which is built around ghrelin and melanocortin agonists for GI and metabolic diseases in-licensed from Ipsen. TRV was part of the $21 million Series A syndicate, but in the B round, Ipsen is taking the lead and building upon the 17% equity stake it acquired as part of the original in-licensing deal. Rhythm is more specialty play than science experiment, but the risk lies in the indication: metabolic disease has proven a thorny field, despite the screaming unmet need, for product development. Recent FDA decisions for two weight-loss drugs have given the field a lift, but overall the climate still seems to favor more regulation, not less.

Our Third Rock edition of FOTF ends with Igenica, a low-profile antibody firm that pulled in a $33 million C round with Third Rock in the lead. It was Third Rock’s first involvement in Igenica, which hasn’t said much until now about its twin oncology discovery platforms: one analyzes the surface proteins of tumor cells and provides data on the relative abundance of antigens; a second uses mouse models not just to screen antibodies against those antigens for affinity, but to measure anti-tumor effect.

More on Igenica below in our roundup, but we’ll end with a FOTF challenge: If Third Rock really wants to be on the cutting edge of biomedical innovation, how about funding some microbiome start-ups? With the wealth of data coming out of this week’s microbiomapalooza, surely there’s a way to put those Third Rock millions to use. We can see the headlines now: “Venture Firm Follows Gut For Latest Launch.”

You’ve got an appetite for bad puns and tasty fundings? Belly up to the latest edition of…

Igenica: Preclinical antibody firm Igenica said June 12 it has raised a $33 million Series C round led by new investor Third Rock Ventures, one of the rare instances of Third Rock waiting a few years and stepping in for a later round. But Igenica is no late-stage investment. The new cash brings total venture fundraising to $55 million, and the goal is to have clinical data in hand from a lead program and an IND filed for another before raising more money, says chief business officer John Celebi. The firm says it is going after drug targets that have not previously been investigated for cancer, using both an antibody discovery platform and a target discovery platform.  The firm has been lying low, rumored to be involved in antibody-drug conjugate development, but to date it has said very little about its programs. Third Rock moved with “such alacrity,” says Celebi, that the final tranche of the firm’s $24 million Series B round was rolled into the C round, which also included previous investors The Column Group, 5AM Ventures, and OrbiMed Advisors , The firm’s executive chairman is David Goeddel, a founding scientist at Genentech and Tularik, and now a partner at The Column Group, and both Celebi and the firm’s VP of research Guoqing Chen are Tularik alumni. – Alex Lash

PhaseBio Pharmaceuticals: PhaseBio announced a $25 million Series B financing in December 2010 to advance its diabetes and cardiovascular drug candidates, but on June 5 the privately held biotech said it had raised an additional $23 million from existing investors. It called this funding a third tranche of its Series B, which brings the round’s total to $48.4 million. “It’s really not our objective to consider another [venture] round,” said CEO Christopher Prior. The money will be used to fund, among other things, a Phase IIb head-to-head trial of lead candidate Glymera, using Novo Nordisk’s Victoza (liraglutide) as a comparator. Glymera is a recombinant GLP-1 analogue for type 2 diabetes. Using an elastin-like biopolymer (ELP) delivery technology acquired from Duke University, PhaseBio seeks to create drug candidates that offer steady-state absorption and longer half-lives than potential competitors. Backers include Johnson & Johnson Development Corp., Astellas Venture Management, New Enterprise Associates, Hatteras Venture Partners and Fletcher Spaght Ventures. The new money also will be put toward a Phase I study of Vasomera for acute and chronic heart failure and pulmonary hypertension, and a Phase I/IIa study of Insumera, a fully mature native insulin formulated to be long-acting with the ELP technology. -- Joseph Haas

Seldar Pharmaceuticals: We wouldn’t be surprised if “Drais” were Japanese for “outsource.” That’s because Drais Pharmaceuticals is quickly becoming the virtual developer of a mini-pipeline of products spun out of Astellas Pharma. Seldar is the name given to the latest outsourcing vehicle under Drais’ auspices, and it works like this: Astellas’s venture arm, along with a familiar syndicate of Sutter Hill Ventures and InterWest Partners, have put $13 million into Seldar to develop a single asset, ASP7147, a bombesin BB2 receptor antagonist to treat irritable bowel syndrome. ASP7147 comes from Astellas, and Drais’ management team will oversee it, with a Phase I trial ready to start soon. It’s another example of a growing comfort with single-asset entities that have short, defined development timelines, all the better to sell or partner without the complicated infrastructure of a full-fledged biotech. It’s also an example of VCs and management sticking to familiar faces who’ve done right by each other in the past: Drais is run by two executives who once ran a US outpost of one of Astellas’ corporate predecessors. Seldar owns all rights to the compound, but Astellas can receive a milestone payment and royalties on future sales. Astellas also has first shot at negotiating partnerships for ASP7147, the right of first refusal for Japan, and the non-exclusive right to negotiate in other regions. The deal follows hard on the heels of a similar arrangement, dubbed Telsar, in which Astellas transferred ownership of an ulcerative colitis treatment to the Drais team and took part in a $14 million Series A round. The Seldar syndicate also invested in Telsar – as well as in Drais, and before that, in AkaRx, which brought its backers a lucrative return in 2009. -- A.L.

BioMarin Pharmaceutical: In its first public offering in five years, orphan disease drug developer BioMarin raised nearly $236 million in a May 31 sale of 6.5 million shares at $36.28, giving the company a post-market cap of $4.4 billion. If underwriters exercise the 650,000-share overallotment, proceeds will be $259 million. The healthy stock valuation appears to be a result of growing investor optimism for BioMarin’s Phase III enzyme replacement therapy GALNS (N-acetylgalactosamine-6 sulfatase) to treat the rare autosomal disorder Morquio A syndrome (MPS IV). GALNS recently topped Leerink Swann’s predictions of the ten most successful near-future product launches. Joe Schwartz, Leerink’s managing director of biotech, believes enzyme replacement therapies are a big opportunity, and he calls GALNS a potential “miniblockbuster." It would be the only therapy for MPS. BioMarin’s financing is the most raised in a follow-on public offering in the past five years among biotechs with $400-500 million in revenues, a crowd that includes Regeneron Pharmaceuticals, Onyx Pharmaceuticals, Myriad Genetics, and The Medicines Co. It was also the second triple-digit offering of the month in the rare disease space, following Alexion Pharmaceuticals and its $462 million sale of 5 million shares that priced at $93.02 each. (Alexion had sales of $783 million in 2011.) Rumors have also circulated this week that GlaxoSmithKline has eyes on BioMarin as a possible acquisition target. – Maureen Riordan

Kick-ass photo courtesy of Lidal-K.

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