Financings of the Fortnight Spins A Big LP

 

Since when did “LP” stand for “Lavish Pharma” – as in, lavishing cash upon the life science venture world?

Everyone in our corner of the playground has known for some time that corporate venture groups are making more direct investments, especially in funding early-stage biotechs. “We’re going in earlier and earlier,” Jens Eckstein, the head of GlaxoSmithKline’s longstanding venture arm SROne, told "The Pink Sheet" recently. “We’re now incubating companies and creating companies on our own.”

In 2012, 28% of the nearly 80 biopharma or diagnostic start-ups that raised A rounds had at least one corporate investor on board (and often had more). In 12 of those deals, the corporates took the lead. Eckstein also said that SROne invested $53 million in 2012, its most active year yet.

Big Pharma is filling the void left by limited partners, too. Again, one of the most aggressive spenders is GSK. The latest example, announced last week, is its $23 million investment in a fund run by French firm Kurma Life Sciences Partners to focus on rare diseases. Officially Kurma Biofund II, it’s the first instance of a fund specific to a disease or indication subsector that we can recall since Kleiner Perkins Caufield & Byers said it would set aside $200 million for a “pandemic and biodefense” fund in the midst of the avian flu frenzy. (That link is well worth clicking, by the way, if only for the San Francisco Chronicle file photo of Brook Byers rocking That ‘70s Hairdo.)

Glaxo, like most of its Big Pharma brethren, wants products with the possibility of accelerated approval and high prices that won’t get push-back from payors. The rare-disease rush has gone on for quite some time, prompting our colleagues to ask a year ago if it were a precarious bubble. Apparently GSK and Kurma’s other LPs that include New Enterprise Associates don’t think so.

To be clear, the money GSK is pouring into venture funds is separate from the capital under management at SROne. (SROne used to make LP investments but hasn’t for about six years, Eckstein said.)  In the case of Kurma, GSK feels its smaller partner is better suited to sniff out the opportunities in European research labs, a similar story it told when it agreed earlier this year to co-fund up to 10 single-asset startups with Avalon Ventures in San Diego. (Again, the cash did not come from SROne’s capital pool.) GSK isn’t a limited partner in the Avalon deals, per se, but it is leaning heavily on Avalon’s scouting expertise. “If we can’t find ten cutting-edge programs, we’re not going to get into ten,” Lon Cardon, GSK’s SVP of alternative discovery and development, told Start-Up in April. “But we’re pretty confident Avalon can source four, five, or six without too much trouble.”

The Avalon arrangement also gives GSK an option to purchase each entity as it produces a clinical candidate that can move into IND-enabling studies. But in its more straightforward LP relationships – at least the ones publicly disclosed – it invests with no such strings attached.

Since the start of 2012, GSK has made other big commitments. In March 2012 Index Ventures said it had closed its first life-science-only fund at €150 million ($220 million) with GSK and Johnson & Johnson combining to commit half the total.

In January 2013 GSK said it would pump $50 million into Sanderling Ventures’ new $250 million fund, a surprising bit of news if only because Sanderling’s previous fund closed eons ago in 2004. Based near San Francisco, Sanderling’s West Coast location, where GSK had not partnered with a venture firm at the time, was a factor in GSK’s decision. (Since that announcement, during this year’s JPMorgan conference, Sanderling has not filed any regulatory updates that would indicate more progress toward the $250 million goal.)

GSK also has invested in Boston-based Longwood Founders’ Fund, run by Boston biotech veterans Christoph Westphal, Michelle Dipp, and Rich Aldrich. Dipp and Westphal were GSK executives for a relatively brief and controversial time after the company bought their Sirtris Pharmaceuticals. The amount of GSK’s Longwood investment was not disclosed.

(Other examples of Pharma LP investments: VenBio’s first fund backed by Amgen, Baxter International, and the CRO Pharmaceutical Product Development; Merck & Co.’s Research Venture Fund initiative, which includes an investment in Flagship Ventures’ latest fund; and Eli Lilly’s “Mirror Funds,” which after a big opening splash in 2010 hasn’t produced news since 2011.)

The $64,000 question – or multibillion-dollar question, really – is whether all this activity will pay off with more drug revenue for GSK and its peers. There’s strong evidence that direct corporate venture bets have rarely led to the parent company acquiring the investment targets, but there’s nothing yet to help glean how much Pharma’s LP activity has helped. Let's take GSK: From 2010 to 2012, the firm was 461 million pounds in the red based on its purchase and sale of equity investments, so assuming the SR One and LP activity counts against those figures, it’s hard to say GSK is getting a good financial return. But all this corporate venturing, whether as GP or LP, not just a financial exercise; GSK personnel take scientific advisory positions in the funds it invests in, where they have a window into dealflow and emerging ideas and technology.

Perhaps it’s instructive to note that of all the Big Pharma, GSK has made the most noise about re-organizing its internal research with a more venture-like mindset. As companies like GSK, Merck, and J&J cozy up to innovative entrepreneurs and financiers, is the warm fuzziness of innovation rubbing off? That's their hope. And even though there's been little correlation between corporate investors and corporate acquirers, as noted earlier, it's no predictor of future behavior, so don't be surprised if the investments lead to buyouts. Pharma's co-investors -- the other LPs in their strategic funds and the VCs who syndicate with their corporate venture funds -- are likely to do well. (They already do; companies with corporate VC investment command better acquisition multiples than companies without.)


What remains to be seen is the influence Pharma's cash has on the recipients of said cash. A curmudgeon might note that big Pharma advice -- the bow wrapped around the gift of its early-stage investment dollars -- hasn't resulted in productive R&D within its own walls over the past decade. Directing more resources -- human and financial -- toward what Pharma thinks it wants right now may mean that other opportunities (ones Pharma doesn't realize it needs later on) might not get funded. Then again, without those Pharma dollars propping up the early stage ecosystem, we might see far fewer companies and drug candidates altogether.

Whew. With that, we've managed to put the "long-playing" back in LP. But DJ FOTF is never done dropping old-school science; we put the needle on the record when the drumbeats go like...

Esperion Therapeutics: The anti-cholesterol drug developer just pulled off what sounds like a zen koan or knock-knock joke: An initial public offering for the second time. The Michigan firm priced its IPO on June 26 and will raise $70 million by selling 5 million shares at $14 a pop, giving it at first a market capitalization over $200 million. It’s not really the firm’s second IPO; a previous iteration, also called Esperion, went public in 2000 and was bought by Pfizer in 2004 for more than $1 billion. The program Pfizer brought in ended up stalling, and the current version of Esperion was created to spin it back out. The program is ETC-1002, designed to lower LDL-C (the so-called bad cholesterol) in statin-resistant patients, and is currently in Phase II. The through-line in all this is Roger Newton, leader of the team that discovered Lipitor (atorvastatin) in the previous millennium at Warner-Lambert. He founded the first Esperion in 1998, stayed on at Pfizer after the first Esperion’s acquisition, and spun back out with ETC-1002 in 2008 to form the second Esperion with $23 million in venture backing from Alta Partners, Aisling Capital, Domain Partners and others. Longitude Capital Partners led a $33 million Series B. Pfizer also took a small stake at the time of the spinout; Esperion’s regulatory filings show Pfizer as a 10% owner before the IPO, thanks in part to a conversion of debt into equity, but Pfizer holds no rights or royalties to ETC-1002. Pre-IPO, Esperion’s largest shareholders were Alta, Aisling and Domain, all with nearly 20% stakes. Not unusual these days, existing investors including Newton pitched in to make the IPO happen, buying 1.2 million of the shares, or more than 20%. Newton owned more than 7% of the company before the IPO. Credit Suisse and Citi led the underwriting and will be able to buy up to 750,000 more shares. – Alex Lash

XO1: The Cambridge, UK start-up has formed to develop an anti-clotting antibody with an $11 million Series A investment from Index Ventures, the venture firm’s largest solo A round to date. The preclinical anticoagulant, ichorcumab, was synthesized by a University of Cambridge research team, based on an antibody produced by a patient with unusual blood-clotting patterns. Index’s David Grainger was a longtime Cambridge research scientist who became an advisor to Index in 2008, then joined as a venture partner in 2012. He told our Pink Sheet colleagues that his close ties to the school led to a quick deal, rather than a competitive process.XO1’s key asset was created after a head-injury patient in her fifties exhibited a rare trait. Grainger said the patient in question had “a benign tumor of the immune system,” naturally producing a previously unseen antibody at an “out-of-control” pace. Her rare condition allowed her to survive a hematoma without bleeding to death, despite a clotting profile apparently similar to that of a hemophiliac. Cambridge researchers produced a similar effect synthetically with an antibody that targets exosite 1 of the thrombin molecule. Index invested from its €150 million ($200 million) Index Life VI fund that closed in March 2012. As noted earlier in this column, half the fund’s money came from GSK and Johnson & Johnson, but neither receives special rights to the portfolio companies in return. – Paul Bonanos

PTC Therapeutics: Rare diseases make for frequent IPOs these days. The latest debut for a biotech working on treatments for orphan indications belongs to PTC, which sold 8.4 million shares at $15 each to net itself $117 million. The deal was upsized from the 6.9 million shares it aimed to sell in the $13 to $16 range. Founded in 1998, the firm raised more than $300 million in private cash and tried to go public in 2007, only to withdraw its filing. The company is spending most of its resources on ataluren, in Phase III in the US for Duchenne’s muscular dystrophy caused by nonsense mutations and under review for market approval in the European Union. It is also in Phase III for nonsense mutation cystic fibrosis, only one of a handful of firms working on a disease-modifying drug in the area. PTC’s IPO came days after bluebird bio, a gene therapy firm going after rare blood-borne diseases, raised $116 million in its debut. Another rare-disease firm, Prosensa Holding, could follow soon.-- A.L.

Valeant Pharmaceuticals: In the last fortnight, specialty pharma and serial acquirer Valeant raised a total of $5.5 billion in funds to pay for its most expensive takeover to date, eye care company Bausch & Lomb. On June 24, Valeant closed on a public offering of 27.1 million shares (including full exercise of the 3.5 million-share overallotment) to gross $2.3 billion, selling stock at $85 apiece. Days earlier, the company launched a private offer of $3.2 billion principal amount in senior unsecured notes due in 2021 and 2023. Valeant announced in late May the $8.7 billion acquisition of Warburg Pincus-owned B&L, creating one of the largest ophthalmology companies in the world that will sell prescription and OTC drugs, including Valeant’s existing AMD treatment Macugen, gained through the 2012 Eyetech acquisition, plus contact lens products and surgical devices. Warburg Pincus will receive $4.5 billion of the purchase price, and the remainder will be used to retire B&L’s outstanding debt. Valeant has previously focused on dermatology and neurology drugs, as well as branded generics. The B&L deal marks Valeant's 25th acquisition in the last five years, for an aggregate $19.4 billion in up-front payments and potential earn-outs, according to Elsevier’s Strategic Transactions. -- Amanda Micklus


All The Rest: In a Series B round led by Stanley Family Foundation, with Clarus Ventures and Takeda Ventures also participating, Heptares (GPCR drug discovery) raised $21mm…3-V Biosciences brought in $20mm in Series C funding to advance its Phase I cancer candidate…protein therapeutics firm Complix NV raised a $15.5mm Series B…Vasopharm GMBH completed a $6.5mm Series F round to fund start of Phase III of VAS203 for traumatic brain injury…Trigemina’s Series A-1 round garnered $4.5mm to advance Phase II TI-001, an intranasal oxytocin migraine candidate…A Series A round for Numedii led by Claremont Creek Ventures and Lightspeed Venture Partners brought in $3.5mm…University of Turku spin-out Forendo Pharma (treatments for endometriosis and low testosterone levels) received the first €1.2mm ($1.57mm) tranche from Karolinska Development, which gains a 21% ownership and over a three-year period will invest a total of  up to €3mm…Following a 2012 recapitalization, predictive biosimulation company Entelos received additional undisclosed venture funding from Clearlake Capital Group and Michaelson Capital…epigenetic neurological drug start-up Rodin Therapeutics received undisclosed seed funding from J&J Development and Atlas Ventures…Formed late last year by the merger of public European antibody and vaccine developers Vivalis and Intercell AG, Valneva SE raised €40mm ($53.5mm) in an underwritten rights offering…Repros completed a follow-on offering of 3.75mm shares at $19 for net proceeds of $67mm…FOPOS were also completed by Intercept Pharmaceuticals, $61.7mm; Cempra Pharmaceuticals, $47.7mm; Progenics, $35.2mm; Mast Therapeutics, $23mm; Biodel, $18.5mm; Echo Therapeutics, $10.1mm; and Soligenix, $9.2mm…Four initial public offerings went final: Gene therapeutics firm bluebird bio raised $108mm through the sale of 6.8mm shares at $17, above its initial $14-16 range; Esperion (cardiometabolic drugs) netted $65.1mm, selling 5mm shares at $14, the midpoint of its anticipated range; Aratana Therapeutics, which had postponed its filing of 4.3mm shares at an $11-$13 range, amended its IPO terms to sell 5.8mm shares at $6, raising $35mm; and Canadian drug design company Antibe Therapeutics netted $2mm, selling 3.9mm shares at $0.55…Prosensa Holding BV announced terms of a 5mm ordinary share IPO priced between $11-13…Several firms filed for IPOS: Liver disease therapeutics developer Conatus Pharmaceuticals; outsourced medical services provider Envision Healthcare; small-molecule cancer therapies developer Onconova Therapeutics (Baxter holds a 14.7% stake and a 2012 alliance with the company worth up to $565mm); and specialty pharmaco Iroko Pharmaceuticals…Through a $25mm senior secured term loan facility led by GE Capital, Navidea Biopharmaceuticals gains support for its Lymphoseek radiopharmaceutical agent platform…Hercules Technology Growth Capital provided Rockwell Medical (end-stage renal and chronic kidney disease treatments) with $20mm in debt financing…To help Phase II trials for its lead candidate for primary brain cancer, Diffusion Pharmaceuticals brought in $5mm through the sale of convertible notes to existing investors, adding onto a $5mm convertible note sale of September 2012…Following Elan Corp.'s withdrawal of its offer to acquire private Austrian drug company AOP Orphan Pharmaceuticals, AOP spun off its 80% ownership in cancer business Activartis Biotech GMBH to a group of private investors.

Photo courtesy of flickrer technochick, aka Angie Linder. Thanks, Angie!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Royally weird photo courtesy of flickrer simononly.

Financings of the Fortnight Jumps On Board The A-Train

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

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

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

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

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

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

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

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

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

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

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

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

Financings of the Fortnight Comes Bearing Gifts

This will be the final FOTF of the year, so we’d like to take a moment to wish everyone warm, peaceful and happy winter solstice holidays, no matter which festivities you celebrate. 



We're grateful for your readership, and if there's anything you'd like us to do differently in 2013, or if you just want to wish us a Merry Hannukwanzamas, we're all ears. You can always leave comments below, or more privately, send an email to a - dot - lash at elsevier dot you know the rest. (No happy holidays for you, spambots!) We're also grateful this week to Sten Stovall, European bureau chief, for his help with the column.

In Europe, holiday lights in biotech circles should burn brighter with the news that Sofinnova Partners, based in Paris, has raised $312 million for a new life science fund, tapping almost exclusively into European sources. The venture capital group began life in 1989 and is now on its seventh fund. It raised the money from LPs including insurance companies, pension funds, fund-of-funds, financial institutions and high net worth private individuals, 90% of which are based in Europe (including 22% from France).

That’s a big shift, Sofinnova founder and managing partner Denis Lucquin tells FOTF: “Ten years ago 50 percent of our financial means came from the US. This time, we didn’t have any. They’re too nervous about the situation in Europe and the Eurozone, and they just don’t have the confidence to put money into Europe.”

Its previous fund closed in 2009 with $370 million committed, so willfully or not, the group has scaled back a bit. (Sofinnova Partners is not to be confused with the US-based Sofinnova Ventures, which closed a new $440 million fund in late 2011.)

No matter where they’re located, investors are nervous about early stage life sciences, but Sofinnova Partners made a contrarian pitch: Sofinnova Capital VII fund will be invested in early-stage life science companies, with about two-thirds going into Europe and one-third into the US. The fund will target biopharmaceuticals, devices and industrial biotechnology. As part of the comprehensive coverage of biotech crossover investment in the November START-UP, we heard from VCs, under pressure from impatient limited partners, who are looking to public investments for faster exits. “One of the ways to compress the timelines is through participating in public financings,” Sofinnova Ventures’ Jim Healy told our colleague Stacy Lawrence.

If Lucquin is feeling similar pressure, he’s not letting on: “We will eventually exit these investments by either selling them to big corporations or by floating them on a stock market. We usually do that after five to six years, on average, but sometimes it takes a bit longer.”

Then again, the firm’s recent track record gives its partners some breathing room. The latest fundraising follows a three-year period in which Sofinnova completed the trade-sale of portfolio companies Corevalve, to Medtronic Inc. for up to $850 million; Novexel SA to AstraZeneca for up to $505 million; Movetis to Shire PLC for €428 million; Fovea to Sanofi for up to €370 million; and PregLem SA  to Gideon Richter for up to CHF445 million. Portfolio firms Stentys and DBV also went public on the Paris Euronext stock market. For all those, says Lucquin, Sofinnova had been the initial and largest investor from start to exit, representing a total enterprise value (stock market capitalization plus debt) of $3.6 billion.

That's a lot of stocking stuffers. If you know a FOTFhead who's not a START-UP subscriber, by the way, don't forget magazine subscriptions always make a lovely present. In fact, the START-UP elves are busy right now in their secure undisclosed sweatshop working on the 2012 A-List, in which we not only break down the year's Series A investment activity, but ask the question What does it all mean? All we can tell you now is that, yes, Virginia, there really is a Père Noël, as the Parisian Sofinnovians would say. And there really are Series A biotech investors despite the early-stage aversion you hear so much about.

Leave some cookies and a glass of milk, put out the fire in the fireplace, and, if you can, clean the soot out of your chimney, 'cause whether you've been naughty or nice, here comes...

Amarin Corporation: Cardiovascular drug developer Amarin is getting ready to launch its FDA-approved fish oil pill Vascepa (icosapent ethyl), and it’s got $100 million in fresh cash to go it alone. The Dublin, Ireland firm said December 6 it raised the non-dilutive capital through Pharmakon Advisors, calling it a “hybrid debt-like instrument.” The funding will allow Amarin to hire 250 to 300 salespeople for an early 2013 launch. Vascepa was approved in July. The delay has raised questions about Vascepa’s future. CEO Joseph Zakrzewski said on a conference call that Amarin will continue discussions with potential acquirers and partners. But absent a deal, the company will prepare to market the primary-care drug itself, an enormous challenge for a small organization that has no other marketed products, lacks revenue, and had just 31 employees at the end of 2011. Approved for patients with very high triglycerides, Vascepa will enter a market against a variety of competitors. Most prominent is the blockbuster Lovaza (omega-3-acid ethyl esters), sold by Pronova BioPharma ASA and GlaxoSmithKline PLC and known as Omacor in Europe. A generic version of that drug will be sold in the US by Apotex beginning in 2015. Vascepa is thought to have an advantage over some competitors, in that it does not contain docosahexaenoic acid (DHA) and thus does not raise LDL cholesterol. Amarin shares nearly doubled in value in April 2011, when it reported Phase III data showing that Vascepa lowered LDL cholesterol, but as IP issues and muddy launch plans weighed on the shares, they lost those gains within six months. Its share price was hammered again on the financing news and as of the closing bell December 12 was down 21%. The new debt vehicle can be paid back via a series of small installments until November 2013, at which point payments will increase until 2017. Zakrzewski said the payments are tied to Amarin’s revenue forecasts, and are capped if sales are less than expected – Paul Bonanos

Moderna Therapeutics: The developer of messenger RNA therapeutics emerged from incubation with the announcement of a $40 million financing on December 6. Flagship Ventures is leading the financing joined by what Moderna CEO Stephane Bancel called “high net worth individuals interested in going after very disruptive innovation.” Moderna is adapting research by Harvard University’s Derrick Rossi and Ken Chien and Massachusetts Institute of Technology’s Robert Langer to create treatments that aim to let the human body restart or increase the production of naturally occurring therapeutic proteins inside their own cells without triggering an innate immune response. The company was founded in October 2011, and by June 2012, Moderna was conducting preclinical studies of two drugs in primates. “In the body, we have a huge number of secreted proteins,” Bancel told our “Pink Sheet” colleagues. “What we have demonstrated in the serum, across several drugs and several animals, is that we are able to inject by intramuscular or subcutaneous [administration] and around the injection site get the body’s cells to uptake the RNA, make the proteins of interest and then secrete them to the bloodstream. It’s a very novel way of thinking about drugs.” The $40 million will be used to demonstrate safety with a goal of advancing two drugs in undisclosed indications into Phase I, he added. Moderna emerges from the Flagship Venture Labs think tank and incubator, which earlier this year launched microbiome-focused Seres Health. The new company's board will be chaired by Flagship co-founder Noubar Afeyan. The plan is to develop, make and sell mRNA drugs for rare diseases in-house while partnering out opportunities in larger patient populations. The firm thinks its technology offers significant promise in cardiology and oncology because of its ability to penetrate specified cells and trigger the production of proteins in those cells, but not outside of them. – Joseph A. Haas

ArmaGen Technologies: The Santa Monica, Calif. start-up said November 29 it has secured a $17 million Series A from an unusual syndicate: Three pharma corporate venture groups and the finance arm of a Japanese conglomerate. Corporate venture has played an increasing role in biotech funding, reaching down into early rounds more often in the past couple years, but a Series A exclusively from corporate is still rare. Boehringer Ingelheim Venture Fund is the lead investor, with participation from Shire, Takeda Ventures, and Mitsui & Co. Global Investment. What’s caught their attention is ArmaGen’s recombinant protein technology to create drugs that penetrate the blood-brain barrier. The near-term goal is to go after rare CNS diseases such as Mucopolysaccharidosis (MPS) Type I (Hurler's syndrome) and MPS Type II (Hunter's disease). Both BI and Shire’s funds are relative newcomers to the venture scene. When it launched in 2010, BI’s fund director anticipated about three deals a year, a push for board seats – which it has with ArmaGen – and made clear a goal of eventually partnering or acquiring the investee. Shire unveiled its investment group in September 2010 and has been aggressive; we counted at least eight investments since its debut. ArmaGen is run by UCLA endocrinologist William Pardridge, who spun it out of his lab in 2004. Until now he has raised government and military grants, but no venture financing. ArmaGen’s “Trojan Horse” technology creates fusion proteins that both bind to blood-brain-barrier receptors to sneak through, and bind to targets once inside the brain. – Alex Lash
 
Flexion Therapeutics: When its founders created Flexion in 2007, they didn’t plan on pursuing late-stage drug development. Times have changed. The company said December 4 it raised $20 million in a Series B funding earmarked in part for a Phase III trial of an osteoarthritis compound. It’s a significant shift away from the company’s original goal. The founders, former Eli Lilly executives who pioneered Lilly’s Chorus program, intended for Flexion to acquire compounds that pharmas were neglecting, develop them through Phase II, and strike partnerships with pharmas for late-stage trials. But partnering terms have proven onerous in the general market, even for drugs that have displayed promise in Phase II data, Flexion CEO Michael Clayman told “The Pink Sheet” DAILY. Novo Ventures partner Heath Lukatch said the company might even attempt to support development of a product through NDA registration. For now, Flexion has cash to sustain itself through 2013. First-time backer Novo Ventures led the new round, which also included returning investors 5AM Ventures, Pfizer Venture Investments, Sofinnova Partners and original seed investor Versant Ventures. The syndicate supplied $55 million in Series A funding, spread out over three closings between 2009 and early 2012. Based in Woburn, Mass., Flexion’s primary focus is on FX-006 and FX-005, a pair of osteoarthritis drugs. FX-006 is a sustained-release reformulation of a steroid that can be injected directly into a joint, and is a potential first-line therapy.  – P.B.
 
The Best of the Rest: A $50 million Series D investment for 23andMe, led by the king of late-stage social-media investments Yuri Milner, will let the company reduce the cost of its personal genome service to $99… Led by Flemish investment firm PMV, Biocartis raised €34.5 million in its Series D… Infinity Pharmaceuticals raised $150 million in a secondary offering… Zafgen closed a $21 million Series D round to support Phase II trials for obesity candidate beloranib… Rare disease start-up River Vision Development also completed a $17 million A round involving corporate backers… New investors Morgan Stanley and AllianceBernstein joined NanoString’s $15.3 million Series E… After raising an initial $15 million in December 2011, Cerulean Pharma reportedly added $13 million to its Series D… Working on a cloud application for electronic medical records, Modernizing Medicine closed a $12 million placement… Galera Therapeutics grossed $11 million in a Series A co-led by NEA and Novartis Venture Fund… Avelas Biosciences’ real-time metastatic node visualization tools will get funded via the company’s $7.65 million A round… New investor Astellas Venture Management joined the syndicate for Bicycle Therapeutics’ £3.75 million Series A… Biomatrica raised $5 million to back its SampleMatrix technology for ambient biological sample storage… To help complete Phase III trials for Parkinson’s agent pimavanserin, Acadia Pharmaceuticals grossed $86 million in a private placement… Cel-Sci is using a $10.5 million RDO for Phase III studies of Multikine for head and neck cancer… Applied DNA Sciences raised $7.5 million from institutional investor Crede CG II… Israeli biotech Redhill Biopharma completed a $6.5 million financing… Developer of inhaled respiratory therapeutics Aradigm grossed $6 million in a PIPE… CNS-focused Supernus publicly raised $48 million… AcelRx completed a $41.4 million FOPO to support acute and breakthrough pain projects… To help pay for Phase II trials of diabetic foot ulcer candidate DSC127, Derma Sciences grossed $31.7 million in its follow-on… Pain drug developer Durect’s follow-on resulted in $12.6 million… Cancer immunotherapeutics company Northwest Biotherapeutics closed a $12 million public offering… NovaBay raised $7.4 million publicly for its anti-infectives work… As it prepares for Phase II of its oral insulin capsule, Oramed Pharma completed a $5 million FOPO… and Arrowhead Research publicly sold $4.1 million in stock for its peptide drug conjugate platform.  – Amanda Micklus

Financings of the Fortnight Follows the Follow-Ons

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

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

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

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

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

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

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

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

Thanks to Maureen Riordan for help with the data.

Photo courtesy of Floris Oosterveld via a Creative Commons license.

Financings of the Fortnight Doesn't See Much To "Like"

 

Without further ado, we bring you a few IPO notes from the Facebook Fiasco Fortnight. While most market watchers trained their eyes on Zuck, his biotech-veteran CFO, his bankers, and (eventually) his lawyers, a few biotechs made moves of their own. Only one took a step forward: Kythera Biopharmaceuticals filed an S-1 after raising about $100 million through four venture rounds and seven years. The company’s lead product, a Phase III injectable meant to reduce the fat that causes double chins, is fully licensed to a division of Bayer.

Two others took steps back. TVAX Biomedical withdrew its modest $20 million offering, citing poor market conditions. The firm has an autologous immunotherapy platform that has produced a Phase III brain cancer treatment and a Phase II treatment for renal cell carcinoma. And Cancer Genetics, which first filed in late December, postponed a planned $48 million offering, according to Renaissance Capital. No official word yet on a second attempt.

For any small company -- let alone a biotech -- hoping to tap the public markets, the Facebook bungle couldn’t have come at a worse time. The Euro crisis drags on, and the ripple effects of a potential Greek Euro exit loom ever larger in macroeconomic calculations. Then comes Facebook, only the most watched, most anticipated U.S. financial event of the so-called recovery, and instead of a shot of much-needed confidence, it delivered yet another ringing example of American institutional ineptitude at best, criminal venality at worst. Years to prepare, to hire the best and the brightest, and this is the best they could do?

This headline made us chuckle: "IPO activity remains slow despite Facebook offering." Despite? We venture that in sectors like ours, it was more like an extra twist of the knife. Next time an underwriter comes knocking with a fabulous biotech, potentially game-changing science, visionary leadership, blah blah blah, what will happen? Hardcore biotech investors will surely do their own diligence, but what about the “swing voters,” the more general investors who might crack open a window to make a biotech bet or two? Are they going to stick their necks out? Would you?

You don't have to buy our shares, and you don't have to "like" us. Just enjoy another edition of... 

TVM Capital: The international venture firm has raised its seventh life-science fund with a northern twist. Announced May 28, the fund will be based in Montreal and focus mainly on single-product companies in Quebec, part of an asset financing trend that VCs such as CMEA Capital, Atlas Venture, and Index Ventures, as well as non-traditional investors, have tested recently. The new fund also marks the fourth time since November that a Big Pharma has poured cash into a Canadian biotech investment vehicle, including the Merck Lumira Biosciences Fund, which we noted in this column earlier this year. A major chunk of TVM Life Sciences VII, which has C$150 million ($146 million) committed, comes from Quebecois fund-of-funds manager Teralys Capital, with ties to several regional investors. The goal is to fund about 15 projects, mainly but not exclusively in Quebec. Another major limited partner is Eli Lilly & Co., which alongside its investment will open a branch of its Chorus drug development network in Montreal. It’s unclear, however, what ties Chorus Canada has to the Lilly/TVM arrangement. A Teralys managing partner told “The Pink Sheet” that Chorus will not have rights to help develop the assets that receive TVM investments. Other VC investors in TVM Life Sciences VII included BDC Venture Capital, Fondaction and Advantus Capital Management, a subsidiary of the Minnesota Life Insurance Company. Only the size of the investment by Teralys (C$65 million) and that made by BDC Capital (C$20 million) were disclosed. – John Davis

Royalty Pharma: The buyer of biopharmaceutical royalty streams said May 24 that it raised $600 million in debt to fund future acquisitions. That a royalty fund has raised cash is no surprise; RP rival Cowen Healthcare Royalty Partners announced a $1 billion fund, its second, to start 2012. OrbiMed Advisors also got into the game with a $600 million royalty fund in 2011. The funds have recently marketed themselves as alternatives to life-science venture capital for limited partners uneasy with venture’s sallow returns and long fund cycles. But Royalty Pharma prefers bond holders to equity holders, which makes sense given that royalty deals are more like debt than equity investments, with lower risk and return profiles. The $600 million tranche, with a borrowing spread of Libor + 3% and a maturity date of November 9, 2018, brings RP’s total debt load to $3.4 billion. Two other tranches of $850 million and $1.9 billion mature on November 9, 2016 and May 9, 2018, respectively. RP said that strong demand for the debt issue boosted the size from $500 million to $600 million. The firm has bought royalty streams to more than two dozen products including Humira (adalimumab), Remicade (infliximab) and Cimzia (certolizumab). - A.L.

Prosonix: The Oxford, UK firm extended its Series B round with £5.7 million ($9 million) to push forward development of its generic asthma treatment fluticasone propionate (PSX-1001). The firm is banking on its ultrasound drug-engineering technology to convince European regulators to approve its inhaled version of GlaxoSmithKline’s Flixotide/Flixonase. Ultrasound induces the crystallization of drugs from solution and can be precisely controlled, leading to the formation of particles with little variation in size and shape. The particles are stable and do not require formulating with excipients for use in inhalers. In contrast, conventional jet-milling makes inhaled powders that are more unstable and with more variable physicochemical properties, Prosonix CEO David Hipkiss told our "Pink Sheet" colleagues. Pharmaceutical companies that currently dominate the respiratory products sector, such as GSK, AstraZeneca and Novartis have not faced significant generic competition because of the complexity of developing inhaler drug delivery technology, and the difficulty of showing bioequivalence to inhaled powders. Also, in the U.S. there is no regulatory pathway for generic inhaled respiratory products. Belgian investment firm Gimv joined existing investors in the second tranche of the Series B. In the June 2011 first close, Prosonix raised £11.4 million from a European syndicate that included Ventech of Paris; Gilde Healthcare Partners of Utrecht, the Netherlands; Entrepreneurs Fund BV and Solon Ventures, both of London; and Quest For Growth of Leuven, Belgium. Prosonix hopes to start a Phase IIa trial later this year for its second product candidate, a twice-daily inhaled therapy for chronic obstructive pulmonary disease. - J.D.

Sangart: The San Diego firm added $50 million from a previous investor to bring its Series G round to $100 million and its total cash raised to $280 million. Sangart said the cash will help it complete its current Phase IIb trial for its lead product, an oxygenated form of recycled blood meant to treat tissues deprived of oxygen after traumatic injury. It will also aim to complete a Phase Ib for another product that uses carbon monoxide instead of oxygen with the recycled blood to treat sickle cell anemia. When the two trials are done, the company wants to look for a licensing partner for one or both products, or perhaps even a buyer for the company, CEO Brian O’Callaghan told “The Pink Sheet.” The cash comes from Leucadia National Corp., which also contributed most of the first $50 million Series G tranche. Leucadia is a conglomerate with diverse holdings in mining, beef packing, wine, and timber. – Lisa LaMotta

Photo courtesy of flickrer striatic, who gets two thumbs up.