The half-year data are in. Public biopharma firms raised $3.14 billion in secondary offerings through the end of June. According to Elsevier’s Strategic Transactions database, that surpasses the full year totals from 2011 ($3.09 billion) and 2010 ($2.94 billion), and might have surpassed 2009 if Human Genome Sciences and Vertex hadn’t gone toe to toe, mano-a-mano, FOPO-a-FOPO, each raising more than $800 million, with Dendreon close on their heels pocketing more than $600 million.
And since the half-year mark, we’ve had a couple more big issues, with Synageva BioPharma (details below) and ImmunoGen each hitting the $100 million mark. So, as the kids like to text these days, WTF? One explanation is that biotech in general has fared well. The Nasdaq biotech index is up 25% for the calendar year, beating the pants off the major indices.
But dig a little deeper and you’ll find that public investors like their biotech companies like they like their porterhouses: Rare. Counting the latest Synageva fund-raise, public companies with a rare-disease focus have rolled up a cool $1 billion this year, nearly a third of all post-IPO money raised (debt not included), led by Alexion Pharmaceuticals and BioMarin Pharmaceutical. No wonder our friends at the RPM Report are calling this the orphan drug bubble.
On the private side of the rare-disease story, stay tuned for the next issue of START-UP, which delves into the sale of Enobia Pharma to Alexion last December -- $610 million upfront with $400 million more in potential earn-outs – as an excuse to ask investors, entrepreneurs and the potential buyers of rare-disease assets the same question: How long can this last?
The recent renewal of the FDA’s user-fee program under FDASIA has tasty carrots that rare-disease advocates say will help spur even more development of treatments for tiny patient populations. So the momentum might not let up. That’s a good thing for people who otherwise would have no medical recourse, and of course it’s something that we’ll continue to cover biweekly in the latest edition of…
Genkyotex: The Swiss biotech with the funny name (it pays homage to Geneva, Kyoto, and Texas, the home turfs of its founding scientists) padded its coffers in a July 9th tranche that supplements a CHF 18 million May 2011 Series C round, for total proceeds of CHF 25 million ($26 million). Participants in the extension included previous backers Eclosion, Edmond de Rothschild Investment Partners (which just announced a new fund, see below), Vesalius Biocapital, and MP Healthcare. The company says the funding will advance its first-in-class orally available NOX inhibitor GTX137831, now in Phase Ia for diabetic neuropathy, through a Phase II trial due to start by the end of 2012. It will also fund programs in neurodegenerative diseases such as Alzheimer’s, Parkinson’s, and ALS. Born out of the Geneva incubator Eclosion, six-year-old Genkyotex has raised about CHF 30 million to date. It’s developing small-molecule inhibitors of the NOX (nicotinamide-adenine dinucleotide phosphate oxidase) family of enzymes. NOX enzymes are involved in intracellular electron transfer and produce reactive oxygen species (ROS). NOX-4 over-expression has been linked to diabetic nephropathy and lung fibrosis, and there is evidence that NOX-1 and NOX-2 isoforms are involved in neurodegenerative processes. Blocking the action of NOX may help reduce the formation of ROS, which is thought to be involved in metabolic, cardiovascular, pulmonary, neurological, and other diseases. With the new cash, Genkyotex also named Eric Meldrum, formerly of 3-V Biosciences, as CSO and Alexandre Grassin, previously with Alexion Pharmaceuticals, as finance director. For more on Genkyotex, be on the lookout for the July/August issue of START-UP, which will feature a company profile. – John Davis and Maureen Riordan
Synageva BioPharma: Ah, the joys of going public. In its second fundraising since it undertook a reverse merger to gain a public listing, Synageva raked in $100 million by selling 2.42 million shares at $41.20 a share. Underwriters have an option to buy 364,000 more shares, as well. Lexington, Mass.-based Synageva was privately held until June 2011, when it merged with publicly traded Trimeris, whose HIV treatment Fuzeon never gained traction despite a longtime partnership with Roche, which has worldwide rights. The merged company now considers itself a rare-disease specialist as it pushes forward its lead candidate, an enzyme replacement therapy for lysosomal acid lipase (LAL) deficiency, also known as Wolman disease. Synageva raised $74 million in January at a stock price of $25.18, which means between dilutive events the shares went up 60%. Like other orphan disease companies, its stock price has ridden what many see as a bubble into lofty heights. As our colleagues at the RPM Report explain here, the market cap of public rare-disease firm Alexion Pharmaceuticals now exceeds the combined market cap of Human Genome Sciences and Amylin, both hotly pursued for their commercial holdings. Alexion cashed in a couple months ago with a stunning $462 million follow-on, the largest of the year so far, and right behind Alexion in dollars was another rare-disease player, BioMarin Pharmaceutical, with a $236 million fundraise, also in May. – Alex Lash
Nektar Therapeutics: Nektar said July 10 it has sold $125 million in debt in a private placement at an interest rate of 12%. The company said in a release that the debt financing, plus a royalty sale from earlier this year, should put its cash reserves at the end of the year around $300 million. The firm had nearly $500 million in cash and equivalents at the end of the first quarter, and the new debt issue will help pay down $215 million in previous debt, with an interest rate of 3.25%, due in late September. The new debt comes due in 2017. The debt sale comes more than four months after it raised $124 million by selling future royalty streams from two products, UCB Pharma’s Cimzia (certolizumab) and Roche’s Mircera (methoxy polyethylene glycol-epoetin beta), which date back to a technology deal Nektar struck in 2000. The firm often associated with Pfizer’s Exubera inhaled insulin “bong” – it provided the inhalation technology and received a $135 million payment when Pfizer ended the partnership – has to some extent reinvented itself under new leadership . Its pipeline includes a Phase III reformulation of the chemotherapy irinotecan for breast cancer, which Nektar has decided for now to keep unpartnered. Cowen and Co. and CRT Capital Group are handling the transaction. - A.L.
Edmond de Rothschild Investment Partners: Fill ‘er up. Just in time for START-UP’s upcoming annual life-science VC “gas tank” update, the Paris-based venture firm announced the first close of its fourth BioDiscovery fund, which is focused mainly on Europe. The firm said it has €125 million committed and is on target to hit a final close of €200 million by the end of 2012, which would push its life-science assets under management past €500 million. It will hew to its previous strategy of leading 15 to 20 investments in biopharma, device and diagnostic companies. With BioDiscovery IV, Rothschild joins The Wellcome Trust, Index Ventures, Vivo Ventures, and H.I.G. Bioventures in closing at least part of a healthcare-focused fund this calendar year, which has proven extremely difficult for venture firms to raise fresh capital. Current portfolio companies include the German Alzheimer’s developer Probiodrug, French eye specialists Novagali Pharma, and cardiovascular developer Regado Biosciences. – A.L.
Thanks to Maureen Riordan for help with the data.
Photo courtesy of Floris Oosterveld via a Creative Commons license.