Deals Of The Week: Has BioCryst Struck Out?

As baseball executives gathered at the Opryland Hotel in Nashville during the week of Dec. 3 for the trade and free agency frenzy known as the winter meetings, the deal-making also continued in the biopharma corner. But just as executives from many major league teams were waiting for the strategies of big spenders like the Texas Rangers and Los Angeles Dodgers to materialize so they could make their corresponding moves, it was a week of frustration at BioCryst and Presidio as a planned merger that might have created a new significant player in the hepatitis C space crumbled under the weight of three rapid clinical setbacks.

In the aftermath of a third setback, FDA placing a clinical hold on oral hereditary angioedema compound BCX4161 the week of Nov. 26, the two companies announced Nov. 30 that they mutually had decided against a planned all-stock merger announced on Oct. 18 that would have created a new company with a wholly owned portfolio of three oral antiviral candidates for hepatitis C.

During an investor call Dec. 7, BioCryst announced that it will cut its staff by 50% while reducing planned cash-burn for 2013 by as much as 45% while it narrows its focus on the HAE and HCV programs, as well as preclinical broad-spectrum antiviral BCX4430. CEO Jon Stonehouse explained that the three clinical setbacks - the delay of a clinical trial for NS5B inhibitor BCX5191 in HCV because of toxicity concerns and the likely clinical failure of flu candidate peramivir - had eroded the North Carolina biotech's stock price.

"Despite these setbacks, we have a path forward for BioCryst to rebuild shareholder value because of our promising compounds," the exec said. "Following the review of BioCryst's assets, resources and cost structure, we concluded that restructuring and a highly focused approach to our development programs was required. This will preserve cash and enable BioCryst to reach near-term milestones that will give us greater insight regarding the opportunity and risk associated with our three core programs."

The planned merger with privately held Presidio not only would have combined HCV assets, but also would have brought BioCryst a needed injection of cash. The deal valued Presidio at $101 million and would have involved 24.5 million new shares in BioCryst being issued to Presidio's investors. At the same time, Presidio shareholders would commit to providing $25 million of a planned $60 capital raise for the new company.

Now, the retrenched BioCryst will cut down from 75 positions to a headcount of 37, which Stonehouse said reflected reductions evenly spread throughout the organization. Instead of spending $40 million in R&D and associated costs in 2013, the company now anticipates a cash-burn of $22 million to $25 million, excluding deal-related and restructuring costs. BioCryst will record a restructuring charge of between $2 million and $4 million during fourth quarter 2012.

The revised R&D plan is to study low doses of '5191 in HCV-infected chimpanzees in an attempt to demonstrate meaningful antiviral activity at lower doses than previously used in clinical trials. In November, BioCryst withdrew an IND for '5191 due to safety concerns regarding renal toxicity at the dosage thought needed to benefit human patients. BioCryst expects go-or-no-go data from the chimpanzee studies in early 2013, Stonehouse told the investor call.

The company also hopes to begin a Phase I study of '4161 in January 2013 to demonstrate the safety, level of drug exposure with oral administration and pharmacodynamic effects of the kallikrein inhibitor. BioCryst, which hopes to position '4161 as an oral prophylactic against HAE attacks, thinks such a product would be a game-changer in the rare disorder space. For now, however, the drug is stalled as FDA implemented a clinical hold on '4161 due to concerns about compounding of the drug at trial sites.

BioCryst also plans to seek medical journal publication of a manuscript describing the activity of '4430 in certain filoviruses. That candidate's prospects loom crucially because peramivir is considered virtually dead after a Phase III trial was ended due to poor efficacy findings.

While BioCryst and Presidio were mired in a "No-Deal," however, other biopharma companies were proactive just like the executives in the baseball world during the past week. Now, it is time to "play ball" with ...

Baxter/Gambro: In an effort to extend its global footprint to areas like Latin America, Europe and the Asia Pacific, Baxter International has agreed to pay $4 billion including the assumption of debt to acquire Swedish dialysis company Gambro, which reported revenues of $1.6 billion annually. Baxter is using its cash held overseas to pay for the transaction and the deal is expected to close in the first half of 2013. “With Baxter generating more than two-thirds of its cash overseas, we view the Gambro acquisition as a smart way to put that money to work,” wrote Leerink Swann analyst Danielle Antalffy in a note to investors. The acquisition rounds out Baxter’s kidney dialysis business, adding Gambro’s suite of hemodialysis products to its own peritoneal dialysis offerings. Gambro’s products typically are used in the hospital setting, while Baxter’s products usually are used in the home. Baxter expects to see $300 million in cost synergies by 2017 and add approximately 7% to sales over the next five years. The company currently brings in revenues of $13.8 billion. “Over the last three years, Gambro’s growth has been roughly flat, and Baxter's renal business has grown about 4%,” wrote Morgan Stanley analyst David Lewis. “Pro forma for the deal, Baxter believes it can accelerate growth to [about] 6% by investing to relieve Gambro capacity constraints, leveraging Baxter’s global selling infrastructure, using Gambro to accelerate the home HD launch, and using the new breadth of the business to pursue public/private partnerships.” - Lisa LaMotta

Optimer Pharmaceuticals/AstraZeneca: Building on its regional partnering strategy for Dificid (fidaxomicin), Optimer Pharmaceuticals has signed AstraZeneca to market the antibiotic in South America, including in Brazil, Central America, Mexico and the Caribbean in a deal announced Dec. 3. AstraZeneca has a “major market position in three key Latin American markets, Brazil, Mexico and Columbia, according to Optimer CEO Pedro Litchtinger. AstraZeneca will pay Optimer $1 million upfront, up to $3 million in milestones upon first commercial sale in certain countries, and up to $19 million in other milestones contingent on the achievement of sales-related targets in the region. In a related supply agreement, Optimer also stands to receive payments from AstraZeneca that amount to a double-digit percentage of net sales in the territory. One of a few big pharmas still investing in antibiotic drug development, AstraZeneca is Optimer’s fourth commercial partner. The company already has signed a co-commercialization deal with Cubist Pharmaceuticals in the U.S., and deals with Astellas Pharma in Japan and Europe and Specialised Therapeutics in Australia. It’s all part of a strategy Optimer says is focused on finding commercial leaders in key regions of the world while focusing its own attention and resources on North America, where it is building a commercial organization. The company still expects to sign at least one more partner to bring its Clostridium difficile infection treatment to China. - Jessica Merrill

Ironwood/Protagonist: Constipation drug seller Ironwood Pharmaceuticals and peptide discovery platform company Protagonist Therapeutics said Dec. 6 that they have expanded an existing partnership. The parties did not disclose terms or specifically differentiate the expanded partnership from its two-year-old predecessor, but expressed that both sides are pleased with the progress of the existing deal to discover new therapeutics addressing unmet needs, based on Protagonist’s Disulfide Rich Peptide (DRP) platform. Like the January 2011 deal, the new arrangement includes an upfront payment by Ironwood, along with milestones and royalties if a product advances through the clinic and is approved and marketed; Ironwood will continue to fund full-time staff within Ironwood’s walls in order to evaluate and develop potential products. The companies did not identify which therapeutic areas are covered under the existing or new partnership, and they have not announced any product candidates from the original collaboration yet. Ironwood says it has discovered most of its pipeline on its own thus far; it currently markets Linzess (linaclotide) for irritable bowel syndrome with constipation and chronic idiopathic constipation. Protagonist established a separate discovery collaboration with Zealand Pharma in June 2012. - Paul Bonanos

MD Anderson Cancer Center/GlaxoSmithKline – University of Texas’ MD Anderson Cancer Center has tapped GlaxoSmithKline to help it develop and commercialize an antibody discovered by scientists at the center. Anderson will handle preclinical activities, while GSK will be responsible for clinical development and commercialization. Under the deal announced Dec. 7, the cancer center will receive an undisclosed upfront payment as well as research funding and development milestones. Anderson indicated that the deal could result in $335 million in payments for the center, as well as royalties on any commercial products that are developed. The antibodies activate OX40, a protein that stimulates the immune response in T-cells against cancer. "This agreement is not only a testament to the vision shared by GSK and MD Anderson that successful clinical development of oncology drugs requires seamless integration of drug development expertise and deep biological knowledge," said Giulio Draetta, director of the Institute of Applied Cancer Science at Anderson, in a statement. - L.L.

Mediolanum/Genovax: Eporgen Venture, one of Italy’s first suppliers of seed capital to life science companies from a network of private, non-institutional Italian investors, reported on Dec. 4 the first major transaction by one of its portfolio companies, Genovax, which has sold its Phase II-ready potential therapeutic cancer vaccine, GX-301, to the Italian pharma company Mediolanum Farmaceutici. Eporgen President Konstantinos Efthymiopoulos expects several other transactions involving Eporgen-supported companies to complete in the next few months, and is aiming to raise up to €10 million ($13 million) in additional financing to develop other assets to proof-of-concept in its portfolio companies, which ideally but not necessarily would be clinical proof-of-concept. Italian research and science is as good as in other European countries, Efthymiopoulos said, although he acknowledged that life science entrepreneurship and the network of academic technology transfer offices is not as highly developed. It is only a question of time before the country catches up with its neighbors, he asserted. GX301 will boost its research interests in oncology, Mediolanum said; it will take over all future development and commercialization activities for GX301. A Phase II study in patients with prostate cancer is expected to start in the first half of 2013. - John Davis

StemBANCC: One of the largest European “open innovation” projects to date will see Switzerland’s Roche and the U.K.’s Oxford University coordinate the work of nine other pharmaceutical companies and 22 other academic institutions in Europe on creating more than 1,500 human-induced pluripotent stem cell lines to use as disease models to discover new therapies. This and other new EU projects announced Dec. 5 echo themes for TransCelerate BioPharma, an initiative announced Sept. 18 involving 10 international drug companies which also seeks to identify and solve common drug-development challenges, although focused more on regulatory than research issues. The EU’s StemBANCC project, a public-private partnership formed as part of the EU’s Innovative Medicines Initiative (IMI) will have a budget of €55.6 million ($73 million). The funding will include €26 million from IMI’s EU funds and “in-kind” funding of €21 million from the participating drug companies. The in-kind funding includes company employees and their costs, access to research equipment, facilities and database access. The cell lines, of which 500 will be derived from patients, will be used to set up models of disease, like diabetes or dementia, in order to accelerate the drug-development process. - J.D.

Photo credit: Wikimedia Commons

Deals Of The Week: Living With The Constancy Of Change In HCV Drug Development

One of the frequent thematic tropes found in the music of Canadian prog-rock trio Rush is the constancy of change, that change is constant, and constantly changing, etc. Anyone trying to follow hepatitis C drug development probably understands that message.

Just when it appeared that nucleoside polymerase inhibitors were the way to go in the effort to develop a paradigm-changing combination of all-oral, direct-acting antiviral drugs for the virus, a pair of recent setbacks in the “nuc” arena have made other classes of drugs and the companies developing them more relevant, and potentially more valuable.

Hence, the reported increased interest in Achillion Pharmaceuticals, which expects to produce early data for a proprietary combination of a protease inhibitor and an NS5A inhibitor during the first quarter of 2013. Once thought in danger of being left behind as the M&A mavens at big pharma circled Pharmasset, then Inhibitex, and continued to kick the tires on Idenix Pharmaceuticals, Achillion now is considered by many Wall Street analysts to be on the radar screen of HCV players such as Merck & Co., Bristol-Myers Squibb, Roche and possibly others.

Achillion raised $41.7 million in a registered direct offering just before Labor Day, placing 6.4 million new shares with QVT Financial LP at $6.57 per unit, its closing price on Aug. 31. That marked the New Haven, Conn.-based biotech’s third significant fund raise since August 2010, as it brought in $60.9 million through a follow-on public offering in June 2011, and $49.1 million under a PIPE (private investment in public equity) deal in August 2010.

But Wall Street widely expects that Achillion will have some big pharma R&D machinery behind its HCV efforts soon, maybe even before the Phase II combo data for protease inhibitor ACH-1625 (sovaprevir) and NS5A inhibitor ACH-3102 are unveiled.  (The firm also will disclose Phase I proof-of-concept data for ‘3102 this fall.)

Dismissed as barely relevant in the combo race as recently as earlier this year, Achillion may get a second chance thanks to the disastrous safety issues encountered by Bristol’s expensive nuc prospect, BMS-986094. The pharma paid $2.5 billion to buy that drug’s developer, Inhibitex, only months before shutting development of the drug down entirely in mid-August due to cardiotoxicity that killed one patient and hospitalized eight others.

The news then got worse or better, depending on your perspective, when FDA placed Idenix’s nuc, IDX184, and second-generation compound, IDX19368, on clinical hold because of concerns about their similarity in chemical structure to the Bristol nuc. It’s important to note that the “nuc” class is by no means dead – Gilead Sciences is still viewed as the leader in the HCV combo race thanks to the eye-opening data its nuc, GS-7977, is producing. And Vertex Pharmaceuticals is bringing a nuc licensed last year from Alios BioPharma into the clinic, as well.

Achillion has an analyst day presentation slated for Sept. 27, and with the expectation for POC data with ‘3102 and drug-drug interaction data for the ‘1625/‘3102 combination expected this quarter, Robert W. Baird & Co. analyst Thomas Russo thinks a partnership prior to the combo trial would make sense. “While lack of visibility makes this timing impossible to predict, generally speaking we’d view [a] non-exclusive collaboration positively because it would add shots on goal, external validation, and perhaps regimens that would augment investor excitement and conviction,” he wrote in an Aug. 8 note.

He added that Bristol and Abbott Laboratories have been demonstrating in the lab that high sustained virologic response (SVR) rates can be attained by antiviral combos not including a nuc. “Achillion’s pipeline features PIs and NS5A inhibitors that look best-in-class, complementary, and reasonably likely to succeed in interferon-free combos – all under its roof and/or via external collaboration,” Russo said. “We believe big players will fight on for some period longer, with some looking to fill gaps in their HCV pipelines and others perhaps looking for a complete solution.”

Sovaprevir, in triple-combination testing with existing standards ribavirin and pegylated interferon, has demonstrated effective inhibition of viral replication without generating “meaningful resistance,” an unending concern in the protease inhibitor class, wrote Brean Murray Carret & Co. analyst Brian Skorney on Aug. 9. “Although not a clear home run … [this is] a characteristic we believe is unique to only handful of antivirals in development for hep C,” he added.

Now, on to our weekly roundup of:

Merck KGaA/Symphogen – Danish biotech Symphogen AS has licensed its lead oncology product, Sym004, a mixture combining two antibodies targeting the epidermal growth factor receptor (EGFR) on tumor cells, to Merck KGaA for an upfront payment of €20 million ($25 million). Symphogen was evaluating Sym004 in two Phase I/II studies, which have shown initial signs of the drug’s clinical benefit and have been transferred into Merck’s control. The deal underlines the growing interest in combination therapies for cancer, as well as Merck’s desire to build on its marketed EGFR-targeted anticancer, Erbitux (cetuximab), which is its second largest-selling product, garnering sales of €855 million ($1.13 billion) in 2011. Merck receives exclusive development and commercialization rights for Sym004 worldwide, and now will fund all further development of the compound. In return, Symphogen receives the upfront and potentially could earn €225 million in clinical development and regulatory milestones, as well as €250 million in combined sales performance milestones and royalties on net worldwide sales, bringing the total potential value of the deal to €495 million. Merck is much in need of clinical-stage products that it can advance quickly following a string of late-stage product failures, which have prompted a management reorganization and the start of a cost-saving program including job losses at its R&D facilities in Switzerland, and across functions in Germany. – John Davis

Valeant/Medicis – In a move to become a leader in dermatology, Valeant Pharmaceuticals announced Sept. 3 that it has agreed to pay $44 per share, or $2.6 billion, for Scottsdale, Ariz.-based Medicis Pharmaceutical – representing a 39% premium to Medicis’ closing price of $31.56 on Aug. 31, the last trading day before the deal was announced. The Medicis acquisition, which will be funded entirely with debt, adding to the company’s $7.6 billion debt (as of the end of 2011), will make Valeant the largest dermatology player in the U.S. and second only to Galderma SA in the rest of the world. While Valeant has interests in several specialty pharma areas including dentistry and branded generics, the largest part of the business belongs to dermatologics with a focus on acne, eczema, and topical antivirals. Medicis brings a handful of products that will be complementary to Valeant’s current portfolio including the oral acne product Solodyne (minocycline oral), which will fit in with the company’s topical acne offerings. The company also makes aesthetic injectables like Restylane, Perlane and Dysport – which fit in with Valeant’s collagen stimulator Sculptra. Valeant expects $225 million in synergies – an estimate the company considers conservative and does not take into account any revenue upside or further upside from anything that may come out of the Medicis pipeline. According to Wells Fargo analyst Michael Tong, the deal will nearly double Valeant’s dermatology business, which was expected to produce revenues of $958.7 million in 2012 (analysts estimated Medicis would bring in approximately $820 million in revenues in 2012). – Lisa LaMotta

Medivir/Novadex – Achillion is not the only player in the HCV space looking to take advantage of recent stumbles by Bristol and Idenix. Medivir AB, which is developing Phase III protease inhibitor simprevir (TMC435) in tandem with Johnson & Johnson unit Janssen Pharmaceuticals for hepatitis C, announced a deal with Novadex Pharmaceuticals Sept. 6 in which it acquired a package of preclinical HCV assets, including novel nucleoside polymerase inhibitors. A release said the deal will include an upfront payment and potential milestones, but did not disclose specific terms. Medivir said the deal will include intellectual property and prodrug technologies that will further strengthen its HCV platform and know-how. The prodrug technologies could be applied to both protease inhibitors and nucleoside analogues to enhance their overall pharmacokinetic profiles, the company added. TMC435 also is being tested in combination with Bristol’s NS5A inhibitor daclatasvir (BMS790052) under a collaboration between Janssen and Bristol that was extended in April. – Joseph Haas

ImaginAb/MacroGenics – Two privately held companies in the antibody development space agreed Sept. 5 to collaborate on a pair of imaging products that could support ongoing development of new therapies. Los Angeles-based imaging specialist ImaginAb said it would develop a clinical imaging product for inhibition of the CD3 T-cell receptor based on an anti-CD3 therapy belonging to MacroGenics of Rockville, Md. The companies did not specifically name teplizumab as the therapy, but that is MacroGenics’ most advanced anti-CD3 program.ImaginAb also will develop a companion imaging agent for an immune-regulating B7-H3 target; MacroGenics’ Phase I clinical candidate, MGA271, addresses B7-H3. ImaginAb’s agents typically are used by partners to select patients and monitor responses to clinical treatments. The two companies share at least one investor, the oncology-focused Nextech Venture of Zurich. MacroGenics has raised more than $125 million from a long roster of venture investors since it was founded in 2000; five-year-old ImaginAb announced its $12.5 million Series A round in March 2012, and already has forged partnerships with drug companies such as Astellas Pharma and Oxford BioMedica, as well as a variety of cancer research organizations. Last month, ImaginAb named Eleven Biotherapeutics CEO Abbie Celniker as chair of its board of directors. – Paul Bonanos

Pfizer/SFJ Pharmaceuticals – Pfizer and SFJ Pharmaceuticals announced a collaborative development agreement Sept. 7 to conduct a Phase III trial for dacomitinib (PF-00299804), a pan-human epidermal growth factor receptor (pan-HER) inhibitor in advanced lung cancer. To be conducted at multiple sites in Asia and Europe, the Phase III trial will test the agent in patients with locally advanced or metastatic non-small cell lung cancer with activating mutations of epidermal growth factor receptor. SFJ will fund the trial and provide clinical development supervision as needed to prepare dacomitinib, an oral, once-daily, small molecule inhibitor of the HER-1, HER-2 and HER-4 tyrosine kinases, for regulatory filings as a first-line treatment in advanced NSCLC. If the compound obtains regulatory approval, SFJ will be in line to earn milestone and other earn-out payments. No other financial details were disclosed. This is the second collaboration between the world’s largest pharma and San Francisco-based SFJ, founded in 2009 a co-development partner for pharma and biotech. Earlier this year, the two partnered to run a Phase III trial in Asia of Inlyta (axitinib) for adjuvant treatment of patients at high risk of recurrent renal cell carcinoma following nephrectomy. – JAH

Photo credit: Wikimedia Commons

Financings of The Fortnight Sneaks A Peek At The VC Survey

Pennant races are on. Kids are back to school. (Wait, whatever happened to summer lasting until Labor Day?) And 90% of the venture capital world is on vacation. Whew. Good thing we caught more than 100 of the top life science VCs earlier this summer to participate in START-UP Magazine’s second annual Life Science VC Survey.

We’re putting the finishing touches on our package of feature stories and survey results, including a series of questions for corporate VCs, an ever-more important subset of investors whose role in funding biotech innovation has changed dramatically in the past few years. We’ve asked our participants a battery of questions, and here's a sneak preview: The overall mood hasn’t improved from last year’s survey, and unlike last year, a handful of VCs planning to hit the pavement and raise new funds now tell us that they’re willing to take lower terms and fees (virtually zero said so in 2011). Some are also moving forward with plans for smaller funds and smaller staffs.

(You can find the 2011 survey here and here. Subscription required.)

One partial counterweight to the sour mood and fundraising difficulties is the Food and Drug Administration. In 2011, not a single optimist said the FDA was a reason to feel positive, while 80% of the pessimists said the FDA was one of the largest obstacles the life science industry faced. In 2012, it’s not all horseshoes and hosannas, but 23% of the people who call themselves optimists said the FDA was a reason to feel positive -- a big jump from zero -- while 73% of the pessimists named the FDA as an obstacle. Given the consistency in recent years of the nearly comical vitriol life science VCs have aimed at FDA, any improvement is notable.

Another focus of our survey is therapeutic area. VCs are eternally curious what their peers find the most interesting areas for investment, whether to avoid the herd mentality or to avoid being left behind. Topping the list of most compelling indications or technologies on the biopharma side for the second straight year are oncology and rare disease. The latter we find particularly interesting, seeing how some observers of the field think we could be in a rare-disease bubble at the moment, typified by the Enobia Pharma sale to Alexion at the end of 2011.

One disease area that received a surprising boost of investor confidence in our survey was metabolics/diabetes, which went from solidly unattractive in 2011 to just a bit more hot than not. On the flip side, one of this year’s biggest losers was next-generation biologics platforms, perhaps an acknowledgment that the gold rush of a few years ago has played itself out.

We also asked about politics and policy, geography and stage preference, and we’re slicing and dicing the results in various ways to find out how these subgroups of respondents intersect. We’ll feed you more tidbits in our next column and on Twitter (@invivoblogalex), but if we give away more this time around we’ll have to sing for our supper. Let’s get on with our round-up. Survey says it's…

Novira Therapeutics: Anti-viral drug developer Novira said Aug. 23 it had closed a $23 million Series A round led by first-time investors 5AM Ventures and Canaan Partners. Contract research organization WuXi PharmaTech, based in Shanghai and listed in the U.S., also participated in the round. Three-year-old Novira had been backed previously by seed-stage backer BioAdvance, as well as regional angel groups Mid-Atlantic Angel Group, Robin Hood Ventures and Delaware Crossing Investment Group, which had collectively supplied about $3.5 million to date; all contributed to the new round as well. The Philadelphia-area company plans to develop novel therapies that disrupt viral replication and proliferation by inhibiting the life cycle of the capsid, the protein shell that encloses genetic material inside of viruses. It currently plans to investigate drugs for hepatitis B and HIV, although candidates have not yet been identified for either indication. The company intends to retain rights to a lead program in HBV as it progresses into mid-stage trials, while it may partner an HIV program at an earlier stage, according to CEO Osvaldo Flores. Although HIV research has spurred excitement with renewed hope for a cure, deal-making in the space remains a rare occurrence. An SEC filing indicates that Novira has collected the first $11 million of a $26.5 million round, which Flores said includes the seed money as well. – Paul Bonanos

MediciNova: MediciNova, a specialty firm that licenses approved small-molecule compounds from Japanese companies for development and approval in the U.S., has signed a two-year, $20 million common stock purchase agreement with Aspire Capital Fund. The funds will lengthen MediciNova’s runway as it tries to move a pair of lead programs into pivotal clinical trials. Aspire has bought 606,000 MediciNova shares at $1.65 per share, the firm’s closing price on Aug. 2, for a total of $1 million. Headquartered in both San Diego and Tokyo, with shares traded on both countries’ stock exchanges, MediciNova was one of the more successful biotech IPOs in 2005, raising $113 million.  The income bought additional time for MediciNova’s business model in 2009, allowing it to outlast Biotechnology Value Fund in a battle to acquire Avigen, which brought MediciNova additional cash and the compound ibudilast (MN-166/AV411), in development for progressive multiple sclerosis, neuropathic pain and drug addiction. Ibudilast is currently in grant-funded mid-stage trials for drug addiction. MediciNova’s other lead program is bedoradrine sulfate (MN-221) for acute asthma and chronic obstructive pulmonary disorder. The Aspire deal will help MediciNova advance '221 into a Phase III trial in either acute asthma or COPD by early 2013, but it's unclear how much beyond that trial the cash will last. Based on Aspire’s previous dealings with biopharmaceutical companies, which include similar equity line arrangements with Bionovo and NuPathe, MediciNova expects Aspire to be a long-term investor, with an ownership interest that should reach and then remain in the 5% to 10% range. -- Joseph Haas

Elcelyx Therapeutics: San Diego-based Elcelyx announced a $7 million extension of its Series B financing on Aug. 13, as well as a pair of executive hires, including former Biogen Idec and Mpex Pharmaceuticals business development leader Mark Wiggins as its senior VP of business development. Built upon a platform that produces first-in-class Gut Sensory Modulators (GSMs), Elcelyx plans to develop two products: Lovidia, an over-the-counter weight-loss supplement, and NewMet, a delayed-release formulation of diabetes drug metformin, which the company says will offer a much better safety profile than existing formulations. It’s the latest example of a biotech, or a management team, using a single platform to pursue a dual prescription/over-the-counter strategy. Elcelyx’s two products could offer a life cycle management opportunity for a future pharma partner. Elcelyx launched in 2010 and has raised about $20 million in venture capital over its lifespan, including $17 million under the B round. The $7 million extension was funded by existing backers Morgenthaler Venture Partners, Kleiner Perkins Caufield & Byers and Technology Partners. At present, Elcelyx is taking down $4 million of the extension, which CEO Alain Baron said will take the firm “well into efficacy trials” for Lovidia and NewMet. – J.H.

Relypsa: Still trying to get its phosphate binding agent into Phase III, Relypsa has raised nearly $50 million as part of an $80 million Series C round, according to a regulatory filing. Its lead compound, RLY-5016, is designed to linger in the GI tract and absorb excess potassium, a toxic side effect of certain drugs such as blood pressure medicine. An acute buildup of potassium is called hyperkalemia and can lead to arrhythmia or cardiac arrest. RLY-5016 has been tested in five clinical trials since entering the clinic in 2008 and currently is in a 300-patient, year-long Phase IIb trial for the treatment of diabetic nephropathy. Data from the ongoing trial are expected to be presented later this year. Two Phase III trials are expected to start in early 2013. The company plans to file for an NDA by the end of 2013 and will commercialize the drug on its own, president Gerrit Klaerner told “The Pink Sheet” DAILY. Relypsa is the reincarnation of Ilypsa, a company bought by Amgen in 2007. After paying $420 million, Amgen spun out the remaining four preclinical compounds; Ilypsa’s previous management team has overseen the business. Amgen took an equity stake in the company, less than 20%, when it was spun out. RLY-5016 appears to be tracking behind original expectations. In 2007, at the time the company was formed, management was aiming to advance RLY-5016 into Phase III trials within 18 to 24 months. Later, upon the Series B raise in 2010, the company said those funds would be used to take the compound through Phase III. – Lisa LaMotta
 

Financings Of The Fortnight: Idenix To Forge Ahead On HCV Combo After Novartis' Departure

Idenix Pharmaceuticals has been quite busy of late, on the fundraising front and elsewhere. A clinical-stage biotech with a market cap of nearly $900 million and no marketed products, the virology-focused firm has just exited a long-term collaboration with Novartis, raised $191 million in a registered direct offering, and previewed preclinical data for a hepatitis C candidate that it says appears to offer greater antiviral activity than any other clinical compound in its class.

Also of note, with IDX184, Idenix owns one of four nucleoside polymerase inhibitors still in clinical development for HCV, and that class widely is seen as the backbone for future combinations of all-oral, direct-acting antivirals that could transform a burgeoning market highlighted by millions of warehoused and potentially tens of millions of undiagnosed patients. The peak annual market for HCV drugs has been estimated as high as $20 billion worldwide, and Idenix, while trailing clear leader Gilead Sciences, is positioned as well or better than many more established and deep-pocketed companies racing to grab a significant chunk of that market.

Notably, Idenix might be in an enviable position compared with big pharma rival Bristol-Myers Squibb, which may have flushed $2.5 billion down the drain in January when it bought Inhibitex and its promising mid-stage “nuc,” INX-189. On Aug. 1, Bristol announced it suspended dosing in a Phase II trial of that compound after one patient in the study suffered heart failure – and many Wall Street analysts subsequently have written off that compound (BMS-986094) as a failure.

Idenix CEO Ron Renaud isn’t declaring victory in the frequently changing HCV space, but it’s hard not to view the Cambridge, Mass., firm as being well-positioned, having just reclaimed full rights to ‘184 as the scarcity of such compounds worsens. After nearly a decade of working together on HCV candidates, Novartis and Idenix agreed to end their collaboration on July 31, a decision that Renaud told “Financings of the Fortnight” was a mutual recognition by both companies that a termination would put Idenix on the best footing to advance its HCV program in terms of both clinical and business development.

“Novartis understood that Idenix needed the flexibility to move forward with our pipeline and to have as many possibilities to combine our assets with other assets at various stages of development that the former agreement that we had with Novartis just would not allow,” he said. “There were too many onerous rights – both corporate governance rights and clinical pipeline rights – that prevented us from having fulsome discussions with potential partners about how to move forward together.” Novartis held an option for ‘184, but declined.

Novartis remains the largest shareholder in Idenix and it still stands to benefit significantly if Idenix is one of the winners in the HCV race, Renaud added. All Idenix owners had their ownership stakes diluted through a registered public offering that placed 23.5 million new shares at $8 apiece, including an over-allotment for offering managers JP Morgan and Leerink Swann. The RPO netted Idenix about $191 million, giving the firm runway through the first quarter of 2014, CFO Daniella Beckman said.

Idenix had $79.1 million cash on hand as of June 30, thanks in part to a pair of follow-on offerings in 2011 that netted a combined $105.4 million. Its shares had been trading in the $10 range in the weeks just prior to the offering’s pricing on Aug. 2, but closed trading on Aug. 8 down 4% to a palindromic $8.08 a share. Beckman and Renaud conceded that dilution always will be an issue for a clinical-stage biotech, but said their priority had to be gathering enough cash to see Idenix through a crucial Phase II trial testing ‘184 in combination with IDX719, the firm’s Phase II NS5A inhibitor for HCV.

“On the heels of our restructured deal with Novartis, we wanted to make sure we got any balance-sheet concerns behind us as well, and we wanted to be able to execute the business plan,” explained Renaud. That plan includes not just the combo study but also bringing a second-generation nuc, IDX368, into clinical development next year, with other nucs to follow. “This is going to take some considerable financial resources as well as human resources, and this capital raise will enable us to do that now,” he said.

Idenix intends to start both the Phase II combination study – expected to be an all-comers trial of about 200 HCV patients who will receive 100 mg of ‘184 once-daily and likely 100 mg of ‘719 once-daily, in a set of treatment groups some of which also will receive ribavirin – and the first Phase I trial for ‘368 before the end of 2012. The latter compound is the product of a project that has yielded 1,900 new compounds over the past 18 months in search of nucs superior to those in clinical development now (at Idenix, Gilead (GS-7977) and Vertex Pharmaceuticals (ALS-2200)).

“Right now, ‘368 appears to generate more triphosphate, which is what actually kills the HCV virus, than any other nuc that we’ve ever seen in clinical development,” Renaud asserted. “We suspect this a drug that we can start dosing at very low doses once a day and it appears at least preclinically to be very combinable with other classes of DAAs.”

And the HCV race goes on, as do other biopharmaceutical companies’ fundraising plans, which we now review in this installment of …

Mersana Therapeutics: A March collaboration with Endo Health Solutions to create next-generation antibody-drug conjugate therapeutics for cancer was a key turning point for Mersana Therapeutics, a new beginning signified by a $27 million recapitalization announced July 31. Under the financing, which Mersana called a Series A-1, the biotech will receive backing from New Enterprise Associates and Pfizer Venture Investments as well as a group of returning investors. Using its Fleximer conjugation technology to bind a wide variety of novel linkers with anti-tumor payloads, Mersana says it can create ADCs offering a wider variety of payloads, the ability to increase drug loading per antibody significantly while maintaining pharmacokinetic and physiochemical properties, and the capability to use antibody fragments as well as full antibodies. NEA’s participation in the round marks the first biopharma investment under its $2.6 billion NEA 14 fund. With its investment, NEA also will bring General Partner David Mott to Mersana as chairman of the board, while NEA principal Sara Nayeem will take a board seat. “NEA brings enormous financing capability plus tremendous intellectual resources,” said Mersana CEO Nicholas Bacopoulos. “Pfizer also adds to this validation.” Existing investors Fidelity Biosciences, ProQuest Investments, Rho Capital Partners and Harris & Harris Group also backed the round. Mersana raised $21 million through its Series A in 2005, augmenting that most recently with two sales of debt totaling $10 million in 2011 and 2012. – Joseph Haas

Hyperion Therapeutics: In the lone biotech IPO of this fortnight, Hyperion Therapeutics netted $53.5 million on July 31 by selling 5.75 million shares (including the 750,000-share overallotment) at $10, falling short of its $11-13 range. Hyperion, which has raised at least $100 million in venture capital, is awaiting an October PDUFA date on its lead compound Ravicti (glycerol phenylbutyrate) for urea cycle disorders (UCD), a group of rare genetic diseases caused by an enzyme or protein transporter deficiency in the urea cycle that leads to elevated ammonia levels in the blood. In March 2012, Hyperion acquired a global license to the drug from Ucyclyd Pharma, after initially receiving only limited rights in 2007. The only other branded FDA-approved therapeutic for UCD is Ucyclyd’s Buphenyl (sodium phenylbutyrate), and Hyperion holds U.S. co-promotion rights to that drug, plus an option on worldwide rights. Hyperion is the fifth rare disease company to go public in the last five years, according to Elsevier’s Strategic Transactions, and it’s the second-highest netting IPO behind MolMed SPA’s $82 million offering in February 2008. (MolMed’s orphan candidates include Phase III Arenegyr (NGR-hTNF alpha), a vascular targeting agent for malignant pleural mesothelioma.) Only two weeks out from its IPO, Hyperion has been trading in the black, closing at $10.35 on Aug. 8. Other rare disease players that have fared well include Aegerion Pharmaceuticals (which tried to go public twice before succeeding in October 2010): the lomitapide developer closed at $13.54 on Aug. 8, 42% higher than its $9.50 IPO price. That, however, was still lower than the bottom-end of its anticipated $14-16 IPO range. Novagali Pharma, which is developing a vernal keratoconjunctivitis candidate and debuted on the NYSE Euronext Paris Exchange in July 2010, went a different route and last year sold 50.55% of the company to Japanese pharma Santen Pharmaceutical, which paid €6.15 per share, almost double Novagali’s IPO price. – Amanda Micklus

Atterocor: Besides ADC developer Mersana’s $27 million Series A-1 recap round, FOTF recently saw another private biotech in the cancer space raise funds: Atterocor completed a $16 million Series A financing backed by Frazier Healthcare Ventures and 5AM Ventures on Aug. 3. (The last time these two syndicated together was for Marcadia Biotech’s $15 million Series A, along with Twilight Venture Partners; Roche later acquired Marcadia for $292 million upfront). Atterocor is developing candidates for one of the most uncommon types of cancer: adrenal gland cancers, which include adrenocortical carcinoma, neuroblastoma and pheochromocytoma. Atterocor’s founder and CEO Julia Owens says the new funding will help move a lead medicine into clinical trials. Not much has been revealed about the company’s work, however scientific advisor Gary Hammer, the director of the endocrine oncology program at the University of Michigan’s Comprehensive Cancer Center, has been focused on the mechanisms of adrenal-specific growth and differentiation via growth-factor signaling and transcriptional programs. He is specifically addressing dysregulated growth of adrenocortical stem/progenitor cells. Atterocor was established earlier this year and previously raised $500,000 in debt financing from a single investor. There are only a handful of competitors developing treatments for adrenal cancers. One of the most advanced is Astellas Pharma/OSI Pharmaceuticals’s tyrosine kinase inhibitor linsitinib, in Phase II for locally advanced or metastatic adrenocortical carcinoma. The European Commission granted orphan drug status to the candidate this past April. – A.M.

Exelixis: Small-molecule cancer therapeutics biotech Exelixis  has completed concurrent financings, which are expected to result in aggregate net proceeds of $361.9 million. For the $127.5 million common stock offering of 30 million shares (up from the 20 million originally proposed) at $4.25, Goldman Sachs and Cowen & Co. are jointly managing with Piper Jaffray, Stifel Nicolaus Weisel and William Blair & Co. co-managing. After the FOPO, the second-largest of its six follow-ons to date, Exelixis’ valuation is up to about $760 million, a steady decrease from the company’s last two FOPOs, first in March 2011 when the valuation was $1.4 billion and then in February 2012 when the market cap dipped down to $815 million. In the second part of the current fundraise and marking its first public debt financing to date, the biotech is offering $250 million worth of seven-year, 4.25% convertible senior subordinated notes (with an option to purchase additional notes up to an aggregate principal amount of $37.5 million). The notes are redeemable at a price of about $5.31 apiece (with a conversion rate of 188.2353 shares per $1,000 principal), which represents about a 13% discount to Exelixis’ 10-day pre-announcement average, yet a 25% premium to the FOPO share price. The company closed at $4.28 on Aug. 8, a 13% decrease from the Aug. 6 closing price. The debt offering is jointly led by Goldman, Sachs and Cowen; co-managers are Citigroup, Credit Suisse Group and Morgan Stanley. Exelixis will put the proceeds toward its extensive pipeline of oncology candidates, many of which are partnered with big pharma including GlaxoSmithKline, Sanofi, Bristol and Roche. In particular it needs the cash to advance its lead candidate cabozantinib (formerly XL184) – a dual inhibitor of MET and VEGF pathways – in Phase III for medullary thyroid cancer, and also in multiple clinical trials for other cancers including castration-resistant prostate, lung and ovarian. In 2008, BMS licensed exclusive worldwide rights to ‘184, paying a hefty $195 million upfront, but in 2010 returned those rights to Exelixis, which went on to develop the candidate on its own. In 2011, cabozantinib gained orphan status in the medullary and other thyroid cancer indications and FDA just granted a priority review, with a decision expected by late November. If accepted, this would be Exelixis’ first approval. – Maureen Riordan

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