Financings of the Fortnight And the Neverending Venture Round

Somewhere out there, perhaps, is the end of NovImmune's Series B round.

More than a year ago, our friends at START-UP examined the fates of biotechs that had reeled in huge private financing rounds. Giant biotech venture rounds are back with a buzz in 2014 thanks to Juno Therapeutics, which launched in December with a $120 million Series A commitment. Last month it added on with cash from Venrock and Bezos Expeditions, aka Amazon.com chief Jeff Bezos' private money stash.

But in raw coinage, Juno's A round doesn't hold a candle to what NovImmune has raised in its Series B. Novi-who? It's a Swiss antibody developer founded 16 years ago that in 2006 first notched CHF 58 million ($46 million at the time) for its Series B. Eight years and three extensions later, the Series B now stands at CHF 200.5 million, most recently boosted by a CHF 60 million ($67 million) tranche announced February 18 and led by London life science specialists Rosetta Capital, whose partner Jonathan Hepple is joining the NovImmune board.

That makes NovImmune's Series B the largest biopharma venture round with at least one extension raised in the past decade, according to our Strategic Transactions database. FOTF reached CEO Jack Barbut via email, and he said NovImmune has kept the round open this long to create fairness for all shareholders. "This makes the share structure very easy," Barbut wrote. "For employees, common stock options (sweat equity), and for investors, preferred shares, all [have] the same liquidation rights and thus comply with Swiss statutes, which are very stringent on equal treatment for ALL shareholders." 

CEO since 2000, Barbut said when the Series B started, he didn't expect it to carry on this long. He doesn't know if this recent tranche will be the last.

We went back a decade into our Strategic Transactions database to see what kind of precedent there might be for NovImmune. We found 59 private companies whose extended rounds reached at least $50 million. Here are the handful, other than NovImmune, that topped $100 million:

Four of those companies have since gone public and one (Sangart) has gone under, shut down by its main investor, as first reported by Fierce Biotech. Meanwhile, Symphogen is in no hurry to go public, as its CEO told Start-Up in this feature last year.

NovImmune is not only top of the charts for money raised, but it also has no peer in the length of time of the round. None of the companies with blockbuster rounds took more than two years to secure their extensions. A few smaller rounds took longer. For example, Theraclone Sciences began raising its Series B in 2007 as Spaltudaq (we applaud the name change) and brought the total to $50 million about a year ago. Endocyte took five years to raise a nearly $80 million Series C before going public in 2011. And Alvine Pharmaceuticals spent more than four years building its Series A and is now waiting to find out if AbbVie will exercise an option to buy its lead Phase II program in celiac disease or the entire company outright. (If AbbVie does, it would be one of the very few corporate investors to buy out one of its portfolio companies.)

NovImmune's Barbut said his investors expect "some sort of liquidity event" too, of course, but in the nearer term he said the company is focused on finding a partner for NI-0101, its anti-TLR4 monoclonal antibody that has entered Phase I. It would also like to advance its NI-0501 program, an anti-interferon gamma antibody, and commercialize it solo. NI-0501 has orphan status in the US and EU in hemophagocytic lymphohistiocytosis, a deadly pediatric autoimmune disease, and has completed a Phase I study.

NovImmune doesn't seem to have cushioned its cash with a lot of non-dilutive funding. Its biggest deal to date is the outlicensing of an anti-IL17 antibody to Genentech in 2010, no financials disclosed. The candidate completed Phase I in 2013.

So we've got an orphan disease-focused biologics company with multiple, wholly owned clinical assets, a partnership with one top-tier biopharma, and the kind of cash runway that seems to attract more investment these days from the public markets. The IPO market has welcomed every stripe of biotech, from still-preclinical platforms to heavily capitalized specialty plays, in the past year, so NovImmune seems like an inevitable "ask." If its cards are well played -- keep in mind several banks are in NovImmune's investor pool -- an IPO could provide a nice bump for those who didn't have to ride the traditional valuation escalator (or be forced off of it) through later rounds.

We offer a bump, too -- a fist bump to Maureen Riordan, who did much of the work behind the scenes for this column. Without her this week, there would be no...

Melinta Therapeutics: Known as Rib-X Pharmaceuticals until last fall, antibiotic developer Melinta hasraised a $70 million Series 3 round led by existing investor Vatera Healthcare Partners. New investors included Falcon Flight, an affiliate of the Santo Domingo Group, and undisclosed backers. As Rib-X, the firm raised more traditionally named A, B and C rounds last decade. But a failed IPO try in 2011, and a set of new investors led by Vatera, have led to a housecleaning. In November 2012, the company disclosed a $67.5 million "Series 2" funding led by Vatera. Last fall, it unveiled its new name and new executive team, led by CEO Mary Szela. The Series 3 cash will help fund its Phase III study of antibiotic delafloxacin, a differentiated flouroquinolone in testing as an oral, single-dose therapy for uncomplicated gonorrhea. Melinta is aiming for an NDA filing in late 2014. In addition, the money will finance a two-trial Phase III program of delafloxacin in acute bacterial skin and skin structure infections, as well as lead-candidate selection from the firm’s RX-04 discovery program seeking to address serious and life-threatening Gram-negative infections via targeting of novel binding site on the bacterial ribosome. – Joseph Haas

Argos Therapeutics: Immunotherapy is hot, right? Well, yes and no. While the likes of Juno can command above and beyond $100 million in a single financing, cancer and infectious disease immunotherapy play Argos raised a mere $45 million in its February 7 IPO, its second try at launching onto the public markets. And that’s only after it had to dramatically cut the price to $8 a share from a $14 mid-point of its proposed range. It also had to increase the dilution, selling 5.6 million shares rather than the 4.3 million it had proposed. Existing investors bought 1.4 million shares of the IPO, or roughly a fourth of the deal. No word yet if the underwriters will exercise the overallotment, but the share price has largely treaded water since the offering. Argos investors can take some solace knowing the bargain-priced IPOs of 2013 ended up as top performers of the year. What's discounted now might have legs later, as Argos is one of many biotechs with notable clinical milestones in reach this year, as START-UP explored in January. Argos might see a boost later this year when it reports Phase IIb data for AGS-004 for treatment interruption in HIV/AIDS patients, although data due in 2016 -- Phase III survival data in renal cell carcinoma -- is more likely to be game-changing for Argos. The firm also expects this year to start two Phase II HIV eradication studies, one in adults and another in pediatric patients. Argos aims in these trials are ambitious – to eliminate the HIV virus or to reduce it to negligible levels. – Stacy Lawrence

Arrowhead Research: RNAi therapeutic developer Arrowhead said February 19 it grossed $104 million in a follow-on offering, selling 5.5 million shares at $18.95 a piece. Of the several public biotechs that sold $100 million-plus in stock this fortnight -- Ironwood Pharmaceuticals, Macrogenics, PTC Therapeutics and Puma Biotechnology were the others -- Arrowhead's inclusion would have been unthinkable this time last year, when it was bumping along in microcap land and had just a few million dollars in cash remaining. Arrowhead isn't strictly an RNAi developer; it has a peptide-drug conjugate in the clinic, too. But there's no doubt RNA interference, riding a revival of sorts highlighted by Alnylam Pharmaceuticals' giant deal last monthwith Sanofi/Genzyme, is driving the Arrowhead agenda. It's also worth noting that RA Capital, the hedge fund that helped propel the big Dicerna IPO, is also a key investor at Arrowhead as of last spring, having led a $35 million offering at $1.83 a share that recapped the company. With its stock now worth more than 10 times as much (it closed February 20 at $21.90) Arrowhead is pushing hard to get its lead RNAi compound, against Hepatitis B, into Phase II.  While RA, now a 9.9% owner, led a turnover in the company's cap table, it wasn't a bloodbath. Arrowhead's longtime CEO Chris Anzalone is still at the helm, and the board remains the same. – Alex Lash

Pronutria: Pronutria revealed February 13 a $12.5 million Series B round, with unnamed private investors participating alongside Flagship Ventures. CEO Robert Connelly told our colleagues at "The Pink Sheet" that Flagship provided less than half of the new round, while “business entities, individuals and family offices” supplied the remainder. Flagship created Pronutria within its VentureLabs program in 2011, quietly funding it with a $10.8 million Series A round over a two-year period before lifting the lid last October. Much of the Series B, which Connelly said is probably Pronutria's final venture round, will be used for clinical trials on two muscle-protecting candidates that preserve strength in frail, elderly people with sarcopenia, the loss of muscle mass that can occur during periods of hospitalization. The candidates, PN-107 and PN-365, are formulations of the amino acid leucine delivered as small “shot”-sized beverages similar to bottled energy products found on supermarket shelves. The specific pharmacokinetics and efficacy of each candidate, and the effects of their specific balances of amino acids, will be compared with each other in the trials. The company is still deciding on a regulatory pathway for each one, including possibly developing them as nutritional supplements, medical foods or pharmaceutical products, each of which has its own requirements. Initial clinical trials, now underway, are scheduled for completion by mid-year; Connelly said the company also is mulling parallel development of drug and non-drug formulations of similar product candidates. Further down the line, Pronutria is aiming for products addressing the metabolic, gastrointestinal, immune and renal disease areas, as well as beneficial products for patients with rare diseases and those going through chemotherapy. Whatever drug products Pronutria develops will reside in a separate business unit, which will help ease eventual sales or spin-outs. – Paul Bonanos

Best of the Rest (Highlights of Other Activity This Fortnight): Endocrine disease-focused Versartis raised $55M in Series E financing, and concurrently filed for an IPO…to support the launch of opioid dependence drug Bunavail in the second half of this year, BioDelivery Sciences grossed $60M in a registered direct offering…PTC Therapeutics publicly sold $126M in a FOPO to complete Phase III development and gain regulatory approval of ataluren in Duchenne muscular dystrophy and cystic fibrosis caused by nonsense mutations, in the wake of last month’s EMA/CHMP negative opinion on that candidate’s MAA…Concert Pharma priced its IPO at $14, the top end of its range, to net $78 million...three Israeli biotechs – Galmed, Bio Blast, and MediWound – are all hedging their bets and trying to float on Nasdaq…and PDL BioPharma, which manages patents and royalty assets, completed a $261M convertible notes offering. – Amanda Micklus

Photo courtesy of Mike Mantin  on flickr, via a Creative Commons license. 

2013 Alliance of the Year Nominee: Roche/Polyphor

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

If catching an early big wave together justifies an alliance nomination then Roche and Polyphor look like contenders. They’re hoping to get a long, lucrative ride using novel science and new US and European regulations aimed at speeding up antibiotic development and approval.

And by choosing Switzerland-based Polyphor’s investigational macrocycle antibiotic POL7080 for development and commercialization, Roche has given notice that it’s back in the antimicrobials space again. For the first time in 30 years. In other words Roche hasn't been interested in developing antibiotics since most of you were old enough to vote -- a development worth honoring with a DOTY nod.

last time Roche developed an antibiotic,
BTTF was in theatres

The pact gives micro-sized Polyphor a big pharma partner to help it punch above its weight. Its three drug candidates, developed using its protein epitope mimetics (PEM) drug discovery technology, are POL7080; POL6326, a CXCR4 antagonist currently in Phase II and ear-marked for several indications; and POL6014, an elastase inhibitor that’s in pre-clinical studies.

Are antibiotic development incentives working? The FDA Safety and Innovation Act aims to prod companies along through the Generating Antibiotic Incentives Now (GAIN) provisions that are intended to spur development of treatments for resistant pathogens. Products receiving the qualified infectious disease product (QIDP) designations are eligible for fast track and priority review, as well as an additional five years of marketing exclusivity upon approval. And new antibacterial drugs could be eligible for a streamlined development program even if they would not be the first approved in a particular disease, according to FDA draft guidance.

Meanwhile, new guidance from the European Medicines Agency means marketing approvals for antibacterials against multi-drug-resistant bugs could be granted in Europe on expanded Phase II clinical trial data.

It’s a regulatory path that multinational Roche and privately-held Polyphor will explore together as Roche, the world’s largest maker of cancer drugs, tries to diversify into other areas.

Under terms of their alliance, announced in November, Roche will pay Polyphor up to CHF 500 million ($548 million) for the experimental antibiotic, which has only just entered Phase II testing. Roche will make an upfront payment of CHF 35 million and milestone payments of up to CHF 465 million to the Swiss biotech.

Roche’s previous legacy in the field of antibacterials involved development of Bactrim (trimethoprim/sulfamethoxazole) in 1969, in collaboration with Wellcome PLC, and Rocephin (ceftriaxone sodium) in 1982.The success of Polyphor's drug would be the first new drug against gram-negative bacteria since the '60s, Polyphor CEO Jean-Pierre Obrecht says.

The two Swiss firms will be targeting the Gram-negative strain Pseudomonas aeruginosa, a bacterium found in hospitals and resistant to many antibiotic treatments, by a novel mode of action. It’s the first of a number of novel antibiotic candidate drugs being assembled by Roche’s pharmaceutical research and early development group pRED, which is now under the new leadership of John Reed.

“We’ve been rebuilding the infectious diseases area in pRED following the restructuring last year and we are now focusing on three areas of unmet medical need. These are hepatitis B, influenza and antibiotics – and this is our first demonstration that we’re back in antibiotics,” Janet Hammond, head of infectious diseases discovery & translational area in Roche pRED, told us when the alliance with Polyphor was announced.

Roche and Polyphor believe the timing of their alliance is good. Other big pharma companies have cut back in the antimicrobial space, including onetime leader Pfizer, which closed its antibiotic R&D center in Connecticut in 2011, as well as Bristol-Myers Squibb Co. and Eli Lilly & Co., leaving only a few players, such as AstraZeneca, GlaxoSmithKline and Merck & Co.

Meanwhile there is rising alarm globally over the lack of new antimicrobials. Roche says P. aeruginosa accounts for one in every 10 hospital-acquired infections in the U.S. and is listed as one of the six most dangerous drug-resistant microbes.

Financings of the Fortnight Explores the Alternatives

With all the noise this year about IPOs in our little corner of the world, it’s been easy to forget that most biotechs out there are scrambling for any source of cash they can lay hands on. Assurances aside that traditional biotech VC is making relative bank, the overall pool of traditional venture capital available to invest will continue to dwindle, as respondents in START-UP’s 3rd annual life science VC survey were quite adamant about.

(The survey is now available, by the way.)

This week we got a taste of the post-VC world; or at least, a reminder of the various types of alternative funding out there for health care and biotech that, in a few years, could replace a significant chunk of traditional venture and interrupt for good the boom-and-bust cycle.

First, the elephant in the room: Google announced it would fund a new health care company, Calico, dedicated to anti-aging. The search-and-so-much-more giant is clearly obsessed with health, and doing something about the drastic – dare we say “tragic” – flaws in the care system. Our correspondent Paul Bonanos did a great job delving into Google Ventures’ health care investment strategy in this feature earlier this year, and we recommend reading it (non-subscribers can sign up for a free trial) as background to what might be going on with Calico.

Fly-on-wall fantasy: Page: How do we increase Google searches over a person's lifetime? Brin: What if we just increased the lifetime?
— Josh Berlin (@BioPharmaJosh) September 18, 2013

Paul also reminds us that the Googlers aren’t the only tech-heads with health-care ambitions: Peter Thiel, Yuri Milner and others are shifting their fortunes in small measures. And bully for them; we could certainly use fresh minds and tech-savvy strategies (Tech Tonics?), what with the data-intensive nature of health care these days.

But Silicon Valley’s libertarian streak is often at odds philosophically with another important source of biotech funding that we were reminded of this week. The National Institutes of Health announced the recipients of $45 million from the funds dedicated in 2012 to Alzheimer’s research. Those funds aren’t going directly to biotech companies, but the trials and other efforts they’re backing are much needed in an area that seems practically abandoned by industry – at least in proportion to the level of the dire medical need Alzheimer’s represents. So, indirectly, one can only hope the NIH funding can move the needle enough for biopharma, big and small, to see clearer pathways that deserve cash outlays from the private sector, as well.

Finally, we’re about to see a small but significant step toward equity crowdfunding. Title II of the JOBS Act, which loosens the rules for general solicitation of accredited investors, takes effect next week. It’s not quite crowdfunding nirvana – or the apocalypse, depending on your viewpoint – because we’re still a ways away from Mom and Pop, Joe Sixpack, and the Joneses being able to participate.  (That’s Title III.) But all manner of folks are lined up, ready to provide investment platforms for those with an eye on biotech, as our colleagues have written about here.

If you happen to be at PSA: The Pharmaceutical Strategy Conference in New York next week, you can ask Greg Simon, who’s running the equity crowdfunding site Polliwogg, all about the latest developments. (Or you can catch him on the panel “Funding Biotech: New Ways To Create Value.”)

Or, if you hate going anywhere near New York because you’re convinced it’s about to be overrun by giant drooling sea-dragon spiders, well, the people we write about have products that can help you. Until then, relax in the safety of your home or office, avoid the crowds (and their funds), and enjoy the latest edition of….



Civitas Therapeutics: From the ashes of the inhaled insulin efforts of the previous decade comes Civitas, which said September 11 it has raised a $38 million Series B financing to fund late-stage development of the company’s lead program, CVT-301, an inhaled formulation of levodopa (L-dopa) to treat debilitating motor fluctuations – known as “off episodes” -- associated with Parkinson’s disease. Civitas spun out of Alkermes' pulmonary business in 2010, then the latest casualty in Big Pharma’s complete retreat from several efforts to create inhaled insulin products. But Longitude Capital and Canaan Partners raised $20 million for a Series A, and in early 2011 new CEO Glenn Batchelder told FOTF he hoped to bring a Parkinson’s-related treatment to clinical proof of concept by the end of 2012. (Why an inhaled L-dopa for Parkinson’s? During acute “off periods,” characterized by halting or frozen movement, the Civitas technology aims to deliver drug even when it might be difficult for patients to draw a sustained breath.) CVT-301 is being positioned as an adjunct therapy to oral L-dopa. Bay City Capital led the round and was joined by crossover hedge fund RA Capital, an undisclosed blue chip public investment firm, and all returning shareholders including Alkermes, Canaan Partners, Fountain Healthcare Partners, and Longitude Capital. Partners from Bay City and RA Capital joined the company’s board. Civitas will also explore pipeline expansion with its ARCUS delivery platform for other diseases where what the company defines as a “large, precise” dose delivered from an inhalation device “would provide a significant clinical advantage.” – A.L.

DRI Capital: The Toronto health care royalty investor said September 9 it has raised a new $1.45 billion fund, its third following $240 million and $926 million vehicles, raised in 2006 and 2010 respectively. Investments under the first two funds followed a fairly straightforward set of criteria: drugs with FDA or EMA approval that offer strong efficacy and an attractive pharmacoeconomic profile and that are used to treat very serious, chronic conditions, DRI President and CEO Behzad Khosrowshahi told our “Pink Sheet” colleagues. For the third fund, however, DRI also plans to consider investments in Phase III assets and the higher returns that might come from higher-risk investments. It’s part of a larger but still subtle trend of royalty firms dipping toes into pre-commercial assets, even as traditional venture firms cross the other way and dabble in royalty investments. Khosrowshahi said that DRI has “a decent level of internal expertise” to evaluate pre-commercial risks. The drug royalty business has certainly attracted the capital to lure health care specialists, with DRI joined by competitors such as Capital Royalty L.P., Orbimed Advisors LLC and Healthcare Royalty Partners. Earlier this year, Capital Royalty raised more than $1 billion for its second fund, announcing a revised strategy under which it would emphasize debt instrument financing that would offer its deal partners a more concrete sense of the cost of capital. -- Joseph Haas

Five Prime Therapeutics: The protein therapeutic company notched on September 18 the first biotech IPO of the fall season. More than a dozen are waiting in registration, and an unknown number are also still under wraps with confidential filings. Five Prime raised $62 million by selling 4.8 million shares at $13 each, right within its projected range of $12 to $14 a share. Insiders bought about 408,000 shares. Five Prime was founded in 2001 and built at a time when VCs were more willing to wait for long-term payoffs for platforms. Five Prime’s platform consists in part of a library of 5,600 extracellular proteins to yield novel targets, and biotech or pharma partners have signed on with more than $220 million in partnership or licensing money. Its most advanced candidate FP-1039 is a selective FGF inhibitor that Five Prime and its partner GlaxoSmithKline put into a Phase Ib trial in July.  “If you were to tell a VC, ‘Give me four or five years and a chunk of money to develop this kind of platform,’ it might be a tough sell these days,” Five Prime VP of Biology Brian Wong told our sister publication START-UP earlier this year. Befitting a company that’s taken 12 years to reach the public markets, the pre-IPO ownership was spread rather widely. Only Pfizer had more than a 10% stake, with 13.7%. Venture or priate equity groups Advanced Technology Ventures, Domain Associates, Kleiner Perkins Caufield & Byers, HealthCap, Versant Ventures – from the firm’s very first fund -- and Texas Pacific Group all owned 9%. Founder and CEO Rusty Williams owned 6.8%. Jefferies led the underwriting team, which has the option to sell an additional 720,000 shares. – Alex Lash

Cubist Pharmaceuticals: The antibiotic maker said September 16 it bought $25 million in Series A preferred stock from Optimer Pharmaceuticals, a sale that was negotiated this summer as part of Cubist’s agreement to buy Optimer. That acquisition, not yet consummated, hasn’t gone over well with Optimer shareholders, who have filed suit to stop it because Optimer shares have actually been climbing since the company dumped its CEO and put itself up for sale in February. The $10.75-per-share offer, or $535 million, was at a 19% discount to Optimer’s July 30 closing price. Shareholders could earn more post-acquisition if Cubist hits sales milestones with Optimer’s Clostridium difficile treatment Dificid (fidaxomicin), a product it has been selling in the U.S. since 2011, when it signed an exclusive co-promotion deal with Optimer. The $25 million stock sale is essentially a bridge to help Optimer pay the bills – or as a Cubist spokeswoman told FOTF, “to address Optimer’s near-term cash needs” -- until the merger takes effect. The purchase repeats quarterly, so if the deal hasn’t closed in three months, Cubist will pay another $25 million, and another $25 million three months after that. As of June 30, Optimer had $73 million in cash on hand, down from $119 million at the end of 2012. Seeing how the deal was unusual for its discounted price, there certainly is a chance that the lawsuit will have legs and hold matters up for some time. The Cubist spokeswoman declined to comment on the suit. – A.L. and Jessica Merrill 

All The Rest: myoscience, developing Focused Cold Therapy devices for peripheral nerve conditions, closed on a $25M Series E round…Index Ventures is initially investing $10M into Egalet to support work on abuse-deterring pain meds, with the option for another $10M…Emmaus Life Sciences raised $7.5M to complete Phase III studies for its sickle cell candidate…to pay for its acquisition of CNS assets from Merck, Cerecor got $6.8M in Series A-1 financing…Taglich Brothers led a $3.2M round for screening and assay development services company Caldera Pharmaceuticals…Sanofi was an investor on Hadasit Bio-Holdings-portfolio company KAHR Medical’s $2.5M fundraise…BioMotiv and the NYU Innovation Fund launched autoimmune start-up Orca Pharmaceuticals…KV Pharmaceutical emerged from Chapter 11 bankruptcy, simultaneously closing on a $100M credit facility and $275M rights offering…Cell Therapeutics sold $15M in 15k Series 18 convertible preferred shares…Taiwanese biotech Amaran provided half of the $10M private investment in Stellar Biotechnologies…A $10M PIPE by NanoViricides gives the company a total of $22M in cash for the next two years to fund its FluCide and DengueCide candidates…A day after revealing positive outcomes in its Phase II glioblastoma multiforme vaccine study, Agenus raised $6.5M in an at-the-market registered direct offering…injectables developer Sagent Pharmaceuticals closed on a $75M FOPO…to continue work on ZFP Therapeutic candidates, Sangamo BioSciences completed a $64.5M secondary offering…Galena Biopharma’s $35M FOPO will help to commercialize its first product, Abstral…electroporation drug delivery company OncoSec publicly raised $12M…protein therapeutics company Acceleron priced its IPO at the top end of its range to gross $83.7M...glaucoma drug developer Aerie Pharmaceuticals filed for its IPO, while Bind Therapeutics, Ophthotech, and Enzymotec set terms for their offerings…Cubist offered $800M in two series of convertible senior unsecured notes…therapeutic protein maker Protalix BioTherapeutics closed on $69M in 4.5% convertible notes due in 2018…ProMetic Life Sciences’ $Cdn10M debt financing will help put its plasma purification facility into operations for manufacturing plasma-derived orphan drugs…Benu BioPharma established Benu BioVentures for investments in preclinical to proof-of-concept candidates…and Daiichi Sankyo teamed up with Mitsubishi UFJ Capital to launch a new fund for start-up creation; Daiichi gets rights to buy the companies and IP. -- Amanda Micklus 

Image courtesy of flickr use Kitschweb through a Creative Commons license. 

Uneasy Lies The Head That Wears a Financings of the Fortnight Crown

Compared to other types of financing, royalty-based deals in the biopharma world are rare. That’s because a company needs products with future revenue to parlay into a near-term lump sum, and the relative few companies that have such products often don’t need the immediate cash or can get it other ways.

So when a royalty deal – or a debt deal using product royalties as collateral – crops up, we take notice. And they seem to be cropping up more often. Just our imaginations? Not according to Elsevier’s Strategic Transactions database, which offered up ten deals in 2012, the most in any of the past ten years. 2011 was a close second with 9 deals, and with three more this year, 22 of the 47 we found in the past ten years are of recent vintage. (These numbers reflect only the publicly disclosed deals; there are certainly more, as investors in this space often keep activities out of the spotlight.)

In dollar terms, the total since the start of 2003 is $5.7 billion. The last two years and change have seen $2.7 billion worth of deals, a proportion akin to the deal flow.

The richest deal in recent years is Royalty Pharma’s $761 million purchase of the earn-out rights from the shareholders of Fumapharm, the German firm that sold to Biogen Idec in 2006. The deal could end up extra sweet for Royalty, now that the Food and Drug Administration has approved the main product in the Fumapharm dossier, the oral multiple sclerosis treatment BG-12, renamed Tecfidera.

Another near-blockbuster was Royalty’s $609 million purchase of DPP-IV rights from Astellas Pharma’s Prosidion division. A bit farther down the pay scale, but still significant, were Dendreon’s sale of Victrelis royalties to CPPIB Credit Investments for $125 million, and Nektar Therapeutics’ $124 million deal with an offshoot of Royalty Pharma for its royalties to Mircera and Cimzia, both of which were formulated with Nektar’s pegylation technology.

Now add one more to the list. This fortnight, weight-loss drug maker Vivus used royalties of its Qsymia, weighed down so far by slow sales, as collateral to borrow up to $110 million. (We describe the deal below in our roundup.) And of course, in what could be the ne plus ultra of all royalty deals, Royalty Pharma (who else?) is dangling $6.6 billion to buy Elan, which after its major divestments is basically a holding company for royalties from multiple sclerosis treatment Tysabri. Elan has resisted so far, instead promising shareholders it will pay out a dividend based on the Tysabri stream. This week an Irish regulatory panel gave Royalty a May deadline to firm up its offer.

The dance began in late February soon after Biogen Idec bought out Elan’s share of the drug, paying Elan $3.2 billion plus the promise of tiered sales royalties. Whether Royalty Pharma succeeds in its hostile buyout is more a matter for our Deals of the Week compatriots, but it’s our duty to note that Royalty and its brethren have plenty more to spend. Royalty raised $600 million in debt in 2012 to put toward investments. Its previous debt raise included $850 million to give back to shareholders. Healthcare Royalty Partners, which dropped the "Cowen" from its name in December, raised a $1 billion fund in early 2012.

Royalty funds are to venture capital what bonds are to stocks: a lower-risk, lower-return investment, and often built with complex structures that purposely limit both parties' risk. They're certainly not going to replace a big chunk of venture capital, because they can't fund companies without current or near-future revenue streams. But as the numbers show, they're providing billions of dollars of capital to an industry that can always use a few extra pennies.

It's no jest. Whether you’re biotech royalty or an indentured serf, you’re always welcome in the biweekly court of…

Vivus: Initial sales of the Vivus weight-loss drug Qsymia (phentermine/topiramate) have been slow, so the company fortified its balance sheet with $50 million in new debt. The "synthetic capped royalty financing" from Pharmakon Advisors, announced March 26, allows Vivus to raise another $60 million in debt before the end of 2013, at a time of Vivus’ choosing. Under the terms of the arrangement, Vivus is obligated to repay the Pharmakon fund according to a schedule of pre-set payments between 2014 and 2018, or 25% of Qsymia royalties, whichever is valued lower. Analysts expect that Vivus would make quarterly payments between $7 million and $10.3 million during most of the four-year schedule, if it opts to raise the other $60 million later this year. The total repaid is likely to be about $162 million, according to analysts. Sales of Qsymia were just $2 million during the fourth quarter of 2012, its first full quarter on the market since FDA approved the drug in July 2012. Vivus had $213 million in cash and equivalents on Dec. 31, and spent $58 million on its operations during the fourth quarter. The company is seeking to modify its current Risk Evaluation & Mitigation Strategy for Qsymia, which limits sales of the drug to mail-order pharmacies; an FDA decision allowing it to sell via traditional pharmacies could come in late April or early May. – Paul Bonanos

Novira Therapeutics: The antiviral startup said March 26 it has topped off last year’s Series A with $7.5 million from Versant Ventures, matching the earlier co-lead investors and bringing the round’s total to $25 million. Novira is one of the few startups around working on treatments for Hepatitis B, its lead program, and for HIV. That, plus its pursuit of a relatively new mechanism of action – capsid assembly inhibition -- was enough to put Novira on our sister publication Start-Up’s annual A-List, which highlights the year’s most intriguing recipients of Series A money. 5am Ventures and Canaan Partners led the initial Series A investment, which came after the company spent years subsisting on angel and nonprofit funding and casting about for a way forward. The angels who nurtured the firm through its pre-Series A years also participated in the A round. Only after Lalo Flores, former head of antiviral research at Merck & Co. took over did Novira steer toward capsid assembly. It aims to file an IND for its lead HBV program by year’s end. The company's oral therapeutic candidates could potentially be used as both a monotherapy or in combination with currently used drugs. The company says the Series A money should be enough to move that initial program into Phase Ib or Phase IIa. For Versant’s contribution, the firm will place one of its new European team members, Gianni Gromo, in a board seat. Gromo is one of three Versant partners based in Basel, Switzerland and has ties to Versant’s top biopharma managing director Brad Bolzon from their days at Roche. – Alex Lash

Theraclone Sciences: Another antiviral add-on this week, with Seattle-based Theraclone bringing its Series B total to $50 million with contributions from a host of existing investors including Arch Venture Partners, Canaan Partners, MPM Capital, and Healthcare Ventures. In addition to the extra $8 million from investors, the antibody platform company also secured $6 million in debt from MidCap Financial and Silicon Valley Bank. The firm’s lead programs in the clinic are aimed at pandemic and seasonal flu, partnered with Zenyaku Kogyo, and human cytomegalovirus (HCMV). It has a discovery-phase antibody partnership with Pfizer, as well, and it has worked with Scripps scientists and the International AIDS Vaccine Institute on research to identify more than a dozen “broadly neutralizing” antibodies that might eventually lead to a vaccine for HIV. Theraclone’s platform screens for antibodies from the B cells of the lucky humans who demonstrate natural resistance to particular diseases. Once called Spaltudaq, Theraclone is one of a handful of biotechs to emerge from the Seattle incubator Accelerator and has had its share of tribulations, the worst of which was the sudden death of its CEO David Fanning in 2010. – A.L.

Receptos: The San Diego biotech filed April 4 its intent to go public, joining the growing queue of life science firms with hopes of breaking through to public markets. The firm is farther along in the IPO process than it might have been in previous times, as it actually filed its S-1 confidentially in February under new securities rules ushered in by last year's JOBS Act. Its lead compound is in Phase II testing against relapsing multiple sclerosis and inflammatory bowel disease. Its top four shareholders, each with slightly more than 15% ownership, are Flagship Ventures, Lilly Ventures, ARCH Venture Partners, and Venrock. An IPO would also benefit a much newer venture fund, Osage University Partners, which is trying to prove the worth of a new model based on schools’ participation rights that we describe in the March issue of Start-Up. Based on work that elucidates the structures of G-coupled protein receptors, Receptos spun out of the Scripps Research Institute, which has a partnership with Osage, which would send a slice of its carried interest back to Scripps if the fund succeeds. A Receptos IPO would certainly help. It has not yet set terms of the offer. Credit Suisse and Leerink Swann are leading the underwriting team. Other health care firms on file to go public include Bausch & Lomb, Chimerix, Omthera Pharmaceuticals, Harvard Apparatus Regenerative Technology, Ambit Biosciences, and Sophiris Bio. – A.L.

All The Rest: Raising $38mm from Invesco Asset Management in the biggest venture financing of the fortnight was infirst Healthcare, founded less than a year ago to launch new consumer cough and cold and pain medicines…Through a $33mm Series E financing (concurrent with the conversion of $71mm in debt into Series E preferred stock), Revance Therapeutics aims to complete Phase III trials for RT001, a topical botulinum toxin type A for crow’s feet wrinkles…Led by two China-focused venture funds, research and diagnostics MAb firm OriGene Technologies brought in $21.3mm in its Series D round…With participation from J&J Development and Pfizer Venture, Aquinox Pharma secured $18mm in Series C financing to help advance its Phase II AQX-1125 for COPD… To support development of spec pharma Taris Biomedical’s LiRIS (Lidocaine-Releasing Intravesical System) Phase II interstitial cystitis candidate, return backers added $12.5mm to the $37.3mm the company had previously raised…Schizophrenia drug firm Reviva Pharmaceuticals received $12mm in early-stage debt and equity funding from undisclosed investors… In a Series A round, Hurel Corp. (artificial tissue constructs and microfluidic cell-based assay platforms) snagged $9.2mm from Spring Mountain Capital… Genomic data analysis start-up Bina Technologies brought in $6.25mm of a planned $8mm Series B round…In the second close of initial financing secured in November 2012 when it spun-off from InDevR, rapid virus quantification firm ViroCyt has brought the total funding to $5mm…Undisclosed equity financing secured from the Innovation & Investment Fund Gelderland (managed by PPM Oost) along with several angel backers will enable InteRNA Technologies to progress its lead candidate miR-3157 for melanoma through preclinical studies…In a private placement, public Australian company Prana Biotech issued 35.9mm new fully paid ordinary shares at a price of A$0.195, for $7.3mm in proceeds to fund further development of PBT2, now in two concurrent Phase II trials in Huntington disease and Alzheimer's disease… Through a follow-on offering of up to 165.7mm new Hong Kong-listed shares at HK$24.60, Chinese CRO Sinopharm Group could reap $515.3mm in proceeds to expand its sales network and complete additional M&As… Arca Biopharma hopes to bring in $20mm in a FOPO to fund a Phase IIb trial of Gencaro (bucindolol hydrochloride) for atrial fibrillation… With proceeds from a public offering of units, public Toronto spec pharma Trimel Pharmaceuticals hopes to fund costs related to an NDA filing and further clinical trials for its CompleoTRT bioadhesive intranasal gel technology for male hypogonadism… Eye care giant Bausch & Lomb – owned by PE firm Warburg Pincus, which acquired it and took it private in a $3.67bn 2007 buy-out – filed for an initial public offering that could raise as much as $1.5bn… Two biotechs sent ranges for IPOS, but have yet to price: Chimerix (oral antivirals) plans to sell 6.1mm shares at $13-15, while dyslipidemia therapeutics company Omthera Pharmaceuticals said it hopes to get between $12-14 through the sale of 5.8mm shares… Cell Therapeutics, using proceeds from a $15mm senior secured term loan with Hercules Technology Growth Capital, hopes to advance Phase III pacritinib (for myelofibrosis) and promote recently EMA-approved non-Hodgkin lymphoma treatment Pixuvri (pixantrone) in Europe…In a second debt financing by Hercules, CNS stem cell therapeutics developer Neuralstem issued the finance company 649k warrants to purchase Neuralstem stock at an exercise price of $1.08…In exchange for up to $16mm, ophthalmologic drug developer InSite Vision will sell its future royalties on bacterial eye infection medicine Besivance (besifloxacin ophthalmic suspension) to SWK Funding LLC…Cancer-focused public Australian biotech Prima Biomed hopes to raise $15.6mm in a rights offering of up to 150mm new fully paid ordinary shares. - Maureen Riordan

Royally weird photo courtesy of flickrer simononly.

Financings of the Fortnight, You're Now Cleared For Landing

 

As we write this, at least five biotechs are in registration for initial public offerings. Circling the runway, if you will. Could even be more, what with the allowances for hush-hush registration afforded by this year’s JOBS Act. One has just touched down – the first biotech issue in more than two months -- but only after making major concessions to the public markets. (See Regulus Therapeutics in our roundup below.)

There’s been buzz that 2012 could be the best year for biotech IPOs since 2007, the year before all things financial went to heck in a mortgage-backed handbasket. “Best since 2007” is a rather backhanded compliment, but we understand the feeling that there’s a little more sun shining. As our Pink Sheet brethren reported this week, for example, antibiotic developer Paratek Pharmaceuticals has picked itself off the mat to file for an IPO. In its filing the firm cites more confidence in the revamped FDA guidelines for antibiotic approvals – specifically in skin and skin-tissue infection, which Paratek’s lead candidate, once partnered with Novartis, aims to treat.

But there should be no illusion that landing an IPO will mean a short taxi to the gate and a swift, sprightly exit past the smiling cabin crew. In other words, there’s an oversized suitcase just waiting to tumble out of the overhead bin: IPOs aren’t boosting company valuations. This has been true for years, hence the motto “The IPO is just another round of financing.” But one would think that the rise in other indicators, such as slightly better post-IPO performance, less drastic “haircuts” (the difference between the proposed IPO terms and the eventual ones), and a broader pool of IPO buyers, would put some wind under the step-up wings. (OK, that metaphor is officially grounded.)

As our new colleague Stacy Lawrence reported last week, the step-ups from final venture round to IPO have remained tepid. In fact, according to research from law firm Fenwick & West, the real action recently has taken place earlier in the funding cycle: step-ups at Series B in the second quarter of 2012 averaged 63%, and at Series C, 26%. The jump in valuation at Series D was 9%, and at Series E or higher, it was -9%. Those early boosts in valuation, however, at least are helping the entire group trend in the right direction. In a four-quarter moving average, life sciences venture rounds had a 21% step-up. That’s up from 0% in the first quarter of 2010. Flatter than a flounder on a Nebraska two-lane blacktop, as Dan Rather might have said.

In other IPO news, the upcoming issue of Start-Up breaks down six years of biotech exits, both M&A and IPO, and looks at the companies with corporate venture backers. As we found more than a year ago, private biotechs with corporate VCs on board are acquired at higher returns than those without CVC backing.

Does the CVC magic rub off on IPOs, too? Tune into the new issue to find out. Also in the new Start-Up, we profile a biotech that could be first to market with a disease-modifying drug for an autism disorder; we delve into the unusual business model of a company fully owned by non-profit foundations but looking to attract venture backers; and we examine the strategies of companies working on psoriasis that patients hope will soon make the leap to orally administered treatments.

In Start-Up's annual VC survey, by the way, we asked participants if the aforementioned JOBS Act has had any of its intended effect on the IPO process:

It might be too soon to tell where the IPO market is going, but we, dear readers, are approaching our final destination. Please return your seat back to the upright position, lock your tray tables, and put your  electronic devices away -- except, of course, the one you're using to read the latest edition of....

Regulus Therapeutics: If haircuts have been less drastic this year, you wouldn’t know it from the Regulus IPO. The microRNA developer birthed by Alnylam Pharmaceuticals and Isis Pharmaceuticals made its public debut October 4, the first biotech IPO since July, selling 11.25 million shares at $4 a pop. It was a drastic shift from selling 4.55 million shares in the $10 to $12 range it hoped to hit. The cash raised by Regulus is roughly the same as it had first targeted, $45 million instead of $50 million, but the rest of the metrics were ugly. Seeing how the firm was owned by other drug companies, however, the immediate financial impact might not be as urgent as it would be for traditional venture backers. Before the IPO, Alnylam and Isis held 45% and 44% of Regulus, respectively, and Sanofi (9%) owned most of the rest. There were all sorts of side deals with the IPO, too. Regulus partner AstraZeneca agreed to buy $25 million in common stock at the IPO price, which gives AZ 6.25 million shares – practically an equal post-IPO share to Alnylam and Isis, according to the most recent regulatory filing. Other corporate owners are likely to buy in at the IPO, too: the filing indicates Sanofi, Isis and GlaxoSmithKline, which like AZ and Sanofi also is a development partner, have said they’re interested. Filings in coming days should reveal the extent of their purchases. Underwriters have 30 days to buy up to 1,687,500 extra shares. On its first day of trading Regulus closed at $4.20 a share, up 5%. – Alex Lash

Aragon Pharmaceuticals: When prostate cancer drug developer Aragon announced a $42 million Series C round in March, CEO Rich Heyman told "The Pink Sheet" DAILY that another private round was unlikely, but still on the table. Its new $50 million Series D round, then, represents somewhat of a course change for a company that was mulling a partnership before year’s end, and even acknowledged exploring a public offering late last year. Three days before revealing the D round, Aragon presented strong Phase II data for top candidate ARN-509. Unorthodox investor venBio led the round, and prior investors Topspin Fund, Aisling Capital, OrbiMed Advisors and The Column Group also joined. Validation for ARN-509 came with the August approval of another compound in the androgen receptor antagonist class, Medivation and Astellas’ Xtandi (enzalutamide), but that also could crowd the market as both drugs seek to compete with J&J’s Zytiga (abiraterone). Moreover, Aragon faces a breach-of-contract lawsuit from Medivation, which alleges that Aragon’s scientific co-founders, once researchers at the University of California, Los Angeles, hid ARN-509’s existence when Medivation licensed a series of similar compounds, including Xtandi, from the university. Aragon has filed a counterclaim; the original suit could reach trial early next year. – Paul Bonanos

Antabio: The French antibiotic discovery startup said October 1 it completed the first-ever crowdfunding round for a biotech. It’s a difficult claim to verify, but if not exactly true, it’s certainly one of the few not just to have tapped anonymous, Internet-based donors – akin to the grassroots Internet fundraising that President Obama famously put to use in 2008 – but to have cashed them out in the black. Again, a hard claim to verify, but an Antabio spokeswoman told The In Vivo Blog in an e-mail that every one of the more than 200 crowd funders got a 2x return on investment. The total amount the company raised from them was €300,000. The crowd funders exited when a former Swiss biopharma executive, Christophe Richard, and other angels made personal investments in the company earlier this year. The firm is aiming to have its first candidate in the clinic by 2016. One area of focus is on treatments for bacteria that have developed resistance against carbapenems, the antibiotic class traditionally deployed against Gram-negative bacteria such as Escherichia coli, Pseudomonas aeruginosa and Salmonella. – A.L.

Asceneuron: The Swiss firm spun out this week from Merck KgAA’s Merck Serono unit with the group’s preclinical Alzheimer’s assets that target tau, one of the two major misfolding proteins associated with Alzheimer’s disease. Research into drugs that attack the tau-associated pathologies of Alzheimer’s disease have had a resurgence of late, in part because longstanding approaches to attacking beta amyloid, the other misfolding protein of AD, have failed in late-stage drug trials. Merck Serono, through its venture arm, will invest  €5 million in Asceneuron. Its staff will consist of eight current Merck Serono employees to move the preclinical assets into the clinic up to Phase I, at which point the firm says it will look to out-license or partner the three programs. It’s the third firm to emerge from the closure of the unit’s Geneva headquarters, announced in January, tempered by a €30 million fund to back spin-outs like Asceneuron. Merck KgAA bought the family-owned Serono for roughly $13 billion in 2006. -- A.L.

Photo courtesy of honorary FOTF co-pilot alantankenghoe via a Creative Commons license.

Financings of the Fortnight Has Its Eyes On the A's

Our sister publication START-UP starts up every new year with The A-List, a review of the previous year’s Series A life-science financings, which we feel are an excellent proxy for gauging investor enthusiasm for new biomedical ventures and measuring the shifts in what’s getting funded, and who’s doing the funding. 

But we can’t wait for the end of the year to peek, so we’ve tallied year-to-date Series A financings using Elsevier’s Strategic Transactions. (Two weeks ago, we did the same with follow-on public financing.) The top-line result: In dollar terms, we’re on pace to equal 2010, a particularly glum year with $876 million total raised in Series A money. To match last year’s modest rebound of $1.1 billion raised, Series A funding must pick up with alacrity, a trend that’s hard to imagine as the Euro crisis continues to bubble and the U.S. loses its economic momentum from the spring. 

Here are the numbers: In the first half of 2012, 33 Series As across the biopharma, device, and diagnostic industries totaled $423 million. The majority of the first half’s total comes from the biopharma sector, mainly US and European companies. (24 financings, $345 million.) That’s just $30 million fewer raised than in the first six months of 2011 from the exact same number of transactions. So it’s fair to say biopharma isn’t lagging as much as the device sector. Still, biopharma numbers to date are not on track to reach the full-year 2011 biopharma figure of $887 million from 63 deals.

The average fundraise in the first half is $15.1 million, slightly higher than 2011’s full year tally of $14.1 million. But wait: the higher total is, ahem, warped by Warp Drive Bio’s $125 million investment from Third Rock Ventures, Sanofi, and Greylock Partners in January. Warp Drive is researching the medicinal properties of naturally occurring microbes with R&D support from Sanofi through a separate collaboration. It’s one of the most intriguing deals of the year so far, not just for the cash considerations, but for the unusual structure that gives Sanofi a nonexclusive option to acquire Warp Drive if certain milestones are achieved. At the same time, Warp Drive has the right to force a sale of the company if other milestones are met. It’s a brave new world when Series A-funded companies and their investors are locking in future acquirers. 

We’re also seeing a lot of solo Series As, a sign that the VC shakeout has left fewer viable syndicate partners for early-stage deals. Ten Series As were solo-backed, and the largest was Third Rock’s $41 million infusion into Global Blood Therapeutics, a firm developing candidates that alter key blood proteins, with an initial target in sickle cell disease. Third Rock is no stranger to solo A-rounds, notching SAGE Therapeutics, Blueprint Medicines, and Lotus Tissue Repair in 2011.

But the Boston and San Francisco firm also knows that good syndicates are hard to find: it joined Bessemer Venture Partners and Frazier Healthcare in a $10 million financing for Alcresta, which is working on a nutritional supplement that contains more digestible and absorbable forms of long-chain polyunsaturated fatty acids. Alcresta was the syndicate’s third go-round together, all with the same management team. The same phenomenon cropped up this year with the investment trio of Astellas Venture Management, InterWest Partners and Sutter Hill Ventures, who are now on their fourth venture together. It’s not rocket science for people who’ve made money together to revisit the formula, but the reduced pool of investors makes it all the more likely.

While oncology and peripheral vascular disease start-ups dominated the 2011 biopharma Series As, Series As the past six months were focused mainly on neurology, gastrointestinal, musculoskeletal, and metabolic disorder companies, which together made up 40% of the financing. Neurology led with seven financings bringing in $64 million, or 17% of the first-half dollar total and nearly a third of the deals. Four GI-related financings followed, while metabolic and musculoskeletal players had three deals apiece.

Biopharma Series A's By Therapeutic Category, January-June 2012

 

Note: The total number of deals is greater than 24 as several financings involve companies in multiple therapeutic areas.

SOURCE: Elsevier’s Strategic Transactions

Even though CNS start-up Cerecor’s $22.5 million round was shy of the $30 million raise the company had forecasted a year ago, the transaction topped the list as highest raise in CNS and third-largest Series A in the first half of 2012. Counting the second half of 2011, we’ve now seen 16 A-round neurology deals the past year, which perhaps holds counterbalance to Big Pharma’s well-documented exit from the CNS space.

On the device side, six Series A rounds raised $49 million. The dollars and number of deals lag the full-year 2011 total of $151 million raised in 24 transactions. In vitro diagnostics have tallied $27 million in three deals, slightly better than the 2011 pace, which finished with $48 million from 10 transactions. It’s worth noting that corporate venture played a role in three of the  biggest device and diagnostic Series As. Merck Serono Ventures along with KPCB and TPG took part in the first tranche of the Series A raise for Auxogyn, a company focused on infertility assessment using noninvasive devices that determine embryo viability. Novartis Ventures Fund led a $12.5 million first round for ImaginAb, with participation from Merieux Developpement (bioMerieux’s venture arm) and other investors. ImaginAb is developing engineered antibody fragments for diagnostic imaging, initially in cardiovascular diseases. And the molecular diagnostics company Xagenic pulled in $10 million in a  January round that included Dutch diagnostic giant Qiagen.

Now if you'll excuse us, we're shifting our attention away from data dives and toward springboard and platform dives. But first, many thanks to the Olympian effort of Amanda Micklus and Maureen Riordan for this week's column. It's time to raise the torch for another edition of...

  
California Institute for Regenerative Medicine: California's state agency that funds stem-cell and other regenerative medicine R&D announced July 26 $150 million in grants for translational projects that are expected to file an IND or complete an early-stage clinical trial within four years. Only one of the awards goes to a for-profit entity, the San Francisco Bay Area firm StemCells Inc., which wants to use stem cells to treat spinal cord injuries in the neck both in patients with new injuries and in patients who have been paralyzed for months or years. The other six awards are going to academic or institutional researchers and range from $14 million to $20 million per project. The lack of private sector recipients underscores the challenges of turning stem-cell-related research into product candidates. Three years ago, CIRM handed out $225 million in grants to move 14 preclinical projects toward the clinic; only one of the 14 was based at a for-profit company. -- Alex Lash


Bluebird Bio: Once an area that drew great skepticism, gene therapy is now drawing big money. Cambridge, Mass.-based start-up Bluebird Bio raised its third big round of funding since the beginning of 2010, tapping a diverse syndicate of investors for $60 million in Series D money that will support ongoing trials of gene therapies for rare diseases. It comes just as European regulators have approved the first gene therapy product in Europe, another strong sign of the advances the field has made the past decade. The Bluebird deal includes contributions from public and private growth investors Deerfield Partners and RA Capital, hedge fund operator Ramius Capital Group, and two unnamed public investment funds, as well as strategic backer Shire. They join returning venture firms ARCH Venture Partners, Third Rock Ventures, TVM Capital, and Forbion Capital Partners. Bluebird Bio raised $35 million in a Series B round in early 2010, then was slated to take $30 million in two tranches of Series C capital in an April 2011 agreement. The startup, however, held a call option which it never exercised on the second tranche; its VCs instead put that $15 million into the Series D round at a higher price, according to Bluebird CEO Nick Leschly. The firm plans to conduct a Phase II/III study of a treatment for childhood cerebral adrenoleukodystrophy and a Phase I/II study of a beta-thalassemia and sickle-cell disease therapy. Both are built on Bluebird’s lentiviral technology, in which a patient’s own bone marrow stem cells are genetically modified and returned to the patient, potentially obviating the need for a transplant. – Paul Bonanos

Alimera Sciences: The publicly-traded ophthalmic company said July 18 it has grossed $40 million in a sale of preferred shares to Palo Alto Investors, Sofinnova Ventures, and New Enterprise Associates. The trio gets 1 million preferred shares and warrants to buy 300,000 more, with each preferred share convertible into 13.75 common shares. Investors can trigger a conversion at will, outside of a lockup period and other constraints. The preferred shares entitle their holders to dividends and other distributions pro rata with the common stock, as well as unspecified downside protection. The shares can also convert to common if Alimera’s lead product gains regulatory approval or if Alimera raises additional equity at predefined share prices, Sofinnova partner Garheng Kong told the IN VIVO Blog. Kong was among Alimera’s original investors at Intersouth Partners and is now one of the partners investing Sofinnova’s new $440 million life-sciences-only fund, up to 25% of which could go toward positions in public biotech companies, Kong said. (Alimera is the fourth investment from the fund.) Alimera’s lead product is Iluvien, an eye implant that delivers drug up to 36 months to treat vision loss associated with diabetic retinopathy. It is approved in France, Austria, Portugal, the U.K., and of this week, Germany. The US FDA asked for more clinical data last November, the second time it has issued a complete response letter for Iluvien. No new PDUFA date has been disclosed. The private stock sale must be approved by a majority of common stockholders; as of July 17, holders with 56% of the common stock had agreed to vote in favor, according to Alimera. – A.L.

Durata Therapeutics: With a handful of biotechs knocking on the IPO window this fortnight, only one as of this writing has gotten through. Antibiotic developer Durata on July 18 raised $68 million by selling 7.5 million shares at $9 each. The firm missed its original goal of $75 million by pricing below the intended $11 to $13 per share range, but it sold more shares to bridge part of the gap. Existing investors Domain Associates, New Leaf Ventures, Aisling Capital, Sofinnova Ventures and Canaan Partners agreed to buy 3.8 million shares, more than 50% of the offering, to get the deal done. That’s par for the course these days. It’s rare for a biotech to go public without insider participation, as we detailed in February. Nothing’s changed since then. If biotech backers want to reach liquidity, they’ll more than likely need to help get the glass half-full. Investors are adding not subtracting Durata shares, but their holding times to date have been relatively short. Durata was founded less than three years ago from the ashes of Pfizer’s nearly $2 billion acquisition of Vicuron Pharmaceuticals. In Pfizer’s hands, one of Vicuron’s main products, the antibiotic dalbavancin for skin and soft-tissue infections, received three rejections from the FDA. But with the agency rolling out new regulatory guidelines for certain antibiotics, Durata feels it can do it right this time and recoup the rewards of bringing a once-weekly intravenous gram-positive antibiotic to market. It is currently conducting two Phase III trials. BofA Merrill Lynch and Credit Suisse led the underwriting team, which has the option to buy 1.1 million additional shares for 30 days following the IPO. – A.L.

CoDa Therapeutics: The San Diego wound-healing firm is the first to benefit from venture firm Domain Associates’ new strategic alliance with the Russian sovereign fund Rusnano. On July 24, Domain said CoDa has completed a $40 million Series B financing, with contributions split equally between Rusnano and a Domain-led syndicate of CoDa’s current investors. These include the Australian VC firm GBS Ventures and the New Zealand firm BioPacific Ventures. Domain and Rusnano said in March they were each committing up to $330 million over the next three to five years to fund Domain portfolio companies. CoDa came first because it needed financing, according to Domain partner Brian Dovey. It is in Phase IIb trials for a wound-healing compound aimed at venous leg ulcers and in Phase II trials for the same compound for treatment of diabetic foot ulcers. Domain companies that receive Rusnano funds are obligated to license exclusive rights to sell their products in Russia and the CIS regions to NovaMedica, a new Russian company that Rusnano and Domain are spending up to $190 million to create. The partners claim it will be Russia’s first fully integrated, innovative domestic drug firm, and will be structured as a joint venture between Rusnano and Domain. As a condition of its Series B financing, CoDa has licensed exclusive rights to its lead product and related technologies in Russia and the CIS to the new company, in exchange for undisclosed royalties on sales. Domain is one of several U.S. life sciences venture capital firms that are working with Rusnano, a five-year-old $10 billion sovereign fund charged with helping Russia jumpstart domestic high-tech industries, and as profiled this spring in START-UP's Capital Matters column, it has been aggressive making investments in Western biotech, both directly and through other funds such as Domain and Burrill & Co.  – Wendy Diller

Photo courtesy of the International Olympic Committee.