A Rush And A Push And The Financings Of The Fortnight Is Ours

Meet us at the St. Francis, and bring your own damn water!

Happy Morgan's Eve, everyone. If you’re like FOTF, you’ve been preparing for the week ahead by breaking your day into 25-minute conversations. If our kids need to talk to us, we tell them to take the stairs to the tenth floor, run down the hall, squeeze past 120 people coming out of the bathroom, steal some bottled water left outside a partnering suite, and find Room 1450. Come in, sit down, just  wait while we finish a few emails on our phones. Yes? You can’t sleep? Not exactly an unmet medical need. We’ve also wondered a few times if a toddler’s point blank sneeze into one’s mouth counts as a new form of immunotherapy.

For those of you with older children, you might be practicing for JPMorgan this week when the conversation inevitably turns to financing. Hit your yard-work milestones to trigger the next allowance tranche. That’s the way it is as long as you live under my term sheet, er, roof. 

Whatever the year, there’s always a sensation of falling out of a holiday tree, or warm cozy bed, directly into the boiling JPMorgan cauldron. This year, organizers gave us a bit of a break, pushing the conference back one week, but the slight lag was immediately filled up by a breakneck filing of IPO documents: Six so far in the new year alone, adding to several that squeezed their paperwork through before the ball dropped on New Year’s Eve. (We have details on one of those filers, Flexion Therapeutics, in our roundup below.) A few of those, plus others still in the IPO queue after filing in the back half of 2013, have significant Phase II or Phase III clinical milestones. Yet others that haven’t declared publicly their IPO intentions also have big milestones upcoming, and we can’t help but think their S-1’s won’t be too far behind if a few companies currently in the queue make their debuts soon.

In the next Start-Up, our colleague Stacy Lawrence previews several private companies with upcoming late-stage clinical data, and one thing’s clear: There’s not a lot of 100% novel technology working up the pipeline. That’s not to say the companies in question aren’t doing important or technically difficult work. But many of the products due for data have an element of de-risking that made for faster development and a more reasonable investment thesis, especially worth noting when the company is making a push in an indication where approval has been an elusive target.

For example, Intarcia Therapeutics is delivering an off-patent diabetes drug, exenatide, via a subcutaneous pump that carries a year’s worth of treatment. Intarcia hasn’t filed an S-1 yet, not publicly anyway, but its deep roster of crossover investors makes one hear a ticking clock -- or is that the beat of the subcutaneous pump?

We can’t help but pump Start-Up's upcoming A-List, the annual roundup of the year’s top Series A financings. The 2013 winners include entrants from the fields of gene therapy, immunotherapy, epigenetics and food allergies, and a few have had very unusual financial backers. Learning who's who will be your reward for surviving next week.

And a year from now, perhaps the 2014 A-Listers will include a biotech that has launched with equity crowdfunding. That would be a first. One crowdfund platform that we’ve reported on before, Poliwogg, will try to make a splash in San Francisco next week, so stay tuned to our colleagues from "The Pink Sheet" and Start-Up for more on that. We regret to inform, however, that splashing is generally frowned upon these days in California. Unlike IPOs, raindrops are in short supply, and 2013 was the driest year on record. So we ask you out-of-towners to think twice before showering while you’re here, and if a stranger on the street looks longingly at your Evian, be kind. We’re parched. Better yet, you can save water by drinking your fill of 2014’s first installment of...

Flexion Therapeutics: As its clinical candidates for treating osteoarthritis inch closer to pivotal studies, Flexion has joined the IPO parade. In case anyone’s knees hurt from all that marching, Flexion’s three compounds are formulated for long-lasting pain relief and injection directly into the knee joint. FX006, Flexion’s lead product for front-line use, is a formulation of a common steroid, triamcinolone, that in 2013 posted solid Phase IIb results, but the company still has work to do: it plans a second Phase IIb trial that is set to begin in the second quarter of 2014, to determine the drug’s optimal dose before Phase III. A second product, FX005, is a sustained-release p38 inhibitor; Flexion is positioning the product for end-stage (pre knee replacement) osteoarthritis pain. The company aims to file an IND for a third product, the TrkA antagonist FX007 for post-op pain, later this year. Both ‘005 and ‘007 were licensed from AstraZeneca PLC, in separate deals. Flexion’s founders, Michael Clayman and Neil Bodick, famously institutionalized “A-Team”-style rapid and inexpensive to-proof-of-concept drug development at Eli Lilly & Co. as creators of that company’s ‘Chorus’ model, and struck out on their own in 2007 to monetize POC assets as a stand-alone biotech. At the time, they anticipated that by licensing in pharma assets they could develop and flip them quickly. But the economics they were offered weren’t going to provide the kind of returns they originally anticipated. The company’s reinvention underscores the difficulty of timing biotech models to pharmaceutical tastes, and – at least during the comparably leaner years of 2011-12 – pointed to industry’s increased avoidance of clinical risk. Flexion’s private backers – Versant (~30%), Sofinnova (~19%), Pfizer (~17%), 5AM (~16%), and Novo AS (~11%) – surely hope that timing public investors’ enthusiasm for biopharma is an easier task. – Chris Morrison

AC Immune: When the big Alzheimer’s Phase III trials featuring anti-amyloid treatments failed in 2012, many eyes in the field turned to AC Immune. With arguably the deepest Alzheimer’s pipeline of any private biotech, the Swiss firm said January 9 it has raised a Series D round of 20 million Swiss francs ($22 million) from existing investors. It also said it has launched a Phase I trial of a vaccine to stimulate a patient’s antibodies against phosphorylated tau, a protein that accumulates in tangled formations within neurons. Tau tangles, along with amyloid plaques, are considered two signposts of Alzheimer’s disease, but much debate remains whether the pathologies are treatable or simply an effect of disease progression. Meanwhile, one of the world’s most closely watched Alzheimer’s trials has just begun dosing patients with AC Immune’s monoclonal antibody crenezumab. The trial is funded by Genentech, the Banner Institute, and the US National Institutes of Health, and it involves people in Colombia with high genetic risk of Alzheimer’s who have yet to show cognitive decline. If successful, it would be one of the first signals that anti-amyloid therapy has a preventative effect if administered before symptomatic onset. Dosing began in December, according to AC Immune. The firm has raised 84 million Swiss francs since its 2003 inception, all from individual investors. – Alex Lash

Receptos: Seven months after completing its IPO, Receptos turned back to public shareholders to raise more money, grossing $102 million in a follow-on public offering on January 8. The biotech sold 3.3 million shares for $30.75, a 120% increase from its $14-per-share IPO price. Days before the offer closed, Receptos started enrolling patients in the Phase III portion of its RADIANCE trial of lead candidate RPC1063 for relapsing multiple sclerosis. RPC1063 is being tested in a separate Phase II trial in ulcerative colitis, and Receptos plans to release top-line data on both indications in mid-2014. Recently the USPTO issued composition-of-matter patents on RPC1063, giving the compound patent coverage until at least May 2029. Receptos is busy with others in the pipeline too: it’s designing a Phase II study of RPC4046 in active eosiniphilic esophagitis. AbbVie partnered the anti-interleukin-13 antibody with Receptos in May. Once the study results are published, AbbVie has an option to enter into a worldwide co-development deal with Receptos, which would retain co-promotion rights and split US profits. In addition, this year Receptos expects to select a lead agent from its glucagon-like peptide-1 receptor small-molecule positive allosteric modulator program and start IND-enabling studies in Type II diabetes. -- Amanda Micklus

Blueprint Medicines: The Cambridge, Mass. biotech said January 7 it had secured a $25 million Series B round as it pushes its selective kinase inhibitors, aimed at specific mutations mapped through its platform, toward the clinic. It says its lead compounds should enter the clinic in 2015. They are an inhibitor of the mutation that drives both systemic mastocystosis, an overproduction of mast cells in various organs and tissues, and a subset of gastrointestinal stromal tumors; and an inhibitor of a mutation that leads to a specific type of hepatocellular carcinoma. The firm was initially funded by Third Rock Ventures and Fidelity Biosciences, but neither of those deep-pocketed groups has taken the lead for the B round. Instead, Swiss oncology investment specialists Nextech Invest led the round, with crossover investors Biotech Value Fund and Casdin Capital, Third Rock, and Fidelity, and other undisclosed investors joining in. The crossovers could be a sign that Blueprint is gathering itself for a run at the public markets this year. The firm has been led since last spring by an interim CEO, Third Rock partner Alexis Borisy, who took over for co-founder Chris Varma without an announcement. – A.L.

Best of the Rest (Highlights of Other Activity This Fortnight): Alexar Therapeutics, the latest biotech to come out of asset-based financing entity NeXeption, closed on a $21.5 million Series A round led by New Science Ventures and Third Point Ventures to support work on a topical liver X receptor agonist for inflammatory cutaneous disorders…Auspex, which has a S-1 on file to go public, raised more venture dollars: the orphan disease-focused biotech received $20 million in Series E financing and $15 million in a venture loan...Neuralstem will advance cell therapeutics and small molecules, including lead spinal cord stem cell-derived NSI566 for ALS, thanks to a $20 million registered direct offering…after postponing its IPO in November, GlycoMimetics revived the offering and set terms at 5.75 million shares for $8…and GW Pharmaceuticals, maker of cannabinoid prescription drug Sativex, raised $88 million in a FOPO. -- AM

Stampeding wildebeests (heading to the Celgene presentation?) courtesy of t3rmin4t0r under Creative Commons license.

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. 

Deals Of The Week Watches Crowdfunders Multiply Like Rabbits

That giant sucking sound you hear is investors pulling their money out of early-stage drug and device research. As we’ve chronicled here and in our other publications, big pharma has valiantly stepped in to fill the breach, whether through corporate venture or academic tie-ups, but that won’t be enough to budge the gathering volume of biomedical discoveries stalled between lab and clinic.

Some investors, thinking the JOBS Act and its provisions governing general solicitation will usher in a sea change in how biomedical ideas get funded, have pointed to crowdfunding as a solution. We’ve written about a number of these entities, including MedStartr Inc., Poliwogg LLC, and most recently, HealthiosXchange.

On May 17, VentureHealth LLC threw its hat into the ring. VentureHealth is the creation of Mir Imran, who founded and manages its sibling companies InCube Ventures LLC and InCube Labs LLC, an incubator and collaborative research lab that spins out one or two companies each year. InCube Ventures typically invests in start-ups out of InCube Labs as well as in external companies. Mir himself holds more than 200 issued patents, is the inventor of numerous devices, and has founded more than 20 medical device companies, 15 of which have had successful exits via trade sale or IPO.

There is some debate about whether crowdfunding threatens VC by accessing a new and better idea flow and a broader base of investors. Greg Simon, CEO of Poliwogg, sees it as potentially disrupting the traditional investment supply chain, knocking out investment banks and venture, along with their bloated fees.

Simon told us that venture would probably not be interested in crowdfunding because the numbers are too small and, besides, venture’s business model is based on investing other people’s money.

Mir and his colleagues at InCube think otherwise. VentureHealth embodies the idea that the best of venture can be blended with the best of crowdfunding, to the benefit of venture investors, citizen LPs, entrepreneurs, and biomedical technology.

The potential of linking venture to crowdfunding was unwittingly demonstrated by an early pioneer. MedStartr, a crowdfunder of low-tech health and wellness products to non-accredited investors, operates on what amounts to a donation model. Investors see no return except for the warm glow that comes with contributing to a good cause. But an interesting thing about its crowdfunding model is that venture, angel, and other kinds of investors are on the sidelines watching. And every so often, when they see a good idea, they swoop in and fund it. MedStartr, sadly, is unable to participate in those exits.

But VentureHealth is.

For starters, VentureHealth takes a carried interest fee on what it earns in a sale or other liquidity event, much like a VC would. Mir’s partner, Andrew Farquharson, claims that this model aligns the interests of VentureHealth with its investors. Unlike some other crowdfunding portals, VentureHealth has no plan to become a registered broker-dealer.

VentureHealth’s plan is to only go out to accredited investors. In fact, it will be quite selective in the investors it brings in – physicians, researchers, individuals who understand the technology being offered and the market it’s targeting. As long as they meet those criteria, they can be experienced accredited investors or novice accredited investors who meet the minimum financial requirements set by the SEC but have traditionally been excluded from investing in private companies. Mir told us that VentureHealth is not interested in going out to non-accredited investors. It can raise all the money it needs from its accredited base, with additional support from InCube Ventures and, where warranted, from other venture co-investors.

It’s refreshing to find a crowdfunder who rejects the populist cant that many of its peers go in for. That’s not to say that VentureHealth isn’t opening up ground floor investment opportunities for investors who would otherwise be excluded. But it’s not exactly democratizing the process for all comers.

VentureHealth will focus on devices, drugs, diagnostics, and mobile health. In many cases, says Mir, InCube Ventures will co-invest alongside VentureHealth. The crowdfunding entity will likely have broader a remit for the deals it pursues than its venture sibling, but where they intersect, there will be co-investment. Venture health will be able to draw on the traditional venture strengths of screening deals, doing the diligence, managing companies, and providing follow-on funding.

The two exits listed on VentureHealth’s website illustrate the flexibility and potential of the venture/crowdfunding model especially when managed by industry insiders with extensive relationships and know-how.

Nfocus Neuromedical Inc. is a developer of a neurovascular device with an initial indication in brain aneurysms. The company was founded by Mir and co-inventor Martin Dieck. It was acquired in February by Covidien PLC in a structured acquisition for $51 million upfront and a $21 million earn-out payment. VentureHealth raised $1.49 million. Oxford Bioscience, DFJ e-Planet Ventures and others participated in financing rounds.

In the other exit, BodyMedia Inc., a developer and marketer of wearable body monitors that communicate with mobile devices, was acquired by Jawbone for $100 million in May 2013. VentureHealth raised $469,000. InCube Ventures, Comcast Ventures, and others participated in financing rounds.

Mir acknowledges that there’s an incestuous element to these early exits in which he wears the hats of company founder, venture co-investor, and crowdfunder. That might change over time. But he underscores another advantage of VentureHealth’s tight association with its VC sibling: “When Incube Ventures makes an investment from our fund, we keep a sizeable amount of dry powder on hand for follow-on rounds.” His point is that most angel investors – Mir says crowdfunding is organized angel investing – can’t look that far into the future and reserve capital for follow on fundings.

VentureHealth’s raises currently range between $500,000 and $1.5 million. Mir expects that number to rise as his accredited investor base gains experience. VentureHealth lists one “active investment” on its site: Channel Medsystems Inc. is developing an office-based, cryoablative technology to treat excessive menstrual bleeding. It raised $9.7 in an April B round led by Boston Scientific, toward which VentureHealth contributed $875,000.--Mike Goodman

While the crowdfunding space gets more crowded, deals and acquisitions this week continued their torrid pace.

Valeant/Bausch & Lomb: M&A-focused Valeant Pharmaceuticals International Inc. announced its biggest acquisition yet on May 27, agreeing to pay $8.7 billion to acquire privately held eye care company Bausch & Lomb Inc.  The transaction will increase Valeant’s eye care portfolio substantially: B&L offers a suite of prescription and over-the-counter drugs, contact lenses and lens-care products, as well as ophthalmologic surgical devices and instruments.

CEO Michael Pearson said the deal would create a global eye care platform within Valeant, retaining the B&L brand name,that will provide pro forma net 2013 revenue of roughly $3.5 billion. Of the $8.7 billion price tag, $4.5 billion will go to B&L’s owners at Warburg Pincus, while the remainder will retire B&L’s outstanding debt. Valeant, which had $414 million cash on hand at the end of the first quarter, said it will finance the transaction mainly through debt, while also raising between $1.5 billion and $2 billion in new equity. The Canadian specialty pharma projects $800 million in cost synergies from the transaction by the end of 2014.

The deal, unanimously agreed upon by both companies’ boards and expected to close during the third quarter, follows Valeant’s recent and apparently unsuccessful courtship of Actavis Inc. Acquiring B&L will enable Valeant to balance its revenue mix from both a geographic and therapeutic perspective. After closing, about 50% of Valeant revenue will stem from the U.S., with Eastern and Central Europe comprising 15%, Western Europe and Japan 13%, and Latin America, Canada, Australia, Southeast Asia and South Africa rounding out sales. In terms of therapeutic areas, dermatology and aesthetics will contribute about 34%, eye health about 32%, neurology and “other” about 12%, and consumer and oral health about 11%.--Joe Haas

GlaxoSmithKline/Okairos: GlaxoSmithKline PLC has done the biggest takeout of a private, clinical-stage European biotech so far this year with the acquisition of Okairos SRL for that company’s Phase I RSV vaccine and T-cell stimulating technology. for the biotech’s VCs nabbed roughly a 10x return on their €23.2 million invested capital.

Vaccines are a core therapeutic area for GSK. With Okairos, it hopes to have the basis of a first-in-class blockbuster. RSV is a common virus that presents with cold-like symptoms. In infants under one year old in the U.S., the disease is the most common cause of bronchitis and pneumonia and can require hospitalization or occasionally be fatal. Okairos’ vaccine provided “complete protection” against RSV in preclinical testing on rats and calves; the biotech started a Phase I trial in 40 healthy volunteers in February. MedImmune Inc.’s Synagis (TK) is a monoclonal antibody used as a preventative in premature and other high risk infants, but there is no RSV vaccine or post-infection therapy on the market.

In addition to RSV, Okairos has four clinical stage vaccine programs for malaria, HIV and hepatitis C (prophylactic and therapeutic). The Okairos platform and much of the management came out of Merck & Co. Inc. Okairos co-founder and CEO Riccardo Cortese was the founder and head of the Istituto di Ricerche di Biologia Molecolare (IRBM) in Rome, which later became a subsidiary of Merck. He departed Merck, taking much of his original IRBM team with him, and in-licensed the technology from the pharma in 2007.--Stacy Lawrence

AstraZeneca/Omthera: In its quest to reshape its cardiovascular pipeline, AstraZeneca PLC bypassed commercial-stage fish oil pill maker Amarin Pharmaceuticals Inc. announcing plans May 28 to acquire Amarin’s rival Omthera Pharmaceuticals Inc. instead. By acquiring Omthera, AstraZeneca accepts more risk, but gains an NDA-ready asset for dyslipidemia for considerably less than it would have cost to acquire Amarin ([A#14130528004]). AstraZeneca will pay Omthera $12.70 per share, or approximately $323 million, an 88% premium over Omthera’s closing price on May 24. The enterprise value of the deal is lower, about $260 million after incorporating Omthera’s cash balances of roughly $63 million, the company said.

In addition to the upfront cash from AstraZeneca, Omthera shareholders will receive contingent value rights of up to $4.70 per share, about $120 million, tied to milestones for Omthera’s lead product Epanova. The product, a mixture of polyunsaturated free fatty acids derived from fish oils, namely EHA and DHA, has demonstrated efficacy in Phase III studies for reducing triglyceride levels, as well as non-HDL cholesterol in combination with a statin, in patients with hypertriglyceridemia.

It is an indication for mixed dyslipidemia, a broader patient population, that both AstraZeneca and Amarin hope to pursue, and there, Amarin is ahead. Its product, Vascepa, is already on the market, and the company is awaiting action from FDA on an sNDA for mixed dyslipidemia. But, with a market capitalization of close to $1 billion, Amarin would have been a more expensive takeout.--Jess Merrill
 
ThromboGenics/Eleven Biotherapeutics: Following the recent U.S. and European launches of its first product, the macular adhesion therapy Jetrea (ocriplasmin), Belgian biotech ThromboGenics NV now wants to build on that success by developing a range of ophthalmic products. As part of that strategy, it has licensed technology from U.S. company Eleven Biotherapeutics to design a new protein therapeutic targeted at diabetic eye diseases such as diabetic macular edema.

ThromboGenics has identified a biologic target involved in diabetic eye diseases, and will use Eleven's AMP-Rx protein design technology to create a novel product, the companies announced May 28. Eleven has received an undisclosed upfront payment, and will receive development, regulatory and sales milestones plus royalties on any protein developed using the technology. Eleven argues it has already validated the technology by developing its own lead protein therapeutic, EBI-005. The product is being evaluated in a Phase Ib study for the treatment of dry eye disease.

ThromboGenics is a European biotech success story. In addition to launching Jetrea in the U.S. on its own at the beginning of 2013, it has also received a total of €90 million ($117 million) in milestone payments from ex-U.S. Jetrea licensee Alcon (a division of Novartis AG), after that company gained EU approval and subsequently launched the product in the U.K. and Germany. The biotech expects "significant" royalties from Alcon's net sales of Jetrea.--John Davis

Amgen/Astellas: Amgen Inc. took a second stab at the Japanese market with an alliance and joint venture with Astellas Pharma Inc., five years after selling off its Japanese affiliate and portfolio to Takeda Pharmaceutical Co. Ltd.

The alliance with Astellas, announced May 29, provides Amgen a co-development and co-commercialization partner for five products. The furthest in development are AMG 145, a PCSK9 monoclonal antibody  in global Phase III trials and in Phase II in Japan with a lead indication of hyperlipidemia; and romosozumab, a sclerostin mAb in global Phase III and Phase II/III in Japan for osteoporosis. Anti-HGF mAB rilotumumab is in Phase I in Japan for gastric cancer, and MET inhibitor AMG 337 for gastric cancer and blinatumomab for hematological tumors are still in preclinical.
The alliance for the five products will last through 2032 at the latest. Astellas would pay undisclosed royalties to Amgen for any products that reach market, but the companies will otherwise share development costs and profits 50-50.

Astellas and Amgen also formed a joint venture, Amgen Astellas BioPharma KK, which is structured to allow Amgen to turn the operations into a wholly owned Japanese affiliate as soon as 2020. The JV, 51% owned by Amgen, 49% by Astellas, will open Oct. 1 in Tokyo and will comprise seconded employees from Astellas, transferred employees from Amgen and new hires. However, a source close to Amgen’s previous Japan operations said Amgen may have trouble with recruitment after exiting the country.

At a May 29 press conference in Tokyo, Amgen CEO Robert Bradway said, “This is the alliance we expect to create a platform for Amgen to have its own operations in Japan.”--Dan Poppy

Pfizer CTI/UCSF: Pfizer Inc.’s Centers for Therapeutic Innovation (CTI) has broadened its scope through a deal with the University of California San Francisco that will focus on small molecule research – a first for CTI. Until now, the Pfizer initiative had focused only on biologic projects. Under the new collaboration, CTI will provide UCSF with funding and scientific expertise to support preclinical and clinical development of the compounds. The therapeutic areas and number of compounds included in the collaboration were not disclosed, but UCSF is eligible for milestone payments and royalties should any of the compounds advance through commercialization. CTI is expected to engage some of its other partners in small molecule research.

CTI was set up by Pfizer in late 2010 to allow the Big Pharma to better engage scientists on medical campuses and in research institutions. Pfizer set up hubs in San Francisco, New York, and Boston and has committed hundreds of millions to the projects. CTI is expected to expand to as many as eight cities.
The first initiative under the CTI banner was a collaboration set up between CTI and UCSF in November 2010. At the time, Pfizer committed $85 million of funding over a five-year period.--Lisa Lamotta

There's A Financings of the Fortnight In Every Crowd

"Psst, wanna buy some biotech?"

It’s already helped rock singers and indie film makers and arapaima trackers. But can crowdfunding help fill the life sciences venture gap?

The JOBS Act of 2012, signed into law by President Obama in April, aims to let small private companies raise money and go public more easily. Part of the law deals with the brave new world of equity crowdfunding, or selling private shares to the grass roots. Many of the details have yet to emerge from the Securities and Exchange Commission, which is charged with writing the new rules, including those that regulate crowdfunding. That means US entrepreneurs eager to use the model for the time being have to give something other than equity as remuneration for their backers’ cash. On the science-focused site PetriDish.org, you can search for projects based on the awards they’re using as compensation. (Get back to us when someone offers hats.)

Another example a bit closer to our hearts – or more accurately, our guts – are two citizen-science projects on the crowdfunding site IndieGoGo that ask the unwashed masses to submit body swab  samples and help build massive microbiome databases. (The more unwashed the masses, the better!) Both of the projects, American Gut and uBiome, have a sliding donation scale, but for less than $100, contributors will receive a kit to swab their various regions and, er, effluences, and submit them for analysis. Once processed the personal microbial profiles are made available back to the contributors. (Hey, a hat would be nice, too.) We’ve reported on the caution VCs have shown so far toward the wealth of microbiome data emerging from this new field, so we’re eager to see if projects like these, if and once they meet their crowdfunding goals, draw interest from more traditional investors. 

Despite the temporary regulatory limbo, plans are afoot in the US to create crowdfunding platforms that let start-ups sell equity. (We’ll dig into one of those plans in the next Capital Matters column of START-UP.) Elsewhere, the model is already underway. As we noted in this column in October, the French crowdfunding site Wiseed.com shepherded grassroots investors to what it says is the first-ever equity crowdfunding exit – through a biotech firm, no less. French antibiotic developer Antabio raised €300,000 from 207 crowdfunders in late 2010. The firm pulled in a Series B round from an angel investor a year later, and in mid-2012, the same angel offered to buy out the crowdfunders’ shares. It’s not clear what kind of return they received. An Antabio spokeswoman told the IN VIVO Blog in October it was a 2x return, but Wiseed’s own material calls it a 44% return. And the co-editor of this site says he invested €1400 and received €2434, a 73% return. (When we get clarification, we'll pass it along.)

Back in Washington, the SEC recently held a small-business meeting and took public comment on what its JOBS-related rules should look like. Some of the key crowdfunding questions remain up in the air, such as: Should equity crowdfunding services be regulated lightly, like the arts-donation site Kickstarter, or treated like broker-dealers? With serious questions like that still unresolved, we probably won't know anytime soon whether crowdfunding can become a real piece of the life science funding puzzle. But you can still find all the other puzzle pieces every two weeks by opening the rectangular cardboard box marked…

BioTime: The San Francisco Bay Area stem cell company said November 15 it has secured $10 million from an unnamed private investor to help pay for its proposed acquisition of assets from stem-cell pioneer Geron. Those assets have been in limbo for a year after Geron said abruptly in November 2011 it would end its stem-cell R&D to focus on small molecule cancer treatments. Geron’s spinal-cord injury treatment, derived from embryonic stem cells, was the first of its kind to enter the clinic, the most advanced example of cutting-edge stem-cell technology that has, to date, been slow to attract backers beyond California’s publicly funded regenerative medicine agency. Led by a Geron cofounder and its former CEO, BioTime in October made a public offer for Geron’s stem-cell assets. On November 15, concurrent with the financing announcement, BioTime published a non-binding letter of intent with Geron. If consummated under the terms outlined in the letter, the deal would create a new company to house the Geron assets, with Geron shareholders receiving more than 21% of the common stock and warrants to buy 8 million common shares of BioTime itself. The unnamed financier would put $5 million into the new company in exchange for 7% of the common stock and three-year warrants for roughly 350,000 shares at an exercise price of $5 per share. In addition, BioTime would contribute to the new company $5 million in cash, $30 million in BioTime common shares, warrants, and other rights. The anonymous investor’s other $5 million would go to the parent BioTime to buy 1.35 million common shares at about $3.70 per share, plus three-year warrants to purchase 650,000 shares with an exercise price of $5 per share. – Alex Lash

Lanthio Pharma: New European biotech start-ups have been few and far between this year. Tapping an unusual syndicate, however, the new Dutch firm Lanthio said November 27 it has raised a €4.8 million Series A round to push a lead compound from its peptide discovery platform into clinical trials, likely to treat lung fibrosis. The round was led by seed investor BioGeneration Ventures, which specializes in Dutch start-ups. But the surprising part of the funding news is that 20-year-old German antibody firm (and first-time investor) MorphoSys also took part. It will take a minority stake in Lanthio, and it will also become an R&D partner, receiving what the companies called “preferred rights to exclusively license” Lanthio’s technology for drug discovery. No financial details were disclosed. Spun out of the University of Groningen in 2011, Lanthio’s platform produces peptides that are stable in circulation and act as receptor agonists – relatively rare, as most peptide technologies find it easier to produce receptor antagonists. Other investors included INKEF Capital and Hanzepoort. INKEF Capital is an investment vehicle for the largest pension fund in the Netherlands, Stichting Pensioenfonds ABP. The round remains open for one more investor, Lanthio CEO Bart Wuurman told our colleagues at “The Pink Sheet” DAILY this week. "The number of European life science VCs with money to invest in new companies can be counted on one, maybe two, hands, as they appear to be keeping back financing for their existing investments," Wuurman said. – John Davis

Applied Genetics Technology: As we noted in September’s issue of START-UP, some VCs have taken a shine to gene therapy companies lately. Once considered far too risky for investors, the field has seen an unlikely renaissance recently, thanks to improved clinical data sets, improvements in manufacturing, and even a drug approval that could be a bellwether. On Nov. 19, the latest investment in the sector went to Gainesville, Fla.-based Applied Genetics Technology Corp., which reaped $37.5 million in a new Series B round. Leader Alta Partners was joined by first-time backer and GSK affiliate SR One as well as academic spinout specialist Osage University Partners. Returning investors from AGTC’s $11.8 million Series A round in 2009 included InterWest, Intersouth Partners and MedImmune Ventures. AGTC will use the funds for a Phase II trial on a therapy for alpha-1 antitrypsin deficiency, a protein disorder that leads to loss of lung function and liver damage, as well as early-stage treatments for the rare eye disorders achromatopsia and X-linked rentinoschisis. AGTC uses adeno-associated virus vectors to insert DNA into cells in order to correct genetic disorders. In early November, Belgian gene therapy company uniQure received European approval for Glybera (alipogene tiparvovec) to treat a rare protein deficiency, making it the world’s first gene therapy to gain regulatory approval. – Paul Bonanos

TauRx Pharmaceuticals: Just when you thought late-stage Alzheimer’s trials were done for a while, the Singapore-Scotland hybrid TauRx said November 20 it has received the first tranche of a $112 million equity investment to help push its lead candidate into Phase III. The money comes from a sole investor, Genting Management, a subsidiary of the Malaysian conglomerate Genting Berhad. The full investment is due by year’s end, according to TauRx, and gives Genting a 20% stake in TauRx. It brings the company’s total equity raised to nearly $300 million since its 2002 inception. The company says those Phase III trials have already begun enrolling. They will total more than 1500 patients around the world to confirm disease-modifying effects that a Phase II trial of an earlier version of the drug showed in mild to moderate Alzheimer’s patients, says the company. The firm’s treatment, dubbed LMTX, is aimed at dissolving the tangles of tau protein implicated in the decline of cognitive function of Alzheimer’s. The leading theory of the past decade or so -- that clearing accumulation of beta amyloid, another protein in the brain, would ameliorate the disease -- has encountered major setbacks in recent years, most notably the Phase III trial data released this year for the drugs bapineuzumab and solanezumab. Those disappointments have helped boost a cautious resurgence of work on other pathways such as tau that might lead to an Alzheimer’s treatment. They have also pushed researchers to theorize that beta-amyloid accumulation is a symptom of Alzheimer’s, and once present too late to respond to treatment. – A.L.

The Best of the Rest: To support lead candidate delafloxacin in Phase III for acute bacterial skin and skin structure infections, Rib-X Pharmaceuticals completed the first tranche of a $67.5 million Series 2 preferred share financing… led by Lilly Asia Fund, Chinese mAb developer Innovent Biologics  brought in $25 million in Series B funding… in a Series F to advance EPI743 in Phase IIb for two orphan indications, Edison Pharmaceuticals raised $20 million… French immunotherapeutics company TxCell cleared $15 million in a Series C round… Life Sciences Partners led a $12.8 million late-stage round for blood cancer drug maker Kiadis Pharma… NanoBio’s $11 million Series C will support development of infectious disease candidates and nanoemulsion-based vaccines… With $8 million from Pfizer Venture, Rhythm Pharmaceuticals expanded its June 2012 Series B to $33 million… MabVax Therapeutics raised $5.25 million in a Series B…an at-market RDO of Series A convertible preferred stock brought in $40 million for spec pharma BioDelivery Sciences to support completion of Phase III for chronic pain candidate buprenorphine… In an amended S-1 filing, Audeo Oncology set a range of $14-16 for 3.25 million shares in its planned IPO… A private placement of convertible debentures brought in $12.7 million for OTC-traded cancer therapeutics developer Arno Therapeutics… Concurrent with in-licensing of Genentech’s Phase I IAP inhibitor GDC0917, Curis secured $30 million in debt financing from Pharmakon in exchange for certain future Erivedge royalties. -- Maureen Riordan

Photo courtesy of flickr user James Cridland, whose photo stream is crowded with cool pictures.