Financings of The Fortnight Sneaks A Peek At The VC Survey

Pennant races are on. Kids are back to school. (Wait, whatever happened to summer lasting until Labor Day?) And 90% of the venture capital world is on vacation. Whew. Good thing we caught more than 100 of the top life science VCs earlier this summer to participate in START-UP Magazine’s second annual Life Science VC Survey.

We’re putting the finishing touches on our package of feature stories and survey results, including a series of questions for corporate VCs, an ever-more important subset of investors whose role in funding biotech innovation has changed dramatically in the past few years. We’ve asked our participants a battery of questions, and here's a sneak preview: The overall mood hasn’t improved from last year’s survey, and unlike last year, a handful of VCs planning to hit the pavement and raise new funds now tell us that they’re willing to take lower terms and fees (virtually zero said so in 2011). Some are also moving forward with plans for smaller funds and smaller staffs.

(You can find the 2011 survey here and here. Subscription required.)

One partial counterweight to the sour mood and fundraising difficulties is the Food and Drug Administration. In 2011, not a single optimist said the FDA was a reason to feel positive, while 80% of the pessimists said the FDA was one of the largest obstacles the life science industry faced. In 2012, it’s not all horseshoes and hosannas, but 23% of the people who call themselves optimists said the FDA was a reason to feel positive -- a big jump from zero -- while 73% of the pessimists named the FDA as an obstacle. Given the consistency in recent years of the nearly comical vitriol life science VCs have aimed at FDA, any improvement is notable.

Another focus of our survey is therapeutic area. VCs are eternally curious what their peers find the most interesting areas for investment, whether to avoid the herd mentality or to avoid being left behind. Topping the list of most compelling indications or technologies on the biopharma side for the second straight year are oncology and rare disease. The latter we find particularly interesting, seeing how some observers of the field think we could be in a rare-disease bubble at the moment, typified by the Enobia Pharma sale to Alexion at the end of 2011.

One disease area that received a surprising boost of investor confidence in our survey was metabolics/diabetes, which went from solidly unattractive in 2011 to just a bit more hot than not. On the flip side, one of this year’s biggest losers was next-generation biologics platforms, perhaps an acknowledgment that the gold rush of a few years ago has played itself out.

We also asked about politics and policy, geography and stage preference, and we’re slicing and dicing the results in various ways to find out how these subgroups of respondents intersect. We’ll feed you more tidbits in our next column and on Twitter (@invivoblogalex), but if we give away more this time around we’ll have to sing for our supper. Let’s get on with our round-up. Survey says it's…

Novira Therapeutics: Anti-viral drug developer Novira said Aug. 23 it had closed a $23 million Series A round led by first-time investors 5AM Ventures and Canaan Partners. Contract research organization WuXi PharmaTech, based in Shanghai and listed in the U.S., also participated in the round. Three-year-old Novira had been backed previously by seed-stage backer BioAdvance, as well as regional angel groups Mid-Atlantic Angel Group, Robin Hood Ventures and Delaware Crossing Investment Group, which had collectively supplied about $3.5 million to date; all contributed to the new round as well. The Philadelphia-area company plans to develop novel therapies that disrupt viral replication and proliferation by inhibiting the life cycle of the capsid, the protein shell that encloses genetic material inside of viruses. It currently plans to investigate drugs for hepatitis B and HIV, although candidates have not yet been identified for either indication. The company intends to retain rights to a lead program in HBV as it progresses into mid-stage trials, while it may partner an HIV program at an earlier stage, according to CEO Osvaldo Flores. Although HIV research has spurred excitement with renewed hope for a cure, deal-making in the space remains a rare occurrence. An SEC filing indicates that Novira has collected the first $11 million of a $26.5 million round, which Flores said includes the seed money as well. – Paul Bonanos

MediciNova: MediciNova, a specialty firm that licenses approved small-molecule compounds from Japanese companies for development and approval in the U.S., has signed a two-year, $20 million common stock purchase agreement with Aspire Capital Fund. The funds will lengthen MediciNova’s runway as it tries to move a pair of lead programs into pivotal clinical trials. Aspire has bought 606,000 MediciNova shares at $1.65 per share, the firm’s closing price on Aug. 2, for a total of $1 million. Headquartered in both San Diego and Tokyo, with shares traded on both countries’ stock exchanges, MediciNova was one of the more successful biotech IPOs in 2005, raising $113 million.  The income bought additional time for MediciNova’s business model in 2009, allowing it to outlast Biotechnology Value Fund in a battle to acquire Avigen, which brought MediciNova additional cash and the compound ibudilast (MN-166/AV411), in development for progressive multiple sclerosis, neuropathic pain and drug addiction. Ibudilast is currently in grant-funded mid-stage trials for drug addiction. MediciNova’s other lead program is bedoradrine sulfate (MN-221) for acute asthma and chronic obstructive pulmonary disorder. The Aspire deal will help MediciNova advance '221 into a Phase III trial in either acute asthma or COPD by early 2013, but it's unclear how much beyond that trial the cash will last. Based on Aspire’s previous dealings with biopharmaceutical companies, which include similar equity line arrangements with Bionovo and NuPathe, MediciNova expects Aspire to be a long-term investor, with an ownership interest that should reach and then remain in the 5% to 10% range. -- Joseph Haas

Elcelyx Therapeutics: San Diego-based Elcelyx announced a $7 million extension of its Series B financing on Aug. 13, as well as a pair of executive hires, including former Biogen Idec and Mpex Pharmaceuticals business development leader Mark Wiggins as its senior VP of business development. Built upon a platform that produces first-in-class Gut Sensory Modulators (GSMs), Elcelyx plans to develop two products: Lovidia, an over-the-counter weight-loss supplement, and NewMet, a delayed-release formulation of diabetes drug metformin, which the company says will offer a much better safety profile than existing formulations. It’s the latest example of a biotech, or a management team, using a single platform to pursue a dual prescription/over-the-counter strategy. Elcelyx’s two products could offer a life cycle management opportunity for a future pharma partner. Elcelyx launched in 2010 and has raised about $20 million in venture capital over its lifespan, including $17 million under the B round. The $7 million extension was funded by existing backers Morgenthaler Venture Partners, Kleiner Perkins Caufield & Byers and Technology Partners. At present, Elcelyx is taking down $4 million of the extension, which CEO Alain Baron said will take the firm “well into efficacy trials” for Lovidia and NewMet. – J.H.

Relypsa: Still trying to get its phosphate binding agent into Phase III, Relypsa has raised nearly $50 million as part of an $80 million Series C round, according to a regulatory filing. Its lead compound, RLY-5016, is designed to linger in the GI tract and absorb excess potassium, a toxic side effect of certain drugs such as blood pressure medicine. An acute buildup of potassium is called hyperkalemia and can lead to arrhythmia or cardiac arrest. RLY-5016 has been tested in five clinical trials since entering the clinic in 2008 and currently is in a 300-patient, year-long Phase IIb trial for the treatment of diabetic nephropathy. Data from the ongoing trial are expected to be presented later this year. Two Phase III trials are expected to start in early 2013. The company plans to file for an NDA by the end of 2013 and will commercialize the drug on its own, president Gerrit Klaerner told “The Pink Sheet” DAILY. Relypsa is the reincarnation of Ilypsa, a company bought by Amgen in 2007. After paying $420 million, Amgen spun out the remaining four preclinical compounds; Ilypsa’s previous management team has overseen the business. Amgen took an equity stake in the company, less than 20%, when it was spun out. RLY-5016 appears to be tracking behind original expectations. In 2007, at the time the company was formed, management was aiming to advance RLY-5016 into Phase III trials within 18 to 24 months. Later, upon the Series B raise in 2010, the company said those funds would be used to take the compound through Phase III. – Lisa LaMotta