Financings of the Fortnight Navigates Sequester Seas, Mega Moguls and Mini VCs

With several IPO hopefuls now in registration and a very odd venture round raised by a San Diego biotech, there was plenty of financing news to chew on the past couple weeks. But we’re sailing in a different direction for this fortnight’s most interesting financing.

With the sequester on the horizon, a big question mark looms over National Institutes of Health and other basic science funding. The scientific research lobbying group Research!America (that’s their exclamation point, not ours) says the NIH budget will drop by $2.4 billion, part of $3.6 billion in science research cuts across several agencies, or 7.8% of their fiscal 2011 budgets.

The $2.4 billion in NIH cuts alone is $300 million shy of the 2011 external grant totals of the National Institute of Allergy and Infectious Disease, or nearly half the total budget of the National Cancer Institute. NIH director Francis Collins has quoted studies that equate the cuts to 2,300 grants that NIH would not be able to award.

In Boston, which year after year receives the most NIH funding of any American city, health care officials and politicians are warning about 1,700 jobs lost.

As we slouch toward another 11th hour (and 59th minute) Beltway showdown, let’s focus instead for a moment on a small – OK, tiny – counterexample. In San Francisco this week, former Genentech CEO Art Levinson and friends unveiled a new science award, the Life Sciences Breakthrough Prize, which will distribute $3 million to its winners. The inaugural group holds 11, but future years the winners’ pool will be limited to five.

Like we said, tiny. And the prizes are achievement awards, not grants for future projects, so it’s by no means a replacement for NIH’s role. But as fret about the future sources of scientific funding, what caught our eye was the presence of two non-life-science people on the new foundation’s board: Facebook chief Mark Zuckerberg and super-investor Yuri Milner. In 2011, this column made an open plea for Milner to throw some of his vast sums into the life science arena.

Since then, his investment firm Digital Sky Technologies has dipped a toe, joining syndicates for cancer diagnostics firm Foundation Medicine and consumer genome analysts 23andMe. No pure biopharma or device investments yet for Yuri, as far as we can tell, and so far he's following the same late-stage pattern as his highest profile tech investments (both Foundation and 23andMe have marketed products). Still, we’re encouraged by his involvement with a group that is rewarding research-stage biomedical breakthroughs.

High-tech giants are increasingly turning their profits into venture funds, and some of those funds are trickling into health care and the life sciences. Last year, we profiled the nascent health-care ambitions of San Francisco’s Founders Fund -- which came to life in part from Facebook and PayPal investor Peter Thiel’s fortune -- and now we’re starting to see Google Ventures make a health-care splash, too. (In fact, it’s a co-investor with Milner in Foundation Medicine.) Its latest investment is cancer-data analytics firm Flatiron Health, and the new issue of START-UP has a report.

Whether they're high-tech moguls or faces in the crowd at the other end of the spectrum, new sources of life-sciences capital will always be a front-and-center topic for us and our readers. This column has followed a couple crowdfunding efforts, and now our colleagues at IN VIVO have just published a long look not just at crowdfunding but also other ways the biopharma business is tapping into more open or distributed resources. It’s a highly recommended read, as of course are all the latest articles in START-UP and IN VIVO.

Which brings us to that odd round of venture we mentioned up top: San Diego biotech Elcelyx Therapeutics just raised a $20 million Series C round, but the management formed its own fund to lead the syndicate. The entity, GSM Fund LLC, is a “friends and family” group of Elcelyx executives and others from the San Diego biotech community, CFO Martin Brown told FOTF. In planning the round, Brown also spoke with conventional VCs but had this idea in the back of his mind, particularly because Rick Barry, the founder and managing director of now-defunct Eastbourne Capital Management, had wanted to invest in Elcelyx for some time. Under the C round, Barry will join the Elcelyx board of directors. The GSM Fund members have all committed to reserves that, if called, could end up doubling their investment.

What started as a backup plan became the reality, said Brown. “I was keeping a book and pretty soon we had more than enough,” he said. “It just happened that the LLC got a first-mover advantage. The timetable was really important to us because getting the financing locked in allowed us to commit to some pivotal studies. If the financing had taken a lot longer, we would have had to put some of our plans on hold.”

There were really no secondary benefits to the LLC model for Elcelyx itself, Brown added, although it was a different story for the individual investors. “There are advantages for the investors in the way we structured this,” he said. “It’s not a typical VC fund where there are management fees and carry. Every dollar that was invested by the members of the LLC purchased shares in Elcelyx.”

Jeffrey Sohl, director of the University of New Hampshire Center for Venture Research, told FOTF that it’s rare but not unprecedented for angels to create a one-time limited partnership structure to invest in a company as sort of a mini VC.

We have more details on the Elcelyx deal in the roundup below. All you have to do is scroll down. From friends and family to Facebook fortunes, from mega-moguls to mini-VCs, we cover it all here in… 

Elcelyx Therapeutics: For its new $20 million Series C round, privately held Elcelyx led a syndicate by forming its own venture fund, GSM Fund LLC, which takes its name from Elcelyx’s proprietary Gut Sensory Modulation technology. The round includes previous backers Morgenthaler Ventures, Kleiner Perkins Caufield & Byers and Technology Partners. Those three VCs had financed a two-tranche, $21 million Series B during 2011 and 2012. The LLC is structured so that its members can be called upon to double their investment if necessary. The roster includes four area biotech CEOs, four or five local MDs, about a dozen PhDs and a host of biotech executives and lawyers. New board member Rick Barry, one of the GSM Fund contributors, owned 19.9% of Amylin Pharmaceuticals and was a major investor in Telik and Sarepta Therapeutics when he ran the now-defunct Eastbourne Capital Management. Elcelyx is working to bring both a delayed-release version of metformin (NewMet), currently in Phase II, and an over-the-counter weight-loss supplement (Lovidia) to market. “The timetable was really important to us because getting the financing locked in allowed us to commit to some pivotal studies” CFO Martin Brown told FOTF. “If the financing had taken a lot longer, we would have had to put some of our plans on hold.” – Joseph Haas

Jounce Therapeutics: Jounce is the latest project incubated by Third Rock Ventures to see the light of day. The firm emerged from stealth mode Feb. 14 to reveal a $47 million Series A round, in which Third Rock was the sole investor. Jounce will attempt to develop cancer immunotherapies using a proprietary development platform, which company executives say will be a broader approach than that taken by some others in the field. Although it hasn’t yet named any specific targets, Cambridge, Mass.-based Jounce has already identified antibodies it plans to develop. A group of three Third Rock partners will serve as Jounce’s interim management team, including Cary Pfeffer as CEO, Robert Tepper as chief scientific officer and Robert Kamen as chief business officer. In an interview with our “Pink Sheet” colleagues, Pfeffer said the 2011 approval of Bristol-Myers Squibb’s cancer immunotherapeutic Yervoy (ipilimumab) for metastatic melanoma spurred Third Rock’s increased interest in the field. After establishing the company quietly later that year, Jounce’s management has built an advisory board that includes key research specialists from the University of Texas MD Anderson Cancer Center, Johns Hopkins University, the University of Chicago and the Georgetown Lombardi Comprehensive Cancer Center. – Lisa LaMotta and Paul Bonanos

Retrophin: The pediatric orphan disease firm, whose shares trade over the counter, raised $10 million in a private placement to help complete what could be a pivotal Phase II trial for its lead candidate. RE-021 is being tested to treat focal segmental glomerulosclerosis (FSGS). With an eye toward the favored status insurers and regulators are granting orphan drugs these days, Retrophin in-licensed the small molecule a year ago from Ligand Pharmaceuticals for $1 million upfront. Ligand had tested the compound to treat hypertension, but in its new indication Retrophin hopes to gain accelerated approval from FDA. The biotech  was founded in 2011 by then-hedge fund manager Martin Shkreli, who has since shuttered his MSMB Capital Management to devote himself to running the company. In December 2012, Retrophin completed a reverse merger with an OTC-traded shell company. Shkreli told FOTF that Retrophin will likely do either another reverse merger with a company on a major exchange or de-list and conduct an IPO.  In the placement, Retrophin sold 3.3 million shares at $3 each, a 6% discount to its close on Feb. 12, the day before the financing was announced. The deal included 1.5 million warrants, each with an exercise price of $3.60. On Feb. 20, Retrophin shares closed at $4.20, giving it a market cap of $35 million. MSMB led a $4 million Series A round in May 2012. – Stacy Lawrence

e-Therapeutics: The UK network pharmacology company said February 11 it would seek to raise £40 million in a follow-on offering, upon approval of its shareholders. The cash would help finish Phase I studies of its lead cancer therapy ETS2101 then move it through Phase II testing in brain cancer and Phase Ib/II testing for several other cancers. The company hopes the clinical activity will lead to licensing in 2017. Part of the new fundraising will come from existing investor Invesco Asset Management, which will boost its stake in e-Therapeutics from 45.9% to 49.9%, the company said. New shares will be priced at 32 pence each, a 4% premium to the closing price February 10. E-Therapeutics is one of a handful of companies to use modeling of disease pathways (sometimes called network biology or systems biology) to identify the critical points to attack and match them with drug candidates. Another publicly traded network-based company with products in the clinic is Merrimack Pharmaceuticals, which debuted on the Nasdaq one year ago. Merrimack has used its network biology platform to build an antibody combination product, which we describe in a feature in the new START-UP magazine. – Alex Lash

All of the Rest: Bind Biosciences, which is selectively targeting disease sites with its Accurin platform, raised an $8.7 million tranche out of a potential $20.25 million from foreign investors… To support its human plasma gelsolin for inflammation, BioAegis Therapeutics closed on a $3 million round… Reports here and here state that Aerial Biopharma has completed the second tranche of its $12 million Series A financing… Ophthalmic implant maker PolyActiva completed a $A9.2 million Series B… Longbow Capital led a £1.5 million financing for UK drug discovery company Domainex… Helmedix, which is developing autoimmune peptides derived from helminthic worms, raised $A1.25mm in funding… Burrill & Co. was the sole investor in Strand Life Sciences’ Series B… To back its work on injectable drug delivery devices, Unilife completed a $12 million registered direct offering… Regenerative medicine company Cytomedix could realize up to $27.5 million in a combination loan and equity financing…  Developer of oncolytic viruses Oncolytics Biotech publicly raised $32 million… In a FOPO, Medgenics, which is delivering therapeutic proteins using the patient’s own tissue, grossed $29.4 million… Imprimis Pharma completed a $9.7 million public sale in support of its drug reformulations using the Accudel system… Cancer therapeutics and diagnostics company Novelos closed on a $5.5 million FOPO… Stem Cell Therapeutics announced a units offering… TetraPhase Pharma filed for an IPO to advance work on antibiotics against multi-drug resistant infections… Ambit Biosciences re-filed for its IPO after withdrawing its offering in June 2011… Deerfield Management loaned Discovery Labs $30 million to support development of its candidates for RDS in premature infants… With commitments of $245 million, Lux Capital closed its third fund focused on energy, technology, and health care. -- Amanda Micklus

Photo courtesy of flickr member potat0man.

Financings of the Fortnight Jumps On Board The A-Train

We're here to point you toward the newly published 2012 A-List, dear readers, but first let's note some big numbers. US listed biotechs raised at least $1.8 billion in stock and debt sales the past couple weeks. We've highlighted two below, Onyx Pharmaceuticals and InterMune, but the totals help highlight a broader imperative: Go public if you can. The grass is greener.

But easier said than done; the US JOBS Act, meant to ease regulation, spur IPOs, and let a million crowdfunders bloom, has so far done little of anything. Our colleagues at START-UP described here the snail's pace of the crowdfunding portion of the JOBS agenda. And the JOBS Act's so-called "IPO on-ramp" seemed after the bill became law in April to be more of an LA freeway at rush-hour, with all of eight biotechs going public in the US. Will the bottleneck clear soon? If all the institutional investors and hedge funds crossing over into biotech recently are any indication, a bunch of extremely well-funded private companies will try their hands soon.

Reeling in more private money instead of going public is still an option for some companies, but generally the numbers don't recommend doing so. Biotechs in 2012 attracted $4.1 billion, down from $4.8 billion in 2011, according to the National Venture Capital Association's Money Tree report. Medical device investments dropped to $2.4 billion in 2012, from $2.8 billion in 2011. There have been worse years in the past decade, but the decline stands out in a year that featured legislation meant to spur investment. A recent survey of investment bankers shows a lot of skepticism about the JOBS Act (h/t to Dan Primack's "Term Sheet" email), a big dip from their positive attitudes last summer. Life-science VCs never sported the rose-colored lenses, as noted in the second annual life-science venture survey that START-UP published last September.

Then again, a flurry of IPO activity this quarter or next could make that slim "Too soon to tell" majority look all the wiser. Other VCs voted for optimism with their checkbooks in 2012: the early-stage investors. There weren't a ton of them, as you might extrapolate from the overall VC numbers noted above. One way to take the temperature is to tally the disclosed Series A rounds, which is why START-UP publishes its A-List every year. Lucky you: It just went live Thursday night, and for the non-subscribers we'll share this tidbit that shows biopharma Series A activity was, in dollar terms, practically flat, but deal volume was up, making for a small decline in average deal size (UPDATE: removing deals for which no dollar figure was disclosed suggests a slight uptick in Series A average haul):

Click through, and you'll find lots more discussion. We've got device and diagnostics numbers, too, as well as The A-List itself: the 12 companies we feel best exemplify the year's scientific, financial and strategic trends in early stage life science venture: ArmaGen Technologies, Avelas Biosciences, Cibiem, Cotera, Enterome, Galera Therapeutics, Global Blood Therapeutics, Intact Vascular, Novira Therapeutics, Oculeve, Solstice Biologics, and Warp Drive Bio.

If that's not enough to make you tear down the paywall, the A-List feature also includes profiles of two very active Series A investors and a round-up of the year's activity for our A-List alumni, who stretch back to 2004. It's all so A-riffic, you'd half expect the official celebrity spokesperson to be A-Rod. A-hem. Before we get too carried A-way, let's A-vail ourselves of the latest A-dition of...

Onyx Pharmaceuticals: Intent on proving this year it isn’t a one-trick pony with the success of kidney and liver cancer treatment Nexavar (sorafenib), Onyx took advantage of a share price upswing to raise $359 million in a follow-on, selling 4.4 million shares at $81.50 each. According to Elsevier’s Strategic Transactions database, it’s the largest life sciences follow-on since orphan disease play Alexion Pharmaceuticals raised $465.1 million in May 2012.  It’s also the largest financing Onyx has done to date. As of Sept. 29, 2012, Onyx had $573 million in cash. (It also tallied an operating loss of $228.9 million in the first nine months of 2012.) The firm expects to use the cash in part for trials intended to push Kyprolis (carfilzomib) all the way up to frontline therapy. In addition, it’s waiting for data due the second half of 2013 that would be the basis of a European regulatory application; Onyx is planning to market the drug on its own there. Kyprolis was first approved in July to treat relapsed/refractory multiple myeloma. Onyx said in January it had more than $62 million in Kyprolis sales after five months on the U.S. market. Shares were up by as much as 14%, but they've since retreated to a 2% gain in the new year. Still, Onyx almost doubled its share price in 2012, so investors seem content for now to eschew profitability. But that likely won’t remain the case for too long.  — Stacy Lawrence

InterMune: More from the fortnight’s follow-on fiesta! InterMune raised $229 million in concurrent public offerings of convertible senior notes and new stock, even as it continues to work to get its potential blockbuster in idiopathic pulmonary fibrosis approved in the U.S. Priced Jan. 16, the offering netted $102 million in sales of 2.5% convertible senior notes due in 2017, along with $127 million from the sale of 13.5 million common shares at $9.90 apiece. The senior notes convert to common stock at a price of $12.87, 26% higher than InterMune’s average stock price of $10.19 before the offerings. The Brisbane, Calif. company is conducting a Phase III ASCEND trial to obtain evidence that pirfenidone, a dual inhibitor of TGF-beta and THF-alpha synthesis, can produce significant improvement in forced vital capacity in IPF patients. Already marketed in Europe as Esbriet and Japan as Pirespa, pirfenidone would be the first drug approved in the U.S. for IPF. The current standard of care is lung transplant. InterMune said it would use the proceeds to fund ASCEND and commercialization efforts for the drug, as well as to retire 5% convertible senior debts that come due in 2015. — Joseph Haas 

Versartis: Like several venture-backed companies of late, Versartis is the latest to take another round of venture funding and aim for late-stage trials on its lead program rather than strike a partnership or execute a trade sale. The Redwood City, Calif. developer of VRS-317, a long-acting version of human growth hormone intended to treat pediatric growth hormone deficiency, announced January 15 it has closed a $25 million Series C round, building on at least $32 million in previous funding. Aisling Capital led the new round, while prior investors Index Ventures, New Leaf Venture Partners, and Advent Venture Partners’ Life Science Fund provided follow-on funding. Like its successor Diartis, Versartis was spun out of extended half-life technology developer Amunix in 2010 to establish a separate, single-asset entity that would house VRS-317. Shortly after Versartis’ $11 million Series A, Amunix founder Willem "Pim" Stemmer told START-UP in 2010 that Versartis could be on the block as soon as late 2011, with one or two rounds of funding in between. Now, Versartis says it’s preparing to go long, with a 2014 Phase III trial slated to succeed the Phase Ib/IIa trial currently underway. Versartis declined to discuss its new deal. Other companies, such as Intarcia Therapeutics and Flexion Therapeutics, have also recently taken big rounds instead of crafting an exit or partnership. – Paul Bonanos

Aileron Therapeutics: The biotech with the most advanced "stapled" peptide program said January 14 it has hit a milestone and triggered the second tranche of its Series D round, bringing the total to $42 million. The cash will help push its lead drug ALRN-5281 into the clinic to treat patients with orphan endocrine disorders. The compound's clinical progress will be closely watched, as stapled peptides are one version of constrained peptides, altered to hold their shape, penetrate cells and perhaps hit previously undruggable targets. They have also sparked a recent and vigorous debate, as well, as the brand-new edition of START-UP explains. Aileron holds exclusive rights to the stapled version, which was invented at Harvard Medical School in the previous decade. Its Series D, first unveiled in 2009, was notable for a syndicate that included four corporate venture groups: SR One (of GlaxoSmithKline), Roche Venture Fund, Lilly Ventures, and Novartis Venture Fund. All four are participating in the new tranche, along with existing investors Apple Tree Partners. — Alex Lash

The Best of the Rest: BioCrossroads Indiana Seed Fund made $500k and $250k investments in, respectively, Esanex – to advance Phase I trials for an Hsp90 inhibitor for solid tumors that Pfizer acquired in its 2008 buy-out of Serenex – and Algaeon, which is developing algae cultivation technology for nutraceuticals and to date has only raised money from its founders and angel investors… From its new life sciences fund, TVM Capital has made the first investment in Kaneq Bioscience, a spin-off of Kaneq Pharma that's developing early-stage compounds for metabolic diseases and cancer... To fund Phase II trials for Aganirsen in back-of-eye diseases, including the orphan indication neovascular-associated corneal graft rejection, Gene Signal has received undisclosed funding from a group of private investors who have backed the Swiss company since its 2000 formation... Ariad Pharmaceuticals priced a $300mm FOPO of 15.3mm shares at $19.60. RNAi-based therapeutics developer Alnylam Pharmaceuticals brought in $174mm through the public sale of 9.2mm shares at $20.13… Aegerion Pharmaceuticals closed a $67.9mm public offering… A FOPO of 6.7mm shares at $7.50 brought in $47mm for Aveo Pharmaceuticals… Antibiotics-focused Trius Therapeutics raised $34.1mm in a 7.2mm share FOPO priced at $4.75… Antibody player KaloBios has set terms for its IPO of 3.85mm shares at a proposed $12-14 range… Israeli biotech Alcobra has hopes for an $18.75mm IPO on Nasdaq to advance its work on cognitive dysfunction disorders… A price range between $22-$25/share was set for the planned IPO of Pfizer’s animal-health unit Zoetis, which it’s spinning off as an independent company... Through the sale of ten-year, 2.125% convertible subordinated notes, Theravance brought in $282mm… Raising $105.7mm by selling 3.25% six-year senior notes, Pacira Pharmaceuticals will use $30mm to repay debt, the rest to fund continued commercialization and development of additional indications of Exparel, its injectable post-surgical anesthetic… Through the offering of five-year convertible senior notes, Auxilium Pharmaceuticals collected $200mm… Pharming Group secured €16.35mm ($21.71mm) in convertible bond financing through a syndicate of existing institutional investors led by Kingsbrook Opportunities Master Fund… Oculus Innovative Science is spinning off Ruthigen as an independent public company to develop RUT5860 for preventing infection in trauma and surgical procedures… Concurrent with venture funding from a group of investors led by Colorado-based High Country Venture, ViroCyt – an InDevR spin-off developing technologies that enable rapid quantification of viruses – began operations. — Maureen Riordan

A-Train photo courtesy of flickr user The Eyes of New York. 

Financings of the Fortnight Climbs Half Way To The Stars

Yeah yeah. We know. The life science venture shakeout isn’t over yet. It’ll get smaller before it gets bigger. Happy new year, everybody. That was the drumbeat we heard as we made the rounds at J.P. Morgan this week. But the California sun was shining, the street musicians were banging on their plastic buckets, and the doors of the St. Francis (don’t call it the Westin!) just kept on revolving.

Let us throw a few names at you. Sanderling Ventures. Alex Denner. Ascension Health. Hatteras Venture Partners. Shakeout notwithstanding, all have raised or are raising new health care funds, some by notable means. Hatteras is boosting its fund size 50% to $125 million by adding Small Business Administration loans under a new venture-friendly government program. 

Sanderling Ventures, whose last fund was of 2004 vintage – so long ago uncorked it doesn’t even register on START-UP’s latest annual gas-tank chart -- has laid down a marker that it’s looking to raise a seventh fund of $250 million, and GlaxoSmithKline says it will be a limited partner with a $50 million stake.

The venture arm of Ascension Health, one of the largest hospital groups in the US, has raised a third fund of $225 million. And Carl Icahn’s former biotech consigliere Alex Denner is also launching his new hedge fund, friends of FOTF tell us.

But the fund news we found most intriguing was that apparently CMEA Capital of San Francisco is giving an eighth fund a go, and it might be life-sciences only. We’re not sure of the details – and CMEA isn’t talking – but we do know this: two new partners with biotech experience have been dubbed "founding partners" of CMEA 8. It says so on the firm’s Web site. One is Kent Hawryluk, who has been an Indianapolis-based VC with Twilight Venture Partners for years. He helped found Marcadia Biotech in 2006 and sell it to Roche in late 2010 for nearly $300 million upfront. The other is Troy Wilson, who was president, CEO and co-founder of Intellikine until Takeda bought it about a year ago for up to $310 million.

With CMEA maintaining radio silence despite our entreaties, we’re left to speculate about the verbiage on Hawryluk and Wilson’s CMEA pages: 

“Our success at Marcadia is a reproducible formula for the portfolio companies of CMEA 8. We focused on transforming breakthrough science into a product needed by patients and Pharma. It was through capital efficiency, proper incentives, and hard work we were able to create value in such a short amount of time.”

And…

Wilson’s most recent success illustrates the strength of the CMEA 8 model. He was President and CEO of Intellikine, a company he co-founded. In just over four years, Intellikine discovered three drugs to treat cancer and advanced them into clinical testing… Along with several of his Intellikine colleagues, he recently co-founded Wellspring Biosciences. “It’s exactly the sort of company we want in CMEA 8,” he says.

Wellspring, by the way, is developing small molecules for cancer treatment, according to its bare-bones Web site.

Last we heard news from CMEA, it was launching the Velocity Development Corp. in 2011, a virtual development team for asset financing, as a carve-out of its seventh fund. In an earlier permutation, Velocity was supposed to be backed by Eli Lilly & Co. as part of Lilly’s “mirror fund” scheme, but instead it launched in mid-2011 as part of CMEA’s portfolio. Around the same time, Atlas Venture created its own asset-financing group, the Atlas Venture Development Corp. AVDC since has announced two projects, Arteaus Therapeutics and Annovation Biopharma, and in the following months, other asset-based venture schemes have debuted.

All the while, Velocity has been quiet. In discussing Velocity at the time of its launch, CMEA managing general partner Jim Watson, one of the San Francisco firm’s high-tech investors, said there would be no CMEA 8. Plans apparently have changed.  

A lot has certainly changed for Kleiner Perkins Caufield & Byers partner Risa Stack. On January 7, Stack said she was taking a position as a general manager and a primary deal maker for General Electric's healthyimagination, a $6 billion initiative to make health care affordable and accessible. Stack will develop strategy and drive execution of new initiatives with an initial focus on personalized medicine and health care data, her areas of expertise at KPCB.

Stack already was on the healthyimagination advisory board, and the initiative’s CEO Sue Siegel is a long-time friend and colleague, having worked at Mohr Davidow, a frequent co-investor with Kleiner Perkins in diagnostics.  Stack worked closely with co-founder Brook Byers, who also was heavily involved in many of her portfolio companies. (Byers is Kleiner’s board representative at Foundation Medicine, which just extended its Series B round – see item below.)  Several of Kleiner Perkins’ diagnostics portfolio companies, including Foundation, CardioDx and Veracyte, are in the early phases of product launch.  And with technologies abundant – even fungible, some say – it makes sense to look to integrators like GE to drive adoption.

Raise a fund? Ha. We at FOTF HQ can barely raise our fingers to the keyboard to write this column after four days of pounding the San Francisco pavement. Fortunately, there's nothing better to elevate one's chi and center one's chakras (we are in California, after all) than the year's first edition of...

Foundation Medicine: Coincidence? In Vivo Blog readers name Foundation Medicine’s Series B round their top financing deal of the year. Four days later, the company reveals it’s grabbed the attention, and cash, of three renowned investors who have added $13.5 million in new capital to push the Series B total to $56 million. Microsoft chairman Bill Gates, jVen Capital founder and former Digene chief Evan Jones, and Russian billionaire Yuri Milner topped off the round, following a September 2012 first closing that featured crossover investors Deerfield Management, Redmile Group and Casdin Capital; strategic backers Roche Venture Fund and WuXi Corporate Venture Fund; and VCs Third Rock Ventures, Google Ventures and Kleiner Perkins Caufield & Byers. The latest cash infusion arrives as Foundation continues to commercialize its first product, FoundationOne, a genomics test that oncologists use to choose appropriate treatments or clinical trials for cancer patients based on assays of their tumors. Foundation struck at least seven pharma partnerships during 2012, and it is planning to launch a hematologic malignancies test in 2013. Gates invested on his own rather than through his foundation, as he did in a 2011 round for Nimbus Discovery. Milner, known for his late-stage investments in Facebook, Twitter and Zynga, recently took a stake in 23andMe. And Jones, who has backed Veracyte, Fluidigm and CAS Medical Systems, took a board seat at Foundation. – Paul Bonanos

Ultragenyx Pharmaceutical: Last summer, START-UP posed the question “Was Enobia’s Sale A High-Water Mark For Rare Disease Deals?” Rare disease company Ultragenyx is trying to make that question look silly. The Northern California firm with close ties to rare-disease leader BioMarin Pharmaceutical said on December 20 it has raised a $75 million Series B round. It was led by Adage Capital Partners and featured a varied roster of heavyweight crossover public investors, corporate venture groups and its existing venture backers. The cash will go mainly toward the biotech’s lead clinical programs, UX-001, a Phase II replacement therapy for hereditary inclusion body myopathy, and UX-003, an enzyme replacement therapy to treat  mucopolysaccharidosis type 7, due to enter a Phase I/II trial this year. The cash also likely means that Ultragenyx will look to go public in the not-too-distant future, often a requisite to entice public investors to make private biotech investments, as our colleague Stacy Lawrence explained in a November START-UP feature. (For more crossover coverage, check out the new In Vivo magazine, in which Stacy has drawn back the curtain on Deerfield Management, which wants to become unequivocally the top health care hedge fund.) Despite the influx from global funds like T. Rowe Price, Blackrock and Jennison Associates, and the inclusion of rare-disease heavyweights Shire and Sanofi-Genzyme Bioventures, one of Ultragenyx’s original backers has the board chair: Eran Nadav of TPG Biotech. TPG and Fidelity Biosciences led the company’s $45 million Series A round – which landed it on START-UP’s 2011 A-List, by the way. – Alex Lash

Labrys Biologics/Solstice Biologics: By lumping two companies together, we don’t mean to imply they are two versions of one concept or two products spun out of one platform. On the contrary, they’re quite different. But they have the same lead Series A investor, venBio, and therein lies the rub. Labrys – $31 million committed, syndicate also includes InterWest Partners, Canaan Partners and Sofinnova Ventures – is a single-asset bet, an antibody to treat chronic migraine pulled from Pfizer’s shelf that should start Phase II this year; that’s the kind of idea venBio mainly was formed to go after. But Solstice – $18 million, and Aeris Capital joins venBio – is a bold technological idea, a reworking of RNA strands to help deliver their therapeutic promise into all kinds of cells. To date, constraints on delivering nucleic acids as drugs have limited the field to a few clinical applications. If Solstice’s RNA engineering works – a big if, as venBio cofounder Corey Goodman told "The Pink Sheet" Daily – it could crack the field wide open and justify the leeway venBio LPs gave Goodman’s team to seek out one or two early stage deals. Meanwhile, Labrys is to some extent a bet on Goodman’s drug connoisseurship. He ran Pfizer’s San Francisco biotech group for a couple years before the Wyeth merger shut down the group, and he was well acquainted with the migraine antibody. When Pfizer decided to outlicense it in early 2012, Goodman joined the competition quickly. – A.L.

Sarepta Therapeutics: On the heels of 48-week extension data from a Phase IIb trial in Duchenne muscular dystrophy (DMD) patients, Sarepta priced an underwritten public offering Dec. 13 netting the company $118.2 million. The Cambridge, Mass., firm announced it would offer more than 4.95 million new shares of common stock at $25.25 per share, a slight discount from its same-day closing price of $25.44. The raise capped off a turbulent 2012 for Sarepta. The company had an unclear future after 24-week data from eteplirsen’s Phase IIb trial in DMD produced mixed results. The share price sank as low as $3.24 in December 2011, adjusted for a subsequent reverse stock split, and the firm risked being de-listed by NASDAQ. Gains in early 2012 eroded gradually, and shares neared a new low as recently as July. However, a turnaround began that month as Sarepta engineered a six-for-one reverse stock split to bolster its share price. Then, in short order, it released impressive 36-week and 48-week data for eteplirsen. In the aftermath, Sarepta’s share price soared, peaking at $45 in early October. The improved trial results also brought about major interest in the company from institutional investors, Sarepta CEO Chris Garabedian said. They make up a large majority of the offering’s investors, he said, which comes after an at-the-market facility brought in $37.8 million after the 36-week data were released. -- Joseph Haas

The Best of the Rest: HealthCare Royalty Partners provided Nuron Biotech with $80 million in equity and royalty financing… Russian VC RusnanoMedInvest participated in venture rounds for Regado Biosciences ($51 million), Marinus Pharma ($21 million), and Lithera ($20.6 million)… Naurex completed a $38 million Series B round led by Baxter Ventures...Allakos raised $32 million in Series A funds to support work on immuno-inflammatory antibodies... for its FANG cancer vaccine platform, Gradalis pulled in a $24 million Series B… health IT company Within3 raised $20 million… NeRRe Therapeutics closed an $18.4 million Series A and got rights to GSK’s neurokinin antagonists… To further its anti-diabetic agent imeglimin, Poxel raised $17mm in Series B financing… NanoDimension led a $16 million Series B for Blend Therapeutics… GoBalto raised $12 million in a Series B round to support cloud-based software that simplifies clinical trials… TPG Biotech provided Trevi Therapeutics with $10 million in Series A financing… Avaxia Biologics pulled in a $6.4 million Series B to advance gut-targeted therapies… Actinium Pharma raised $5.1 million as part of a $20 million offering  prior to going public via a reverse merger… Tackling hypertrophic cardiomyopathy, Heart Metabolics closed on a $4 million Series A round… Tau Therapeutics collected $3 million to develop T-type calcium channel inhibitors for solid tumors… Transcriptic reportedly crowdfunded its seed round with help from AngelList and SecondMarket… Troika Venture Capital provided undisclosed financing to cancer metabolism firm StemPar Sciences… Rare disease player Synageva closed on a $118 million FOPO… A few weeks after signing on Leica Biosystems to create a companion dx for its NeuVax breast cancer candidate, Galena publicly raised $24 million… The regenerative medicine company Cytori Therapeutics completed a $20 million public offering… Targeting bioactive signaling lipids, Lpath finalized a $12 million follow-on… In a deal with Aspire Capital, Cyclacel raised $20 million… Nymox collected $15 million in a private placement to pay for trials of NX1207 in BPH and prostate cancer… Seaside 88 has provided NanoViricides with $5 million… Tonix Pharmaceuticals closed on a $3.4 million PIPE… Cancer Genetics set IPO terms at 5 million shares for $6-8… Stemline Therapeutics upped its planned IPO offering to 2.3 million shares at $10-12... Audeo Oncology postponed its IPO… To fund Procysbi commercialization, Raptor Pharma got a $50 million loan from HealthCare Royalty Partners… Oxford Finance loaned Agile Therapeutics $15 million… Arno Therapeutics raised an additional $2.15 million in convertible debt on $12.7 million initially collected in November… To help pay for its acquisition of cancer-trating laser equipment, Pinnacle Biologic received an undisclosed amount of debt financing... ADMA Biologics received $6 million in debt financing from Hercules Technology Growth Capital… Abbott officially spun off the biopharma unit AbbVie…and nine months after START-UP wrote about it here, Wellcome Trust launched a £200 million evergreen fund. -- Amanda Micklus

Photo of Powell Street in 1959 courtesy of Roger4336. He took it himself. Please note the previous location of Lefty O'Doul's. It has since moved.

Financings of the Fortnight Follows the Follow-Ons

The half-year data are in. Public biopharma firms raised $3.14 billion in secondary offerings through the end of June. According to Elsevier’s Strategic Transactions database, that surpasses the full year totals from 2011 ($3.09 billion) and 2010 ($2.94 billion), and might have surpassed 2009 if Human Genome Sciences and Vertex hadn’t gone toe to toe, mano-a-mano, FOPO-a-FOPO, each raising more than $800 million, with Dendreon close on their heels pocketing more than $600 million.

And since the half-year mark, we’ve had a couple more big issues, with Synageva BioPharma (details below) and ImmunoGen each hitting the $100 million mark. So, as the kids like to text these days, WTF? One explanation is that biotech in general has fared well. The Nasdaq biotech index is up 25% for the calendar year, beating the pants off the major indices.

But dig a little deeper and you’ll find that public investors like their biotech companies like they like their porterhouses: Rare. Counting the latest Synageva fund-raise, public companies with a rare-disease focus have rolled up a cool $1 billion this year, nearly a third of all post-IPO money raised (debt not included), led by Alexion Pharmaceuticals and BioMarin Pharmaceutical. No wonder our friends at the RPM Report are calling this the orphan drug bubble.

On the private side of the rare-disease story, stay tuned for the next issue of START-UP, which delves into the sale of Enobia Pharma to Alexion last December -- $610 million upfront with $400 million more in potential earn-outs – as an excuse to ask investors, entrepreneurs and the potential buyers of rare-disease assets the same question: How long can this last?

The recent renewal of the FDA’s user-fee program under FDASIA has tasty carrots that rare-disease advocates say will help spur even more development of treatments for tiny patient populations. So the momentum might not let up. That’s a good thing for people who otherwise would have no medical recourse, and of course it’s something that we’ll continue to cover biweekly in the latest edition of… 

Genkyotex: The Swiss biotech with the funny name (it pays homage to Geneva, Kyoto, and Texas, the home turfs of its founding scientists) padded its coffers in a July 9th tranche that supplements a CHF 18 million May 2011 Series C round, for total proceeds of CHF 25 million ($26 million). Participants in the extension included previous backers Eclosion, Edmond de Rothschild Investment Partners (which just announced a new fund, see below), Vesalius Biocapital, and MP Healthcare. The company says the funding will advance its first-in-class orally available NOX inhibitor GTX137831, now in Phase Ia for diabetic neuropathy, through a Phase II trial due to start by the end of 2012. It will also fund programs in neurodegenerative diseases such as Alzheimer’s, Parkinson’s, and ALS. Born out of the Geneva incubator Eclosion, six-year-old Genkyotex has raised about CHF 30 million to date. It’s developing small-molecule inhibitors of the NOX (nicotinamide-adenine dinucleotide phosphate oxidase) family of enzymes. NOX enzymes are involved in intracellular electron transfer and produce reactive oxygen species (ROS). NOX-4 over-expression has been linked to diabetic nephropathy and lung fibrosis, and there is evidence that NOX-1 and NOX-2 isoforms are involved in neurodegenerative processes. Blocking the action of NOX may help reduce the formation of ROS, which is thought to be involved in metabolic, cardiovascular, pulmonary, neurological, and other diseases. With the new cash, Genkyotex also named Eric Meldrum, formerly of 3-V Biosciences, as CSO and Alexandre Grassin, previously with Alexion Pharmaceuticals, as finance director. For more on Genkyotex, be on the lookout for the July/August issue of START-UP, which will feature a company profile. – John Davis and Maureen Riordan

Synageva BioPharma: Ah, the joys of going public. In its second fundraising since it undertook a reverse merger to gain a public listing, Synageva raked in $100 million by selling 2.42 million shares at $41.20 a share. Underwriters have an option to buy 364,000 more shares, as well. Lexington, Mass.-based Synageva was privately held until June 2011, when it merged with publicly traded Trimeris, whose HIV treatment Fuzeon never gained traction despite a longtime partnership with Roche, which has worldwide rights. The merged company now considers itself a rare-disease specialist as it pushes forward its lead candidate, an enzyme replacement therapy for lysosomal acid lipase (LAL) deficiency, also known as Wolman disease. Synageva raised $74 million in January at a stock price of $25.18, which means between dilutive events the shares went up 60%.  Like other orphan disease companies, its stock price has ridden what many see as a bubble into lofty heights. As our colleagues at the RPM Report explain here, the market cap of public rare-disease firm Alexion Pharmaceuticals now exceeds the combined market cap of Human Genome Sciences and Amylin, both hotly pursued for their commercial holdings. Alexion cashed in a couple months ago with a stunning $462 million follow-on, the largest of the year so far, and right behind Alexion in dollars was another rare-disease player, BioMarin Pharmaceutical, with a $236 million fundraise, also in May.  – Alex Lash

Nektar Therapeutics: Nektar said July 10 it has sold $125 million in debt in a private placement at an interest rate of 12%. The company said in a release that the debt financing, plus a royalty sale from earlier this year, should put its cash reserves at the end of the year around $300 million. The firm had nearly $500 million in cash and equivalents at the end of the first quarter, and the new debt issue will help pay down $215 million in previous debt, with an interest rate of 3.25%, due in late September. The new debt comes due in 2017. The debt sale comes more than four months after it raised $124 million by selling future royalty streams from two products, UCB Pharma’s Cimzia (certolizumab) and Roche’s Mircera (methoxy polyethylene glycol-epoetin beta), which date back to a technology deal Nektar struck in 2000. The firm often associated with Pfizer’s Exubera inhaled insulin “bong” – it provided the inhalation technology and received a $135 million payment when Pfizer ended the partnership – has to some extent reinvented itself under new leadership . Its pipeline includes a Phase III reformulation of the chemotherapy irinotecan for breast cancer, which Nektar has decided for now to keep unpartnered. Cowen and Co. and CRT Capital Group are handling the transaction. - A.L.
 
Edmond de Rothschild Investment Partners: Fill ‘er up. Just in time for START-UP’s upcoming annual life-science VC “gas tank” update, the Paris-based venture firm announced the first close of its fourth BioDiscovery fund, which is focused mainly on Europe. The firm said it has €125 million committed and is on target to hit a final close of €200 million by the end of 2012, which would push its life-science assets under management past €500 million. It will hew to its previous strategy of leading 15 to 20 investments in biopharma, device and diagnostic companies. With BioDiscovery IV, Rothschild joins The Wellcome Trust, Index Ventures, Vivo Ventures, and H.I.G. Bioventures in closing at least part of a healthcare-focused fund this calendar year, which has proven extremely difficult for venture firms to raise fresh capital. Current portfolio companies include the German Alzheimer’s developer Probiodrug, French eye specialists Novagali Pharma, and cardiovascular developer Regado Biosciences. – A.L.

Thanks to Maureen Riordan for help with the data.

Photo courtesy of Floris Oosterveld via a Creative Commons license.

Financings of the Fortnight's Gut Check

Has the signal-to-noise ratio of the Obamacare decision already blown out your transistors? Are you sick of “SCOTUS,” which sounds like a region where half the population wouldn’t want to get kicked?

FOTF has a suggestion: Dive into the microbiome, one of the most fascinating ongoing scientific revelations of our lifetimes. Anyone who, as a kid, loved Ray Bradbury’s creepy short story “Fever Dream,” in which a deliriously ill child becomes bit by bit something other than himself, immediately grasps the existential import of the microbiome research: We might need to rethink what it means to be human, because most of the genetic material we’re carrying around isn’t actually ours. (Wait a second, am I typing this, or is it the microbes?)

Lofty questions, indeed; we’re also pondering more practical ones, such as whether the nascent knowledge of our bugs and ourselves can be turned into tests, drugs and other products that improve our health. Only a few investors have made that bet so far.

The latest group is Flagship Ventures, which recently discussed with our “Pink Sheet” colleagues a few details of its under-the-radar start-up Seres Health. Homegrown and fully funded by Flagship, Seres is aiming for what Flagship partner David Berry calls “a new class of drugs,” neither small molecule nor biologic, and why not: If the microbiome has us reconsidering our identities, couldn’t it also lead to new categories of therapeutics?

We’ll have to reserve judgment; Berry wouldn’t say much more about Seres’ activities, although he was eager to discuss the implications of fecal transplantation, a topic that, let’s just say, doesn’t go over well at dinner parties.

You can read more about Seres here, and to hear more from investors about the promises and cautions of translating the microbiome into therapeutic products, stay tuned for the next Capital Matters column in START-UP. Meanwhile, FOTF will be off for the 4th of July week, refreshing itself in the mountains, about as far from the Washington, DC, punditry and sophistry as possible. Just us and our microbes under the stars.

Pitch your tent, kick off your boot and crack open your yogurt, we're lighting the fire under another edition of...

Tesaro: With its $81 million debut June 28, the maker of drugs for cancer and chemo-related nausea became the first life science firm to price an IPO in nearly two months. Tesaro sold 6 million shares at $13.50 a piece, which nets the company $75 million after fees. Tesaro is run by the top executives of MGI Pharma, who formed the company two years after Eisai bought MGI in 2008. Launched in 2010, the firm has been on an IPO fast-track from day one, raising $120 million in two rounds by the end of March 2012. By far the largest shareholder is New Enterprise Associates, which led the Series A with the founders, who told NEA they wanted to create “a new MGI.” Before the IPO, the mega-venture firm owned 50% of the company and, according to regulatory filings, it is one of at least three venture insiders to buy shares at the IPO. Other major shareholders’ pre-IPO shares included InterWest Partners (13%), Kleiner Perkins Caufield & Byers (9.5%) and Tesaro CEO Lonnie Moulder (5%). As much as 1.86 million shares were set aside for insiders, which continues a common theme for biotech IPOs, although the insiders’ percentage of the total is modest compared to other IPOs this year. Underwriters led by Citigroup and Morgan Stanley have the option to sell up to 900,000 more shares. – Alex Lash

Omeros: Speaking of biotech IPOs, the firm that cracked the ice of The Great Recession has raised $30 million on the public markets. The firm sold 2.9 million shares at $10.25 a piece June 27, netting the firm $28 million after fees, and underwriters led by Cowen & Co. and Deutsche Bank can sell up to $4.5 million worth of shares in an overallotment. Omeros has two programs in Phase III, both low-dose combinations of generic drugs to reduce pain and inflammation that occurs during and after surgery. The first is for use during arthroscopic joint surgery, the second for use during ophthalmological procedures. With its October 2009 IPO that raised $68 million, despite a lawsuit brought by its former CFO, Omeros was the first “pure-play” biotech to debut in a year and a half. Since that debut, the Seattle company has raised $25 million in an unusual deal that combined $20 million from Microsoft co-founder Paul Allen’s Vulcan Capital and $5 million from a Washington State development grant to support Omeros’ G-protein-coupled-receptor program in exchange for future royalties that might stem from the program. – A.L.

Neviah Genomics: The corporate venture arm of Germany’s Merck Serono is collaborating with Compugen to establish a new company, Neviah Genomics, which will discover, develop and market novel biomarkers for drug toxicity. Announced June 25, the Neviah collaboration is the first investment under Merck Serono Ventures’ Israel Bioincubator program, established in 2011 with initial funding of €10 million over seven years. MSV Head Roel Bulthuis told “The Pink Sheet” the incubator initially will invest in eight to 10 seed projects, but that doesn’t mean the Neviah investment necessarily equals one-eighth or one-tenth of the €10 million total. “We believe we’ve put Neviah in a good position to execute on its business plan and potentially over time access other sources of capital,” he said. Both MSV and Compugen will be shareholders in Neviah, and Compugen will earn royalties from product sales. Compugen, a Tel Aviv biotech with preclinical biologics, will bring its predictive discovery technologies to the partnership. The goal is for Neviah to provide both software and a kit to let biopharma companies evaluate their own candidates for drug-induced toxicity. The partners hope Neviah can produce a marketable product within a few years. Like all Israel Bioincubator Fund investments, Neviah will be headquartered in Merck Serono’s new state-of-the-art Interlab facility in Yavne, Israel. – Joseph Haas

Aegerion Pharmaceuticals: Another public biotech in the post-recession class tapped the markets to raise cash this past fortnight. Aegerion on June 14 priced 3.4 million shares at $14.75 per share for a net total of $47.3 million after fees. Underwriters led by Jeffries & Co. and JP Morgan have the option to sell up to 510,000 shares. Aegerion has applications before US and European regulators for lomitapide, a treatment for homozygous familial hypercholesteremia, a rare genetic cholesterol disease. The drug originally was developed by Bristol-Myers Squibb and ultimately in-licensed by Aegerion. The firm will use the cash to prepare for launch in both the US and EU in 2013, if the regulatory reviews go well. Aegerion shares closed at $14.22 on June 28, down 3.5% from the sale price. – A.L.

Photo of lovably mischievous microbes courtesy of Googlisti under a Creative Commons license.

Financings of the Fortnight Ponders Neurodegenerative Death And Taxes

The big funding news this fortnight doesn’t come from public or private investors, it comes from taxpayers. As "The Pink Sheet" DAILY reported May 15, the Obama administration formally rolled out its national Alzheimer’s plan, which has been in the works for more than a year.

Alzheimer’s and other dementia-related diseases were already slated to get $450 million in National Institutes of Health funding in 2012, with the same amount proposed by the White House for 2013, but the new plan adds extra money: $50 million right away this year and $80 million proposed for next year, with another $20 million for caregiver support, education, data collection and other services.

Intriguing, then, that in a field where clinical trial costs are often cited as a major barrier to an already-skittish industry getting more deeply involved, nearly half of the extra $50 million for 2012 is earmarked for clinical trials. It won't help struggling biotechs push promising treatments, mind you; $16 million is going toward a prevention trial using the Roche/Genentech-sponsored antibody crenezumab to test still-healthy members of extended families in and around Medellin, Colombia, who share a rare genetic mutation that almost assures them of early-onset Alzheimer’s. The study, which the sponsors consider to be a Phase II adaptive trial, will cost an estimated $100 million. A private research group, the Banner Alzheimer’s Institute of Phoenix, is in charge, and chose crenezumab as the agent last December because it has demonstrated a better safety profile so far in early Alzheimer’s trials conducted by Genentech.

In addition to the NIH’s $16 million, Banner is putting up $15 million. Genentech will pay the remaining costs, but it’s unclear who will pay if the cost runs beyond $100 million. (Genentech spokeswoman Robin Snyder declined to speculate on additional costs but said the company doesn’t expect funding to be an issue.)

However it plays out, the fact of mighty Roche getting subsidies for as much as one-third of a major trial is, at the least, a sign of the importance of making progress – any progress at all – in Alzheimer’s R&D. We’re not complaining; if $16 million of our national treasure brings about an Alzheimer’s breakthrough, or simply speeds the progress toward one, it’s money well spent and a pittance compared to the costly burden of the disease now and a generation from now.

But to be clear: Neither Banner nor NIH accrue any rights to crenezumab, which Genentech licensed from Swiss biotech AC Immune in 2006, so if the trial points toward crenezumab as a viable treatment, Genentech/Roche could be sitting on a gold mine. The trial is expected to run five years, with an interim analysis after two. At that point the investigators would evaluate continuation of the trial to support an application for approval, said Snyder. “We are hopeful that the trial will support an indication, the specifics of which are yet to be discussed with regulatory authorities,” she wrote in an email. “If it works we would like crenezumab to be as broadly available to patients who may be eligible.”

The Banner Institute plans at some point to test the same antibody in people at higher risk for the more common form of Alzheimer’s.

A side note: Steering millions of federal dollars toward potentially groundbreaking Alzheimer’s trials hasn’t yet provoked the same skepticism as the millions being steered toward other drug discovery and development efforts under the new translational center known as NCATS.

Funding crucial Alzheimer’s trials is of course a different proposition than, say, repurposing drugs that have sat on industry shelves or fallen out of use, one of the mandates of NCATS, which had a $575 million budget this year. But both efforts are dollars spent that, in a parallel universe, perhaps, might have gone toward basic biomedical research, a common refrain from critics. (Our START-UP colleagues, who profile a different source of funding for biotech innovation every month in the “Capital Matters” column, wrote about one of the NCATS programs, the Therapeutics for Rare and Neglected Diseases, or TRND, a few months ago. You can read it here.)

Our friends at Pink Sheet are all over the NCATS story, and we suggest you follow along. It will require a subscription, but to paraphrase the late Donna Summer, they work hard for the money. So hard for it, honey. Rest in peace, disco queen, and same to you, go-go king. No one loves to love you, baby, more than…

Arena Pharmaceuticals: Wasting little time, Arena announced May 16 it priced a secondary stock offering and grossed $60.5 million just six days after an FDA advisory committee voted 18-4 in favor of Arena’s weight-loss drug lorcaserin. Arena sold 11 million shares at $5.50 per share, although shares reached as high as $7.02 on May 11, the day of the committee vote. Shares closed May 16 at $5.67. The vote doesn’t guarantee approval of lorcaserin, but it’s a notable reversal. The panel voted down the drug in September 2010, largely due to data that showed an increase in tumors in rat studies. A reassessment of that data, plus new information on the tumors’ causes, reassured the panel this time around that the cancer risk is negligible. Obesity drugs need to meet only one of two criteria set out in FDA’s draft guidance on weight management products: they either must provide a 5% weight loss in 35% of patients on-treatment and twice as many patients on-treatment as on-placebo; or there must be at least a 5% difference between weight loss in the active-product and placebo groups. Lorcaserin met the former standard, but not the latter. (More details about the panel’s decision is here, courtesy of our Pink Sheet colleagues.) Lorcaserin’s PDUFA date is June 27, so Arena’s new cash reserves give it a boost for commercialization, although in a deal expanded just before the committee vote, Eisai owns commercial rights to the drug in the US, Mexico, Canada and Brazil. Underwriters Jeffries & Co. and Piper Jaffray & Co., with help from BMO Capital Markets, have the option to sell up to 1.65 million additional shares. Two other sponsors of obesity are vying for FDA approval. Qnexa from Vivus has a PDUFA date of July 17, and Orexigen Therapeutics, which agreed to conduct a cardiovascular outcomes trial, hopes to re-file Contrave for approval in 2014. -- Cathy Dombrowski and Alex Lash

OncoMed Pharmceuticals: One of the first cancer stem cell companies, OncoMed is now hoping to cash in on the cancer stem cell hype (which just happens to be the subject of a forthcoming feature in Start-Up magazine). After all, OncoMed, founded in 2004, is a relative graybeard of the field, with a couple of alliances under its belt and three programs in the clinic. Tiny Verastem notched a $63 million IPO in late January without anything yet in the clinic, and another company, Stemline Therapeutics, filed its IPO papers in April. OncoMed hasn’t set terms yet, but it won’t be a surprise if it aims sky-high. Venture backers have put at least $170 million into the company since its founding, most of it coming in a massive Series B in 2008. There are seven venture funds and one strategic investor with stakes of 5% or more in OncoMed, led by U.S. Venture Partners (17%), Latterell Venture Partners (12%), and GlaxoSmithKline (12%), which also owns options for worldwide rights to two OncoMed antibodies. GSK can exercise the options at either the end of Phase I or Phase II proof of concept trials. OncoMed owns exclusive rights to its lead compound, the antibody demcizumab, and is currently testing it in two Phase Ib trials, both in combination with chemotherapy agents.  -- A.L.

Egalet: In its second incarnation, Danish pain management firm Egalet Ltd. has raised $14.3 million in Series B financing. The firm restructured and recapitalized in 2010, shedding its cardiovascular program to focus on its abuse-resistant Egalet technology for the development of opioid and non-opioid pain medications.  The company is preparing to advance lead candidate EGP066, an extended-release form of morphine, into Phase III studies. The Egalet platform creates tablets that erode at a controlled rate to produce prolonged- or delayed-release delivery. It also prevents the drug ingredient from being easily extracted, which deters drug abusers from chewing, snorting, or injecting it. First-time investor CLS Capital joined returning shareholders Atlas Venture, Omega Funds, Sunstone Capital, and Index Ventures, which committed to a two-tranched €2 million ($2.6 million) Series A round in August 2010.  Prior to the recap, Egalet A/S had raised at least $60mm in venture financing. In December 2009, it out-licensed its CV compound, the beta blocker EGP042, to RedHill Biopharma. The firm has a second formulation technology, Parvulet, that creates a soft pudding-like substance that can be eaten with a spoon. Farther down its pipeline are extended-release versions of oxycodone, hydrocodone, and hydromorphone. -- Amanda Micklus

Dynavax Technologies: Like Arena, Dynavax is a veteran biotech hoping to soon celebrate its first product launch, with the hepatitis B vaccine Heplisav now before the FDA for review. Dynavax tapped the public markets, raising $74.4 million on May 9 before deductions and expenses. It sold 17.5 million shares at $4.25 apiece, adding more than 10% of its share count to the outstanding base. If that’s not enough dilution, underwriters have the option to sell another 2.6 million shares. What’s more, Dynavax also announced just before the share sale that longtime CEO Dino Dina will step aside for a more commercially experienced successor. He’ll remain CEO until the search is complete, and he’ll also keep his board seat, Dynavax said. Investors didn’t take kindly to the CEO news or the offering, which was priced 17% below the previous day’s close of $5.09. Shares have continued to decline, closing May 17 at $3.76. But Dynavax needs the cash, as it owns full rights to Heplisav, for now at least, and says it intends to launch it independently in the US. Historically, biotechs that keep worldwide or at least US rights to their first commercial products fare better in the long term, but a successful launch is no guarantee. Dendreon’s prostate cancer treatment Provenge (sipuleucel-T) and Human Genome Sciences’ breakthrough lupus drug Benlysta (belimumab), both hailed as welcome additions in under-served indications, have faltered badly out of the gate. That's led to new management for Dendreon and, for HGS, a hostile takeover bid from marketing partner GSK. -- A.L.

Image courtesy of flickr user brain_blogger. How appropriate.

Financings of the Fortnight Puts On The Weight

Was FOTF the only one to notice that anti-obesity drug maker Vivus aced its FDA advisory committee review on Feb. 22, one day after Mardi Gras?

It didn't take long for the company to digest the impact: one week later, it went to the public markets for a stock sale, which we describe below. And Vivus' two main competitors, both of whom have had the FDA send their dishes back to the kitchen at one time or another, saw action as well. Arena Therapeutics spiked briefly to $2.11 a share on Feb. 23 with about 8 times its typical trading volume, only to drop back down under $2. The firm also triggered a sale of 14.4 million shares to Azimuth Opportunity that netted nearly $25 million; not exactly selling high. It's part of a $50 million line of credit opened last November that lets Arena put a sale of stock to Azimuth at a pre-arranged discount.

Arena is next up at FDA, with an advisory committee hearing scheduled in the second quarter, but by then Vivus could know its fate, with a PDUFA date of April 17. Orexigen Therapeutics' shares have traded as high as $4.37 a piece since the good Vivus news, their highest in about a year. So far Orexigen hasn't made any related financing moves, but it did announce Thursday that it would slim down at its San Diego-area headquarters.

Meanwhile, the prospect of a new fat-fighting drug finally reaching the market has generated takeover talk as breathless as Dom DeLuise trying to run up a flight of stairs. Potential buyers might want to wait to see if FDA requires a pre-marketing cardiovascular outcome study. Our Pink Sheet colleagues noted recently that the advisory committee seemed satisfied with the prospect of a post-marketing study, but as we all know, it's not unusual to see a gap between the ad-com opinions and final FDA rulings. An overview of cardiovascular assessments by the Endocrinologic and Metabolics Drugs Advisory Committee in late March could shine more light on what extra clinical hoops the three drugs -- Vivus' Qnexa, Arena's Lorquess and Orexigen's Contrave -- will have to pass through.

If any of those drugs actually work, perhaps we'll pay more attention to what Shakespeare called the food of love than the love of food. Which brings us to our off-topic financing of the fortnight: our favorite pending IPO is Fender Musical Instruments Corp., which wants to go public after 65 years of shredding, twanging, picking and reverberating. We wouldn't care if those shares were a good investment as long as owning them made us sound, at least in our mind, just a little bit like this guy. Or perhaps more appropriately, The Ventures. This is, after all...

Vivus: Following the old adage to strike while the FDA is hot, Vivus parlayed the green light an FDA advisory committee gave its Qnexa (topiramate/phentermine) weight-loss drug into a $202 million public offering on Feb. 29. The San Francisco Bay Area company sold 9 million shares at $22.50 a piece, and underwriters led by J.P. Morgan could sell up to 1.35 million more. The funds will go in part to build a sales force for Qnexa, which has navigated a tortured path to date. It received strong backing last month from the FDA's Endocrinologic and Metabolic Drugs Advisory Committee, a 20-2 vote, in part because panelists were assured that Vivus would be held accountable if it didn't conduct a post-marketing cardiovascular outcomes study. The near-unanimous vote more than doubled the price of Vivus shares, from $10.55 on Feb. 22 to a high of $25.14 on Feb. 27. It closed March 6 at $21.52. Rejected by the FDA in 2010, Vivus resubmitted its marketing application last October with a curtailed patient population, excluding women under 55 to eliminate the chance of the topiramate component of the drug causing birth defects. If approved, Qnexa  initially will be indicated for obese patients with a body mass index (BMI) over 30 or overweight patients with a BMI over 27 who do not have child-bearing potential, and who have at least one comorbidity such as high blood pressure, type 2 diabetes, or abdominal obesity. Qnexa's PDUFA date is April 17. -- Staff reports

Aragon Pharmaceuticals: After mulling an IPO and a partnership, cancer drug maker Aragon Pharmaceuticals opted for door number three: a $42 million Series C round that CEO Richard Heyman said strengthens the company if it eventually chooses to pursue either of the first two. The Topspin Fund, the personal investment vehicle of a small group of high-net-worth individuals including billionaire hedge fund manager Jim Simons, led the round, investing alongside existing backers Aisling Capital, OrbiMed Advisors and The Column Group. Along with former Honeywell executives Leo Guthart and Steve Winick, Simons also manages $213 million fund Topspin Partners, but the three chose to invest in their sidecar fund instead; Guthart said the primary fund is “fully invested.” There are personal connections behind the scenes: Simons also is an investor in OrbiMed's funds and Guthart is treasurer of Cold Spring Harbor Laboratory, where Aragon co-founder Charles Sawyers is on the board of trustees. Aragon intends to complete Phase II work on ARN-509, a candidate for castration-resistant prostate cancer that eventually could compete with Johnson & Johnson’s Zytiga (abiraterone) for the sub-market of men in whom prior treatments have failed. It also intends to bring a selective estrogen receptor degrader into Phase I for breast cancer. If Aragon aims for an IPO, it hopes Topspin's experience investing in public companies could lead the firm to cross over and take a piece. Having insiders take part in an IPO has practically become a prerequisite for going public these days. -- Paul Bonanos

4s3 Bioscience: An investment firm connected to one of the world’s wealthiest families has supplied a $20 million Series A round to 4s3 Bioscience, a start-up investigating new treatments for rare muscular disorders. KLP Enterprises, a trust managed by the family office of Karen Pritzker and Michael Vlock, made the investment. The Pritzker family’s legacy includes ownership of the Hyatt hotel chain, electric and industrial equipment holding company Marmon Group, and credit bureau TransUnion. KLP’s investment builds on a seed round from Genzyme Ventures in 2008, as well as grant funding from Massachusetts Life Science Center, the Muscular Dystrophy Association, National Institute of Health and the HHS Therapeutic Discovery Project. 4s3 is developing drugs that use an antibody technology to deliver muscle-building proteins and enzymes into cells, which could yield treatments for muscular dystrophy and other disorders affecting skeletal muscle. The start-up is housed at the University of Massachusetts-Boston’s Venture Development Center, and its founders are working closely with KLP drug development subsidiary Alopexx Enterprises as they build the company. -- P.B.

Amicus Therapeutics: The developer of treatments for lysosomal storage disorders and other rare diseases topped off its public stock offering March 7 with underwriters taking their full over-allotment, making a total of 11.5 million shares sold at $5.70 a share for net proceeds of $62 million. The firm, whose tale was told in the film Extraordinary Measures (with Brendan Fraser playing CEO John Crowley), last raised cash when it sold worldwide rights to its lead drug Amigal (migalastat HCI), for Fabry disease, to GlaxoSmithKline for $60 million upfront in October 2010. Part of that payment bought GSK a 19.9% equity stake in Amicus at $4.56 a share, at the time a 15% premium. Announcing the GSK deal, Crowley said it would sustain Amicus at least until U.S. approval of Amigal, which has not proved out. The drug is currently in Phase III in a monotherapy trial co-sponsored by Amicus and GSK and in a separate combination therapy trial that is still recruiting patients. -- A.L.

This fortnight's column powered by Mavis Staples.