Friday, February 08, 2013

Financings of the Fortnight Sees Signs That Point To Going Public

Oh, the siren song. The new year arrives, the buzz and handshakes at the JPMorgan conference get everyone hopped up, and a scramble of biotech IPO activity lights up the wires. In 2012 it was Verastem, Adocia, Cempra and Chemocentryx all going through the looking glass by early February. This year, the early birds are KaloBios Pharmaceuticals, Stemline Therapeutics, and Zoetis, the last being an outlier in that it’s Pfizer’s animal health products division, not a human biopharma, and it instantly zoomed to a $13 billion market capitalization. (If you’ve read The Omnivore’s Dilemma, by the way, you’re not likely to invest.)

Two diagnostics firms and an Israeli drug developer could also jump soon, and back on the mega-IPO front, there are stories afoot that Quintiles is eyeing the public markets. Whatever the actual fervor of behind-the-scenes activity, the leaks are a sign that the market is at least promising enough to float a trial balloon through the press.

After the initial flurry in 2012, however, the rest of the year brought about a dozen more IPOs. That same count in 2013 would be a disappointment. Sure, the U.S. government’s chronic can-kicking of fiscal cliffs, debt ceilings, and sequestrations means that we’ll probably never have the predictability markets crave, but the economy continues to creep forward, regulations are in place to (theoretically) make IPOs easier, and the FDA is approving more drugs than ever, except for 1996. No, really. The final count last year was 39 novel drugs; the only year in the PDUFA era with a higher total was 1996, with 56.

What’s more, the class of 2012 has had a strong post-IPO performance – shares up 41% mean, 36% median – which should give them the luxury of financing less frequently, according to a recent BMO Capital Markets analysis. In turn, that might free up more investor cash for new issues. That’s our own speculation. The thing is, a few high-profile biotechs recently have brought on board crossover investors who expect an IPO in the not-too-distant future. They really want to get deals done, and they're motivated to buy shares on the public side, too. Like the economy, it's not a slam dunk indicator of more IPO activity, but it's another potential factor to add to the mix.

One veteran biotech investor now in the thick of all this crossover action is Jim Tananbaum, and his new firm Foresite Capital just closed a $100 million fund. It already has six investments on its books, and we have the details below in our roundup.

We’ve discussed the crossover-biotech relationship quite a bit lately, and we bring it up again with regard to antibody developer KaloBios' new listing. Mutual fund giant Fidelity led its Series E round last May, about six months before KaloBios said it would attempt to sell 3.85 million shares for $12 to $14 apiece; it later  lowered the range to $8-$9. It sealed the deal February 1, selling 8.75 million shares at $8 apiece. (The upcoming Start-Up magazine will take a closer look at KaloBios’ winding path to the public markets.) The other biotech IPO this fortnight was Stemline Therapeutics, which closed its IPO of 3.8 million shares including the overallotment at $10 per share, netting $35.5 million. The firm had been on file since April.

It's been a winding path, perhaps even a long strange trip, just to get to this point in our every-other-weekly wordfest. Time to cross over to the other side of this snappy little JPEG, where you, dear reader, will find yourself soaking in the latest edition of...

Zoetis: Pfizer continued its march toward pharma-only status by debuting shares of its animal-health division, Zoetis, in an initial public offering on January 31 that raised $2.2 billion and immediately valued the new company at $13 billion. Since the start of 2011, Pfizer has sold off its formulation business Capsugel to private equity firm KKR for $2.4 billion and its nutritionals unit to Nestle SA for nearly $12 billion. The moves were set in motion by CEO Ian Read, who took the reins in late 2010 and put everything in the drug giant’s portfolio up for review. Pfizer retains an 80% stake in Zoetis, although analysts say it’s likely to divest the rest through a stock swap later this year to avoid taxes, a move similar to Bristol Myers Squibb’s IPO-fueled sale of its Mead Johnson Nutrition infant formula unit in 2009. Pfizer and its underwriters, led by JPMorgan Chase, Bank of America Merrill Lynch and Morgan Stanley, first aimed for a target between $22 and $25 a share. Zoetis sold 86.1 million shares at $26 apiece, and the price rose as high as $31.74 during the first day of trading. The stock closed February 6 at $31.01. – Lisa LaMotta

Bone Therapeutics: The Belgian regenerative medicine firm announced January 28 it has raised €7.7 million ($10.4 million) in a Series D funding round from current investors and regional bodies to support Phase III trials of its lead cell therapy, PREOB, in patients with osteonecrosis or non-union bone fractures. Like other clinical-stage private European biotechs, Bone Therapeutics is tapping its existing investment syndicate for a relatively small amount to fund a Phase III clinical study while it waits for a more benign investing climate. As our colleague Mark Ratner explained in the most recent issue of In Vivo, the field of cell therapy is undergoing a prominent evolutionary step right now as scientists reconsider the role cells play in the regeneration of tissue, but few large firms except for Shire have invested aggressively in the area. The financing includes €6.1 million from existing investors including Nausicaa Ventures, BAMS Angels Fund I and Life Science Research Partners and €1.6 million in grants from the Societe Regionale d'Investissement de Wallonie (SRIW) and Sambrinvest, both in the Walloon region of Belgium. Up to now, the company has raised around €30 million in funding since it was set up in 2006, including €18 million in capital and €12 million in grants and subsidies. PREOB’s production involves extracting mesenchymal stromal cells from patients' bone marrow, and treating and culturing them ex vivo using a proprietary method, so they develop into bone-forming cells, osteoblasts. These are then injected percutaneously into the necrotic or fracture region, avoiding the need for more invasive surgical procedures. "We think we are the only company pursuing osteoblast cells for therapeutic purposes in oesteonecrosis, whereas potential competitors are using differentiated bone stem cells,” CEO Enrico Bastianelli told our Pink Sheet DAILY colleagues. Osteonecrosis is a progressive degenerative disease of bone, most commonly seen in the hips of relatively young patients age 30 to 50 years. – John Davis

Ariad Pharmaceuticals: Fresh from the FDA’s accelerated approval of its chronic myeloid leukemia treatment Iclusig (ponatinib), Ariad raised $310 million, the latest in a series of follow-on mega-financings for for mid-tier biopharma companies. The firm sold 16.5 million shares at $19.60 each, with the cash going to help marketing and manufacturing of Iclusig, which is aimed at patients with a genetic profile associated with resistance to currently approved tyrosine kinase inhibitors. J.P. Morgan, Cowen and Co., and Jefferies & Co. led the underwriting. Iclusig was one of several oncology drugs in 2012 that earned FDA approval before their user fee date, a remarkable trend in a year that saw the most novel drug approvals from the agency since the mid-1990s. Ariad owns full rights to Iclusig, and CEO Harvey Berger said it will “move heaven and earth” to get it approved next for front-line CML by the end of 2014 before generic versions of Gleevec (imatinib), the breakthrough therapy for the indication, hit the market. It remains to be seen, then, how much Ariad will spare for its other pipeline candidates from the follow-on bounty just raised. In October the firm reported Phase I data for AP26113, its dual ALK/EGFR inhibitor, at the European Society of Medical Oncology meeting, and noted that patients on the drug did not develop the rash typically produced by EGFR inhibitors. AP26113 is designed not to inhibit “native” EGFR, which is widely expressed in normal tissue like the skin. – Alex Lash

Foresite Capital Management: A bit of fund news comes this fortnight from a grizzled industry veteran. Jim Tananbaum was among the founding partners at Prospect Venture Partners’ second and third funds in the 2000s, and the decade before that, he founded GelTex Pharmaceuticals and sold it to Genzyme for $1.6 billion. Now his investment firm, Foresite, has closed its first fund with $100 million committed. It’s already made six investments: AcelRx Pharmaceuticals, Intarcia Therapeutics, Keryx Biopharmaceuticals, Puma Biotechnology, Solta Medical, and Tarsa Therapeutics. Two of those companies have been in the news recently. Puma rewarded its shareholders with an unusual path to a New York Stock Exchange listing last year. It used the Form 10 pathway, reverse-merging into a public company shell, then making a pit stop on the bulletin boards on its way to the Big Apple. Intarcia, developing an implantable version of type-2 diabetes drug exenatide, attracted a huge mezzanine venture round last November: $160 million in equity, $50 million in debt. We assume it’s mezzanine, because it featured a host of cross-over investors who, as has become more common in biotech, are looking for late-stage private companies that will be ready to go public fairly soon. New to Tarsa, Foresite led its Series B round in 2012; at the time the firm already had in hand a Phase III oral candidate to treat osteoporosis, but the drug class, recombinant salmon calcitonin, is drawing regulatory scrutiny for possible ties to cancer. – A.L.

All of the Rest: In an extension to its February 2011 Series D financing, Ocular Therapeutix (ophthalmic drug hydrogel delivery) raised an additional $9.8mm tranche for a total round of $23.8mm… In what appears to be its Series C round, cancer, infectious disease, and biodefense vaccine developer Aduro Biotech has brought in $6.5mm… Connecticut Innovations has backed CyVek’s $5.5mm Series D round to support commercialization of its immunoassay technology, CyPlex, a biomarker analysis platform with applications in life sciences, drug discovery, and clinical research… Baxter Ventures participated in a $2.7mm Series A round for start-up Zytoprotec GmbH, a start-up developing peritoneal dialysis solutions and cytoprotective peptide treatments... MentiNova, which has filed an IND for an oral medicine for Parkinson’s symptoms, has raised $500k in early-stage capital from Foundation Venture Capital… German biotech Apceth received funding to accelerate the progress of its first cancer therapeutic, Agenmestencel-T, which uses a patient's own modified adult mesenchymal stem cells… Recently formed Avillion, with a business plan to partner with biopharmas to co-develop and finance late-stage therapeutics, closed an initial financing round through Abingworth and Clarus… Through a private placement, publicly traded Champions Oncology grossed $9.3mm… Nasdaq-traded Israeli biotech BioLineRx brought in $8mm with a private offering of units… Public NanoViricides raised $6mm through a private placement to fund clinical trials of its influenza vaccines… Concurrent with a reverse acquisition for a public listing on the OTC BB, cancer treatments company DelMar Pharmaceuticals completed a $5.4mm PIPE… First planning to bring in money through a FOPO, but later deciding on a private offering, Canadian company Immunovaccine hopes to gross $2mm to support preclinical/clinical trials of infectious disease candidates… Antibody developer Celldex Therapeutics netted over $83mm in its public offering of 12mm shares at $7.50… Keryx Biopharmaceuticals is putting its $70mm in FOPO proceeds into continued studies of iron-based compound Zerenex (ferric citrate), which has completed a US Phase III trial for treating elevated phosphate levels in end-stage renal disease patients… NewLink Genetics will apply the $42.8mm raised in a public offering to progress its clinical-stage cancer pipeline… Anthera Pharmaceuticals (candidates for inflammatory conditions including cardiovascular and autoimmune diseases) netted $37.6mm in a FOPO of 60.6mm shares at $0.66… A follow-on for GI-focused Ventrus Biosciences brought in $20mm… Transdermal drug delivery firm Echo Therapeutics netted $9.5mm in a FOPO… Tel-Aviv-traded Can-Fite BioPharma, in a public offering of units, raised $7.2mm… An at-the-market financing garnered almost $4.5mm for Navidea Biopharmaceuticals to fund further development/launch of cancer and CNS radiopharmaceutical imaging agents including Lymphoseek (technetium tc 99m tilmanocept), NAV4694, NAV5001, and RIGScan… Through an offering of common stock and warrants, Opexa Therapeutics raised $3.25mm to support continued trials of Phase IIb MS vaccine Tcelna... Research-focused Pacific Biosciences completed a $20.5mm debt offering through Deerfield Management to support continued adoption by biological research firms of its SMRT sequencing technology… Deerfield also led a $15mm debt offering for Flamel Technologies to advance its R&D pipeline of drugs formulated with its Medusa and Micropump delivery technologies... Nutritional supplements company MusclePharm completed a $3.5mm RDO of convertible preferred shares led by the Frost Group… In an SEC filing, cardiovascular device maker Covidien restated its previously announced intent to spin-off its Mallinckrodt pharma business.

Photo courtesy of the U.S. Navy.

No comments: