The Pacific Ocean has the Marianas Trench, the deepest place on Earth, more than six miles down. But Financings of the Fortnight has Crossover Canyon. And this fortnight, it went from zero to 210 million.
The zero was the number of dollars Radius Health raised trying to go public, and 210 million was the blockbuster financing for Intarcia Therapeutics. How fortuitous. As we noted in our previous column, our colleague Stacy Lawrence is working on a Start-Up feature about the return of crossover investors to biotech, and as if to punctuate her weeks of reporting that you’ll be able to enjoy just after Thanksgiving, Intarcia announced Nov. 15 a $210 million Series C, one of the industry's biggest rounds of private financing in memory, and it did so mainly by tapping crossover investors: the hedge fund Baupost Group, the diversified fund Farallon Capital Management, the multinational giant Fidelity Investments, and two other unnamed institutional investors. Existing venture backers New Enterprise Associates, New Leaf Venture Partners and Venrock also joined. The funding consists of $160 million in equity and $50 million in debt, and it’s all in one shot, Intarcia CEO Kurt Graves told our "Pink Sheet" DAILY colleagues. In other words, they don’t need no stinkin’ tranches.
The money will help push Intarcia’s lead product ITCA-650 in a set of Phase III trials. Intarcia has developed a formulation of the diabetes drug exenatide that can be implanted under the skin up to a year in a matchstick-sized delivery device. Exenatide, an analog of glucagon-like peptide-1, is marketed by Bristol-Myers Squibb and partner AstraZeneca as both Byetta and Bydureon, in twice-daily and once-weekly formulations respectively. The partners paid $7 billion to acquire Amylin, which previously owned the drugs, in June.
Meanwhile, Intarcia was once a whisker away from partnering ITCA-650 but backed off to keep full control. That helps explain the enthusiasm of the crossover investors, who have piled into to some of the year’s largest venture rounds, though none of course as large as the Intarcia deal. Crossovers want to take companies public; M&A is not their preferred exit. In fact, one factor in their resurgence is frustration as they’ve watched strategic buyers pick off the best biotechs before they, the public investors, can get a piece of the action. It’s worth mentioning that these days, those buyouts often happen in wildly favorable circumstances for the buyers – in structured deals with earnouts that only pay shareholders if the acquired company’s products hit milestones, as we explained in the March issue of Start-Up.
So when you see hedge and mutual funds featured in a biotech venture round, it’s a good bet that company will do its damndest to go public. With all that cash riding into Phase III, and a product that could address one of the world’s most burdensome diseases, don’t expect Intarcia and its new shareholders to jump quickly into a buyer’s arms.
The crossover road can be rough, too. Radius Health, with crossovers BB Biotech AG and Brookside Capital in the mix, raised $91 million in 2011 – also with a debt component – merged with a public shell, and pointed itself toward the public markets through a process known as Form 10, which lets a company list over the counter without the hullaballoo of a big IPO. It then opted to try for a big IPO, after all, and filed an S-1 in February. Those dreams were put on hold this week; the company said it would withdraw its S-1 because of general market conditions, and the stock is still not trading anywhere, even on the low-profile, low-volume exchanges.
Somewhere in between Intarcia’s $210 million and Radius’s zero is Ziarco, a new company that said Nov. 5 it received the first $6 million tranche of a potential $27 million Series A round. Consider it a small bite of Pfizer’s old Sandwich. Ziarco licensed four drug candidates that were developed at Pfizer’s now-shuttered Sandwich, UK labs, and part of the venture cash comes from Pfizer’s venture arm. But the lead financier is a very unlikely source: the hedge fund Biotechnology Value Fund, which typically invests in small- and micro-cap biotechs like this one. The crossover move is its first in five years, and it doesn’t seem inclined to make a habit of it. BVF partner Mark Lampert called the Ziarco deal opportunistic. Ziarco has four anti-inflammatory and anti-allergy drugs, on which Pfizer spent more than $100 million on R&D, said BVF’s Lampert. The most advanced is a histamine H4 receptor antagonist that has completed Phase I. CEO Mike Yeadon, who was VP and CSO of the allergy and respiration research team in Sandwich, told our “Pink Sheet” DAILY colleagues it could be a once daily low dose oral treatment for asthma, allergic rhinitis, pain, and inflammatory skin conditions. Pfizer Ventures’ stake is undisclosed, and it will receive milestone payments and royalties as the drugs progress.
Speaking of progress, we're almost to the blurbs. A quick programming note: This week we've added a new twist to FOTF. After the four blurbs, you'll find a lightning-round paragraph that takes you through the rest of the fortnight's financings. We hope you find it useful. Now on the count of three, let's all get a running start and jump headlong into...
Visterra: If the Cambridge, Mass. biotech has its way, Tamiflu will have competition. Visterra said Nov. 9 it closed a $26 million Series A round with $13 million from the Bill & Melinda Gates Foundation, Omega Funds, and its existing investors. The cash will help Visterra push its monoclonal antibody VIS410 into the clinic for seasonal and pandemic influenza. It’s a therapeutic, much like Tamiflu (oseltamivir), which is famously stockpiled whenever a new flu strain emerges amid whispers of “pandemic.” Visterra also sees it used as a prophylactic for first responders and others at near-term risk of flu infection. The infusion of cash from the Gates Foundation was undisclosed, but it’s significant nonetheless. Visterra is the third biotech in roughly a month, and fourth since March 2011, to sell equity to the Gates Foundation. In our previous edition we discussed the Gates investment in vaccine firm Genocea Biosciences. New head of global health Trevor Mundel said this summer the foundation would be more aggressive with its new investment strategy, and so far he’s right. (The upcoming issue of Start-Up takes a deeper look at the Gates biotech investment initiative.) So far, the foundation is targeting platforms, such as Visterra’s antibody discovery technology, so it can help point applications of the technology in directions beneficial to global human health. For example, roughly half of Gates’s Visterra investment is earmarked for a program in infectious disease (but not the flu). The other lead investor in the $13 million tranche, Omega Funds, usually buys shares of venture firms no longer able to hold positions in portfolio companies. But the Visterra investment is primary, not secondary, said Visterra CEO Steve Brugger. – Alex Lash
Abbvie: With a split from its parent company Abbott Laboratories imminent, the pharmaceutical unit AbbVie issued $14.7 billion in debt securities that will help it pay back cash to Abbott, as well as fund dividend payments to future shareholders. The debt issuance -- which included three-year fixed-rate, three-year floating-rate, five-year, six-year, 10-year and 30-year notes – was the largest dollar-denominated offering by a company in more than three years, and a sign that throughout market turmoil, health care reform, and other disturbances, Big Pharma has no problem convincing bond buyers of its seaworthiness. However, AbbVie did receive a slightly lower rating, Baa1, from Moody’s because of its untested independence and its overreliance on sales of rheumatoid arthritis drug Humira (adalimumab). Before AbbVie, the largest dollar-denominated debt offering was from Roche in February 2009 to help pay for its acquisition of Genentech. The company issued $13.5 billion in long-term debt, as well as $3 billion in commercial paper, a form of short-term debt. That same year Pfizer issued $13.5 billion in debt in conjunction with its acquisition of Wyeth. Amgen has also issued more than $10 billion in debt over several years to fund share repurchases. AbbVie issued $3.5 billion of 1.20% senior notes due 2015, $4 billion of 1.75% senior notes due 2017, $1 billion of 2.00% senior notes due 2018, $3.1 billion of 2.90% senior notes due 2022, $2.6 billion of 4.40% senior notes due 2042, and $500 million of floating rate senior notes due 2015. – Lisa LaMotta
Pearl Therapeutics: The Redwood City, Calif. company said Nov. 13 it has closed a $65 million Series D round to help move its combination chronic obstructive pulmonary disease drug, PT003, into Phase III testing by mid-2013. With four years of Phase II testing under its belt, Pearl Therapeutics wants to move into two pivotal trials and, it hopes, attract a partner for PT003. The Series D included the company’s four existing investors: 5AM Ventures, Clarus Ventures, New Leaf Venture Partners, and round leader Vatera Healthcare Partners. The company has raised a total of $167.5 million since 2007, including its $69 million Series C in 2010, which included the same four investors. Pearl expects to file for approval of its combo product, as well as each of the components in three separate New Drug Applications, by the first half of 2015. PT003 is a fixed-dose combination of glycopyrrolate, a long-acting muscarinic antagonist (LAMA), and formoterol, a long-acting beta-2-agonist (LABA). It uses a meter-dose inhaler (MDI) as a delivery device, and since MDI technology is already used with other medications, the company will not have to seek regulatory approval for the device, nor will it have to spend resources educating doctors and patients about the use of the device. – L.L.
Auspex Pharmaceuticals: Amid all our talk about public investors crossing over into the mezzanine rounds of private companies, we noticed that Auspex is having a different conversation. The San Diego-area company that makes deuterium-modified compounds has raised a $25 million Series D round that it hopes will fund its lead drug, an analogue of tetrabenazine, a treatment for chorea (involuntary spastic movements) associated with Huntington’s disease (HD). The original version, Xenazine, is marketed by Valeant Pharmaceuticals International through Lundbeck in the U.S. for the same indication. New investor Panorama Capital led the Series D round, with participation from existing investors Thomas, McNerney & Partners, CMEA Capital, and Sloan Biotech Fund. Gaurav Aggarwal of Panorama joins the board with the financing. Auspex has raised a total of $60 million since its 2007 inception. “We like the near-term nature of the product and the uniqueness of it,” Aggarwal told our friends at "The Pink Sheet". He was confident that Auspex could go public even if the syndicate can’t sell the company. Another deuterium modification company, Concert Pharmaceuticals, has advanced its lead candidate for diabetic
The Best of the Rest: Shanghai Jingfeng Pharma’s venture round brought in $30 million led by Vivo Ventures…an OrbiMed-led Series B for Cardioxyl Pharma totaled $28 million…Roche Ventures and MedImmune Ventures participated in Ambit Biosciences’ $25 million Series E supporting quizartinib clinical trials… fellow diagnostics companies Metamark Genetics, Epic Biosciences, and Advanced Cell Diagnostics each raised Series B financings…STAR antibody platform play Alethia Biotherapeutics closed a $4.7 million Series B…Avexxin raised an undisclosed amount in Series B financing for chronic inflammatory disease development…Vivo Ventures and New Leaf Partners joined as new shareholders through MEI Pharma’s $27.5 million PIPE…Tavistock Life Sciences led a $Cdn26.1mm private placement for MethylGene…vaccine adjuvants developer Isconova raised SEK50mm through a rights issue…Idera Pharma completed a $7mm converted preferred stock and warrants sale…small-molecule cancer drug developer Array BioPharma’s FOPO grossed $65.7 million…in the only completed IPO of the fortnight, breast cancer testing company Atossa Genetics raised $6.5mm without taking a haircut…Enanta filed to go public, hoping to advance its anti-infectives…Cardiovascular diagnostics company Singulex postponed its IPO … AstraZeneca completed a $2 billion two-tranche bond issue… insurance provider Aetna raised $2 billion from the sale of senior notes to fund its acquisition of Coventry Health Care.
Photo courtesy of flickr user bumeister1 via a Creative Commons license.