Friday, June 29, 2012

Financings of the Fortnight's Gut Check

Has the signal-to-noise ratio of the Obamacare decision already blown out your transistors? Are you sick of “SCOTUS,” which sounds like a region where half the population wouldn’t want to get kicked?

FOTF has a suggestion: Dive into the microbiome, one of the most fascinating ongoing scientific revelations of our lifetimes. Anyone who, as a kid, loved Ray Bradbury’s creepy short story “Fever Dream,” in which a deliriously ill child becomes bit by bit something other than himself, immediately grasps the existential import of the microbiome research: We might need to rethink what it means to be human, because most of the genetic material we’re carrying around isn’t actually ours. (Wait a second, am I typing this, or is it the microbes?)

Lofty questions, indeed; we’re also pondering more practical ones, such as whether the nascent knowledge of our bugs and ourselves can be turned into tests, drugs and other products that improve our health. Only a few investors have made that bet so far.

The latest group is Flagship Ventures, which recently discussed with our “Pink Sheet” colleagues a few details of its under-the-radar start-up Seres Health. Homegrown and fully funded by Flagship, Seres is aiming for what Flagship partner David Berry calls “a new class of drugs,” neither small molecule nor biologic, and why not: If the microbiome has us reconsidering our identities, couldn’t it also lead to new categories of therapeutics?

We’ll have to reserve judgment; Berry wouldn’t say much more about Seres’ activities, although he was eager to discuss the implications of fecal transplantation, a topic that, let’s just say, doesn’t go over well at dinner parties.

You can read more about Seres here, and to hear more from investors about the promises and cautions of translating the microbiome into therapeutic products, stay tuned for the next Capital Matters column in START-UP. Meanwhile, FOTF will be off for the 4th of July week, refreshing itself in the mountains, about as far from the Washington, DC, punditry and sophistry as possible. Just us and our microbes under the stars.

Pitch your tent, kick off your boot and crack open your yogurt, we're lighting the fire under another edition of...

Tesaro: With its $81 million debut June 28, the maker of drugs for cancer and chemo-related nausea became the first life science firm to price an IPO in nearly two months. Tesaro sold 6 million shares at $13.50 a piece, which nets the company $75 million after fees. Tesaro is run by the top executives of MGI Pharma, who formed the company two years after Eisai bought MGI in 2008. Launched in 2010, the firm has been on an IPO fast-track from day one, raising $120 million in two rounds by the end of March 2012. By far the largest shareholder is New Enterprise Associates, which led the Series A with the founders, who told NEA they wanted to create “a new MGI.” Before the IPO, the mega-venture firm owned 50% of the company and, according to regulatory filings, it is one of at least three venture insiders to buy shares at the IPO. Other major shareholders’ pre-IPO shares included InterWest Partners (13%), Kleiner Perkins Caufield & Byers (9.5%) and Tesaro CEO Lonnie Moulder (5%). As much as 1.86 million shares were set aside for insiders, which continues a common theme for biotech IPOs, although the insiders’ percentage of the total is modest compared to other IPOs this year. Underwriters led by Citigroup and Morgan Stanley have the option to sell up to 900,000 more shares. – Alex Lash

Omeros: Speaking of biotech IPOs, the firm that cracked the ice of The Great Recession has raised $30 million on the public markets. The firm sold 2.9 million shares at $10.25 a piece June 27, netting the firm $28 million after fees, and underwriters led by Cowen & Co. and Deutsche Bank can sell up to $4.5 million worth of shares in an overallotment. Omeros has two programs in Phase III, both low-dose combinations of generic drugs to reduce pain and inflammation that occurs during and after surgery. The first is for use during arthroscopic joint surgery, the second for use during ophthalmological procedures. With its October 2009 IPO that raised $68 million, despite a lawsuit brought by its former CFO, Omeros was the first “pure-play” biotech to debut in a year and a half. Since that debut, the Seattle company has raised $25 million in an unusual deal that combined $20 million from Microsoft co-founder Paul Allen’s Vulcan Capital and $5 million from a Washington State development grant to support Omeros’ G-protein-coupled-receptor program in exchange for future royalties that might stem from the program. – A.L.

Neviah Genomics: The corporate venture arm of Germany’s Merck Serono is collaborating with Compugen to establish a new company, Neviah Genomics, which will discover, develop and market novel biomarkers for drug toxicity. Announced June 25, the Neviah collaboration is the first investment under Merck Serono Ventures’ Israel Bioincubator program, established in 2011 with initial funding of €10 million over seven years. MSV Head Roel Bulthuis told “The Pink Sheet” the incubator initially will invest in eight to 10 seed projects, but that doesn’t mean the Neviah investment necessarily equals one-eighth or one-tenth of the €10 million total. “We believe we’ve put Neviah in a good position to execute on its business plan and potentially over time access other sources of capital,” he said. Both MSV and Compugen will be shareholders in Neviah, and Compugen will earn royalties from product sales. Compugen, a Tel Aviv biotech with preclinical biologics, will bring its predictive discovery technologies to the partnership. The goal is for Neviah to provide both software and a kit to let biopharma companies evaluate their own candidates for drug-induced toxicity. The partners hope Neviah can produce a marketable product within a few years. Like all Israel Bioincubator Fund investments, Neviah will be headquartered in Merck Serono’s new state-of-the-art Interlab facility in Yavne, Israel. – Joseph Haas

Aegerion Pharmaceuticals: Another public biotech in the post-recession class tapped the markets to raise cash this past fortnight. Aegerion on June 14 priced 3.4 million shares at $14.75 per share for a net total of $47.3 million after fees. Underwriters led by Jeffries & Co. and JP Morgan have the option to sell up to 510,000 shares. Aegerion has applications before US and European regulators for lomitapide, a treatment for homozygous familial hypercholesteremia, a rare genetic cholesterol disease. The drug originally was developed by Bristol-Myers Squibb and ultimately in-licensed by Aegerion. The firm will use the cash to prepare for launch in both the US and EU in 2013, if the regulatory reviews go well. Aegerion shares closed at $14.22 on June 28, down 3.5% from the sale price. – A.L.

Photo of lovably mischievous microbes courtesy of Googlisti under a Creative Commons license.

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