Friday, July 12, 2013

Financings of the Fortnight Works On Its "A" Game

There have been a lot of shifts lately behind the reasons people start new biotech companies. Academic and nonprofit sources of biomedical innovation are growing more eager to take on “translational” duties to make their research more palatable to the private sector. Cuts in Big Pharma research groups have created larger pools of available talent. New government regulations now let private companies test public investor sentiment without announcing to the world their IPO intentions. (Regulations are loosening more; the Securities and Exchange Commission just voted to allow direct solicitation of the public in securities offerings.)

The reasons might be more compelling, but are they drawing more investors back to startup-land?

The folks at our sister publication Start-Up have always liked to use Series A rounds as a way to gauge the temperature surrounding biomedical company formation. They’ve been doing what they call The A-List since 2004, tallying the year’s newly disclosed A rounds and all the data around them. It’s about numbers, but also sentiments and attitudes. For example, in the most recent A-List, we asked VCs if all worthy early-stage companies were getting funded. (Click image to enlarge.)

We’re looking forward to asking that question again at the end of 2013. For now, let's take a peek at the Series A financings for the first half of the year to see if we can stir up the tea leaves.

By FOTF’s count, there have been 41 new Series A fundings for device, diagnostic and biopharmaceutical companies with the amount disclosed (and four more without). The funds disclosed total $567 million. That’s well ahead of the 2012 first-half deal flow of 33 rounds and $423 million.

If the pace quickens in the second half of 2013 as it did last year (final 2012 tally: 103 Series A rounds), we could see deal flow akin to the pre-crisis years of 2007 and 2008. That’s one big takeaway.

As usual, biopharma makes up the bulk, with 35 deals and $481 million in disclosed dollars. That’s an average of $16 million per round for the companies that disclosed dollars, a 10% jump over last year’s biopharma average, as noted in the most recent A-List:

We might also be seeing a change in syndicate composition. By this time last year, 10 Series A were solo efforts, the largest being Third Rock Ventures’ debut of Global Blood Therapeutics, and people were telling us how difficult early-stage syndicates were to arrange. This year, only three deals have been announced as solo deals, with Third Rock again taking the top spot with its $47 million commitment to Jounce Therapeutics. (For an in-depth look at Third Rock’s strategy, check out the latest Start-Up cover story.)

Among therapeutic areas, by the way, nine of the 45 companies say they’re in oncology, seven say neurology, and six say cardiovascular disease. Infectious disease, metabolic disease, and gynecology/urology have four or five.

Based on the half-year numbers,our next full-blown A-List might reflect the optimistic bent that the IPO markets have helped create this year. Might, we emphasize. Six months of deal announcements are a squirrely sample size, so take our little foray simply as a guide to things to watch for the rest of the year.

And for the rest of this hour, how about kicking back with the latest edition of...

Prosensa Holding: On June 28, Dutch biotech Prosensa netted $83.4 million in an IPO on Nasdaq through the issuance of 6.9 million shares at $13, the high end of its $11-13 range. Prior to its IPO, the firm had raised €56.4 million ($73 million) through private equity rounds. Company president Hans Schikan says Nasdaq offered a healthier financial opportunity than European exchanges. With an RNA modification technology platform licensed exclusively from neighboring Leiden University Medical Centre, the 11-year-old company aims to develop antisense therapeutics that induce skipping of exons (disrupted gene coding sections). It’s getting a good start: just prior to the IPO filing, it got word of receipt of FDA breakthrough designation status for its lead compound drisapersen (PRO051), a program it partnered with GSK in a 2009 deal that’s worth up to $667 million in pre- and post-commercialization milestones, plus double-digit sales royalties. Earlier in the year, some of the company’s other programs were granted EU orphan drug status in the muscle-wasting disease Duchenne muscular dystrophy indication. Of the European biotechs with initial public offerings (including Belgian cell therapy company Cardio3 BioSciences, see below),  Prosensa has raised the most and has continued to climb. On its June 28th opening, it closed at $19.02, a 46% premium over its offering price, and it closed July 11 at $26.26. -- Maureen Riordan

MannKind: Despite regulatory setbacks, and facing long odds following the poor reception of Pfizer/Nektar’s Exubera and eventual withdrawal of the drug from the market in 2007, MannKind is forging ahead with its own late-stage inhaled insulin candidate Afrezza, and on July 1 announced a $160 million debt financing to support further development. Deerfield Management committed to buying 9.75% senior secured notes, maturing in 2019, in four equal $40 million tranches contingent upon MannKind achieving certain milestones that include the release of Phase III data in Type I and II diabetic patients (using the newer-generation Dreamboat inhaler), paying down debt, and Afrezza’s FDA approval. After an undisclosed period following disclosure of the clinical data (expected later this summer), Deerfield has the option to convert a portion of its notes into common stock. In return for an $18.9 million up-front payment, the investment firm also receives milestone rights, entitling it to up to $90 million based on strategic and sales goals. MannKind is also working in the oncology area but last year partnered some of those programs with Tolero Pharmaceuticals and Colby Pharmaceutical in order to put resources towards Afrezza. Since the start of 2012, MannKind has raised nearly $316 million, including two FOPOs plus the current fundraising, to fund Afrezza efforts. In Q4 2013, the company hopes to submit an amendment to its existing NDA (first filed in March 2009). -- Amanda Micklus

OncoEthix: Privately held Swiss biotech OncoEthix has raised $19 million in a Series B funding to progress its early-stage cancer treatment OTX015 into Phase II proof-of-concept studies, at which point its owners hope to sell or license out the novel medicine to a pharmaceuticals group. The BET bromodomain inhibitor belongs to a new class of medicines which researchers are testing to learn whether they can trigger cancer cell death. SV Life Sciences led the round and was joined by new investor Edmond de Rothschild Investment Partners. Existing investors including Index Ventures and Endeavour Vision also participated. The proceeds will be used to progress OTX015 into Phase II proof of concept, and a potential [investor] exit at that point, CEO Bertran Damour told "The Pink Sheet" Daily. The fundraising brings OncoEthix’s total venture capital up to $30 million and will keep the biotech running for the next 24 months, Damour predicted. The company was founded in 2009 by Esteban Cvitkovic, Kay Noel, Yves Paternot, and Patrice Herait, all experienced oncology drug researchers who set out to establish a portfolio of three to five new cancer medicines through in-licensing. Between them the founders have been involved in bringing 37 drugs to market, according to CEO Damour. OTX015 was in-licensed from Mitsubishi Tanabe Pharma Corp. in 2012. After reaching proof-of-concept, the company plans to out-license drug candidates to pharma partners. – Sten Stovall

Cardio3 Biosciences: Another biotech from The Low Countries debuted this fortnight and almost immediately had to weather a storm. The Belgian firm debuted on the NYSE Euronext Brussels and Paris, selling 1.38 million shares at 16.65 ($21.76) each. Cardio3's lead product C-Cure uses a patient's own hematopoetic stem cells harvested from bone marrow and programmed outside the body to differentiate into heart muscle cells and, re-injected back into the patient, to repair damaged heart tissue. The issue raised €23 million for the regenerative medicine firm, and it raised the eyebrows of UK researchers and subsequently Forbes columnist Larry Husten, who highlighted several data discrepancies in a Cardio3 paper that helped fuel the IPO, as well as a conflict of interest with one of the paper's authors. Husten's column has been updated with a sharp response from Cardio3 and a rather sarcastic one from the UK professor leading the criticism against Cardio3. The firm says the criticism is unfounded; so far investors have mainly rolled with the punch, and the stock closed July 11 at €18.73, down from a brief high of €21.45 but by no means a sign of sauve-qui-peut, as they say in Wallonie. -- Alex Lash

All The Rest: Heliae, a start-up developing algae-based products for the therapeutic, nutraceutical, personal care, and agroscience markets, received $24.8mm in an early-stage VC funding round...regenerative medicine company ViaCyte (developing a stem cell therapy for diabetes) raised $10.6mm in Series C-1 funds from backers including J&J Development Corp., Sanderling Ventures, and Asset Management Co…in an $6mm add-on to its February 2012 Series A round, Mnemosyne Pharmaceuticals garnered a total of $11.4mm...In what appears to be its Series A round, viDA Therapeutics has raised $1.8mm in new VC funding following the second tranche of its seed funding in April…University of Bath spin-out Glythera added £700k ($1mm) to its 2008 Series A, which is expected to total £2mm over the next three years in tranches of a similar size and contingent on the achievement of certain milestones…In an early venture round, Cantargia – a Swedish developer of leukemia therapeutics – added $1mm to its coffers…ETH Zurich spin-off BioVersys (antibiotics) raised an undisclosed oversubscribed Series A round..Publicly traded AntriaBio (metabolic disorders) completed a $12mm private placementAmpliPhi BioSciences (antibacterials) grossed $7mm through the private placement of 5mm Series B preferred shares that convert into 10 common shares…Avanex Life Sciences (Alzheimer's disease therapeutics) completed a $2.6mm PIPE, plus a $10mm funding commitment from Lincoln Park Capital with $100k received so far…Cancer drug developer Merrimack, which went public last year, proposed concurrent $50mm follow-on and $75mm notes offeringsAmarin completed a FOPO of 21.7mm ADSs priced at $5.60 netting $121.5mm…A few companies set IPO terms: OncoMed Pharmaceuticals (cancer) plans to offer 4mm shares at a $14-16 range; Conatus Pharmaceuticals (liver disease therapeutics) anticipates selling 5mm shares at a $10-12 range; and human cell manufacturer Cellular Dynamics set a range of $12-14 for a planned 3.8mm share offeringHeat Biologics (cancer and infectious disease immunotherapies) increased its proposed number of IPO shares, to 2.3mm (from 1.65mm) at the same $10-12 price range…And three companies filed for IPOs: Emcure Pharmaceuticals, an Indian manufacturer and developer of APIs across a variety of therapy areas; Can-Fite spin-off OphthaliX (has a Phase III candidate for dry-eye syndrome); and synthetic biology technologies company Intrexon…Specialty CNS pharmaco Avanir has tentative plans for a $50mm debt financingBiodelivery Sciences brought in $20mm through a senior secured loan from an affiliate of Midcap Financial LLC…regenerative medicine firm Tengion raised $18.6mm through the sales of senior secured convertible notes concurrent with a $15mm equity investment from Celgene…In fund news, Kohl Kohlberg Kravis Roberts closed a $6bn Asia-Pacific region fund focusing on consumer products, retail, health care, education, and industrial companies.

Big thanks to Maureen Riordan and Amanda Micklus for help with Series A data. 

Photo courtesy of flickr user IMLS DCC. Click that link if you like old boats.

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