Rarely has a sovereign fund been as high-profile in the life sciences as Rusnano, which is investing $10 billion of Russian government money in companies from a variety of industries, including life sciences/biomedicine.
In a country that’s had a painful relationship with capitalism since the Soviet state collapsed, it’s no surprise the idea of a giant state-backed fund making bets on private companies has drawn skepticism – including from then-Russian president Medvedev four years ago.
Now, six years after Russia's Vladimir Putin authorized the group, it’s undergoing a shakeup and a corruption audit, apparently with Putin’s blessing. (A related project, Skolkovo – an attempt to build a Silicon-Valley-like cluster near Moscow – has also been dogged by similar investigations, allegations of corruption, and political pressure.)
Seeing how about 20% of Rusnano’s investments have landed in the life sciences so far, what happens next should be of keen interest to many in our corner of the world. That’s why we’re pointing out our colleague Stacy Lawrence’s one-on-one interview with Rusnano chairman Anatoly Chubais in the current issue of “The Pink Sheet.”
Chubais was a key figure in the post-Soviet privatizations that concentrated wealth in the hands of so-called oligarchs, and he has run Rusnano since 2008. He survived the recent shakeup, during which several directors left the fund.
Despite the turmoil, Chubais says he’s pressing ahead with more privatization plans, transforming Rusnano from a vast sovereign fund to a private management firm that runs several funds. Here’s how he described it in “The Pink Sheet”:
“We decided to transform Rusnano into a private equity fund, which means that we will be a separate management company from Rusnano and we will transform it into a GP, which will attract investors and create a family of private equity and venture funds. And the GP itself will be privatized stage by stage… it should start next year and maybe finish between 2016 and 2017.”
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| Anatoly Chubais (right) is listening. (Courtesy Michael Popov.) |
Going into BIND’s initial public offering in September, Rusnano owned 11.5% of the company and according to documents bought more than 200,000 shares at the IPO price, leaving it with a 9.3% stake in the company currently worth $22.3 million.
Through subsidiary RMI Investments, Rusnano also has moved heavily into Regado Biosciences, first by leading its Series E round in late 2012, then buying more shares at IPO, which took place only because Regado accepted a drastic haircut. At the end of August, RMI owned nearly 26% of Regado. The cardiovascular treatment developer debuted in late August at $4 a share and closed October 16 at $5.71.
On top of its direct investments, Rusnano has committed $200 million to Burrill & Co.’s fourth general venture fund, which began investing in late 2011. Topping that, it has earmarked $330 million to invest side by side with Domain Associates, the US venture fund, in a deal that also aims to build Russian manufacturing capacity for the products that emerged from the firms’ jointly-funded portfolio companies.
It’s a significant source of capital for hungry biotechs, but there are strings attached. Non-Russian firms that take Rusnano money must establish a footprint in Russia, part of the firm’s remit to build a domestic pharmaceutical industry through the Pharma 2020 initiative, which, as our IN VIVO colleagues explain here, is as much a proclamation as it is a specific roadmap.
Here’s how Chubais describes the tightened scrutiny of his operation:
“We had a very, very deep check from the special state auditors and there was not a single corruption allegation, which is positive. We have about 100 portfolio companies and for some of them, they have some grounds for further investigation for their efficiency of using money from Rusnano. That’s an investigation which is going on now and we don’t know if it’s a ‘yes’ or ‘no.’”You can scrutinize the entire Chubais interview and pelmeni more stories about the nascent Russian biomedical initiatives in our sister publications. Or, if you just want to keep it on the blog, that's your pirogitive, go ahead and stuff yourself full of…
SAGE Therapeutics: The Cambridge, Mass. CNS startup has raised a $20 million Series B, with ARCH Venture Partners, joining original backer Third Rock Ventures to help move into the clinic the first compound of what the company hopes will be an epilepsy franchise. The new money and the clinical transition comes in the first few months of the tenure of new CEO Jeff Jonas, who previously ran Shire’s regenerative medicine group. SAGE’s platform is dubbed PANAM, for “positive and negative allosteric modulation.” Its compounds are designed to dial up or dial down activity around receptors such as gamma-aminobutyric acid, or GABA, and N-methyl-D-aspartate, or NDMA, without acting directly upon the ligand binding sites of the receptors themselves. The Series B round is nearly half the amount SAGE raised in its $38 million Series A, which was disclosed two years ago and came mainly from Third Rock. (ARCH, it turns out, also topped off the Series A last month with nearly $3 million, but Jonas declined to say why ARCH’s cash was allocated in that fashion.) ARCH Managing Director Robert Nelsen joined SAGE’s board. Jonas said the company will soon file an IND for SGE-547 to treat status epilepticus, a type of seizure that lasts several minutes and can be life-threatening. With an eye toward building a franchise, SAGE will investigate the role of GABA in other epilepsies, and could add indications to ‘547 or develop other seizure drugs that act around the receptor. ARCH and Third Rock know each well. The syndicate partners previously co-invested in a pair of this year’s high-profile IPO companies: cancer metabolism company Agios Pharmaceuticals Inc. and gene therapy developer bluebird bio Inc. With its new fund, SAGE is “comfortable well into next year,” Jonas told “The Pink Sheet” DAILY, and more private funding might not be necessary. – Paul Bonanos
Macrogenics: The antibody developer raised $92 million by selling 5.75 million shares at $16 each in its October 9 IPO. In baseball terms, it hit the triple crown despite a choppy broader market. It upsized its deal; priced at the top of its range; and traded up 56% in the first day. MacroGenics has two candidates in the clinic, with another two expected to advance into clinical testing in 2014. The most advanced is margetuximab, a monoclonal antibody that targets HER2-expressing tumors, which is in Phase IIa testing. It’s intended to be a bio-better of Herceptin (trastuzumab) that not only will be more effective killing tumor cells expressing a lower level of HER2, but also enhance the immune system’s ability to kill cancer cells. Prior to the IPO, Macrogenics raised an astonishing $547 million, including $342 million from partners Gilead Sciences, Pfizer, and Boehringer Ingelheim, among others; $151 million in equity; and $54 million in government grants and contracts. These deals could keep it from leaning too heavily on shareholders; it stands to receive more than $100 million in milestone and other partnership payments by the end of 2015. Venture investors include TPG (11.6% pre-IPO stake), Alta Partners (10.5%), InterWest Partners (10%) and MPM Capital (9.4%). This is MPM’s fifth biotech IPO this year, placing it among the most active in 2013. Only ARCH Ventures, Flagship Ventures and crossover investor Fidelity have been behind as many biotech IPOs this year. – Stacy Lawrence
G1 Therapeutics: North Carolina biotech veteran Christy Shaffer, who left Inspire Pharmaceuticals shortly before Merck purchased it in 2011, has returned with the start-up G1 Therapeutics. The Chapel Hill-based company on October 16 announced a $12.5 million Series A financing that will enable it to bring its lead chemo-protectant candidate into Phase I in 2014. G1’s technology focuses on inhibition of cyclin-dependent kinase (CDK) 4 and 6 to shield cancer patients’ bone marrow from the myelosuppressive effects of chemotherapy. Early on, G1 is planning two development courses for its lead candidate: as an intravenous infusion in small cell lung cancer patients, and as an oral version to protect against radiological-induced myelosuppression, a condition that could result from a nuclear weapon strike. Shaffer joined North Carolina-based Hatteras Venture Partners in 2011 to head up its Hatteras Discovery initiative focused on incubating start-ups derived from academic research. Hatteras Discovery seeded G1 with $600,000 in 2012 and now has invested in the A round, led by MedImmune Ventures, with participation from Mountain Group Capital. With the seed funding and NIH grants, G1 selected a lead candidate, and it hopes to file the IND by summer 2014 and begin Phase I by the end of the year, Shaffer said. With potential to protect all four lineages of blood cells, G1 hopes the candidate will earn first-in-class status. – Joseph Haas
TD1 Innovations: The Juvenile Diabetes Research Foundation said October 15 it has pledged to put up to $5 million into a new company, TD1 Innovations, which will scout new pharmaceutical, device and diagnostic technologies related to type-1 diabetes, the autoimmune version of the disease. If JDRF and its partner in the effort, PureTech Ventures, find compelling technologies, they’ll spin them out into new companies and provide seed funding, with hopes of advancing them far enough to find outside investors or industry partners on the other side of the so-called valley of death. It’s the first project under PureTech’s “Valley of Life” initiative, which aims to give nonprofits a legal structure to make philanthropic investments in for-profit companies without violating the tax code. With venture capitalists and pharma companies reticent to fund early stage biomedical innovation, disease foundations, patient advocacies and other nonprofits have looked to push treatments into clinical trials. To trigger JDRF’s full $5 million investment in TD1 Innovations, PureTech must raise matching funds, but the partners hope the fundraising goes well beyond that, up to $30 million, which they estimate would allow them to spin out roughly 10 new companies. Others have tried so-called “venture philanthropy” – including the Bill and Melinda Gates Foundation) – but this appears to be the first time a nonprofit will have a hand, and a financial stake, in building new companies from scratch. -- Alex Lash
All the Rest: Astellas not only contributed to Mitokyne’s Series A, which brought in $45mm, but also signed a concurrent drug discovery alliance and has an option to acquire the company...a $46mm Series D by immatics biotechnologies GmbH will fund Phase III of IMA901 for renal cancer…Seragon Pharmaceuticals revealed that the value of its Series A, which closed in August, was $30mm..genome and exome sequencing company Personalis completed a $22mm Series B…Aslan Pharma’s $22mm Series B will support Phase IIb trials for gastric cancer candidate ASLAN001…Versartis’ $20mm Series D round will go towards Phase III of VRS317 for pediatric growth hormone deficiency…French vaccines developer Theravectys raised $20mm...Curemark (enzyme replacement candidate for autism) brought in $18.5mm in what looks to be its Series C round…PharmaLink raised $15mm in a Series C round…a Series A round by PharmAkea Therapeutics brought in $10mm concurrent with an alliance with Celgene, which took a stake and has an option to acquire the start-up…Molecular Templates (antibody-drug conjugates for cancer) completed an $8.5mm Series C…AxioMx fetched $2mm in a Series B round…Mid Atlantic Bio Angels invested $400k in Immunomic Therapeutics...Arrowhead Research netted $60mm through the private sale of common and preferred shares…Cytos Biotech hopes to raise CHF17.6mm ($19.5mm) in a rights offering of up to 6.3mm shares...in a private placement to institutional investors, Pharming brought in $16.3mm…Rexahn raised $5.3mm in a registered direct offering…VG Life Sciences concluded a $2.2mm private placement...multiple players completed follow-on public offerings: Portola Pharmaceuticals (hematological and inflammatory disorders) $151mm...$113mm for dermatology-focused Kythera; generic drug maker Lannett netted $71.9mm; Prothena (antibody therapeutics) $71.6mm; Dyax (phage display technology) $56.4mm; cell therapy developer NeoStem $33mm; CytRx (cancer therapeutics) $24.3mm; Cel-Sci (immunotherapeutics) $16.4mm; Tekmira (RNAi therapeutics) $30mm; and Advaxis (cancer and infectious immunotherapies) $23mm...Aerie Pharmaceuticals set terms for its initial public offering hoping to sell 5.25mm shares between $12-14…Ruthigen set IPO terms too: 1.5mm shares at $12-14...several other biotechs filed for IPOs: GlycoMimetics (lead compound for sickle cell disease); Karyopharm (cancer and inflammation); Trevena (GPCR compounds); Xencor (MAbs); Celladon (calcium dysregulation); Vital Therapies (liver disease); and Egalet (abuse-deterring pain drugs)…BioMarin priced five-year 0.75% senior subordinated convertible notes ($340mm) and 1.50% seven-year 1.50% senior subordinated convertible notes ($340mm)…European Investment Bank provided Norgine with an $81.2mm loan to help with product acquisitions. -- Maureen Riordan
Putin art photo courtesy of flickr member volna80.
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