These Days, You Can't Spell Financings Of The Fortnight Without "I-P-O"

It turns out a lot of the words that contain the letters "IPO" are biomedical words:

Pluripotent. Liposomal. Adiposis. Gallipot.

And it turns out a lot of biomedical companies have IPO in them, too. Since we last met 14 days ago, dear reader, a stunning 13 biotechs have made their public debuts, although if not for Eleven Biotherapeutics, it would have been 12.

There are all kinds of ways to slice and dice this baker's dozen; one way is to look at first-day pops. Indeed, our colleagues at "The Pink Sheet" will soon have a detailed look at the crazy first-day run-up of RNAi developer Dicerna Therapeutics; the 207% gain was the biggest in biotech since Antigenics jumped 241% in February 2000, according to Renaissance Capital.  (More on Dicerna's IPO in the roundup below.)

But with the momentum that began in earnest last spring showing no signs of tapering off, we're curious about a different indicator: insider purchases. As soon as IPOs began to rebound from the financial crisis, insiders often did heavy lifting to get the deals off the ground.

But those levels began to decline in 2013, as Atlas Venture partner Bruce Booth noted on his blog last fall. He also noted that insider participation could signal a cooling of the market. Well, yes, but as we noted on this blog in early 2012, it's hard to draw conclusions about deal-by-deal participation. Is heavy insider presence a sign of desperation to get a deal done, or is it a sign of singular enthusiasm? With crossover investors already on the cap table and wanting more at IPO, and with some VCs playing more frequently on the public side of the fence, it can be hard to tell. What's more, SEC filings don't always divulge the true level of insider participation.
 
With all that, let's round up what this year's IPOs have revealed:

Here are the 13 IPOs the past two weeks, plus GlycoMimetics on January 9, and the percentage of insider participation noted in the regulatory filings:

Company Name	Insider Participation at IPO
Dicerna	57%
GlycoMimetics	29%
Celladon	25%
Eleven	24%
Trevena	23%
uniQure	22%
Genocea	21%
Egalet	20%
Auspex	12%
Cara	7%
Ultragenyx	0%
Acucela	0%
Revance	0%
Biocept	0%

That's an average of 16% raised from insiders, but with caveats: some of these numbers (highlighted green) are based on filings which note that insiders indicated an interest of purchasing a certain amount. At the time of this writing, it's not clear whether they actually pulled the trigger, but often those indications don't change much. Other caveat: The percentages don't factor in the green shoe. In other words, some of the numbers you see above will change as more information emerges.

For what it's worth, our own IPO data show insider participation in 2013 averaged 14%. 

It's hard to say what all this means. Two years ago, when insiders shouldered heavy IPO loads -- taking on more risk instead of getting to precious exits -- it was easier to wonder about the desperation of it all. But now, more early stage biopharma investors (Third Rock Ventures, Flagship Ventures, OrbiMed Advisors, 5am Ventures and so on) are squaring the circle, from fundraising to new investment to IPO and back again, and biotech's boom means those extra IPO shares, if you can afford them, could be a lucrative proposition. And as our START-UP colleagues noted last year, biotech VCs haven't been shy about holding... and holding... and holding their shares well past IPO.

Is it worth mentioning that you also can't spell "ripoff" without IPO? Or perhaps we should leave you with this lighter linguistic play: The only anagram of IPO is "poi." A select few find the ancient Hawaiian staple of taro root mush delicious, but other people just need some time to appreciate it. Hmm, sounds like a recipe for what we cook up every two weeks, except we call it...

Dicerna Pharmaceuticals: RNA interference specialist Dicerna more than tripled in its first day of trading, making it the largest post-IPO pop since 2000. Demand for the offering was almost unprecedented with over $1 billion in orders, thanks in part to the RNAi-validating $700 million deal between Alnylam Pharmaceuticals and Sanofi's Genzyme that stole the show at January’s JP Morgan Healthcare conference. But unlike many IPO candidates going into 2014, Dicerna can't count on near-term milestones to support the stock. It expects to start clinical trials for the treatment of primary hyperoxaluria in 2015, with proof-of-concept data due later that year. It also expects to advance DCR-M1711 for cancers driven by the MYC oncogene in the first half of 2014, with proof-of-concept data in 2015. The biotech originally targeted $60 million, but by increasing its price to $15 and shares sold to six million, it ended up raising $90 million. The overallotment could add another $13.5 million. Last July, Dicerna raised a $60 million Series C round at $7 a share with crossover investors RA Capital, Deerfield Management and Brookside Capital Partners, as well as VCs Domain Associates, Skyline Venture Partners, Abingworth Bioventure, SROne and Oxford Biosciences Partners. At market close on February 6, Dicerna’s share price had settled to $33.98, down from its first-day high of $46, but still more than double the IPO offer price.  – Stacy Lawrence

uniQure: The groundbreaking Dutch company gained the first regulatory approval for a gene therapy in the Western world, but it isn’t the first to go public. The company followed bluebird bio and, just by a few days, Celladon into the public markets with its February 4 listing on the Nasdaq, pricing 5.4 million shares at $17 apiece, above the anticipated range of $13 to $15. uniQure netted $81.9 million in the transaction, net of discounts and expenses; a greenshoe option could add $13.8 million more to the offering’s value. uniQure made history in November 2012, when EMA approved its Glybera (alipogene tiparvovec) to treat rare metabolic disease lipoprotein lipase deficiency. It’s part of a renaissance of interest in the field of gene therapy, once considered overly risky, and VCs have stepped up investment in new treatments in the field. After meeting with US regulators, uniQure plans to file an IND for Glybera by midyear. The company will also use its IPO proceeds to complete its Lexington, Mass. manufacturing facility and advance pipeline candidates including Phase I/II hemophilia treatment AMT-060. The company is planning a 2014 commercial launch of Glybera in Europe, in conjunction with regional partner Chiesi Farmaceutici. – Paul Bonanos

Lumos Pharma: Two years after paying $695 for a crowdsourced logo, Lumos has reeled in real cash: a $14 million Series A round led by Sante Ventures and New Enterprise Associates. The Austin, Texas firm is working on a small molecule therapeutic for the rare disease Creatine Transporter Deficiency (CTD), which is in preclinical studies. Lumos was among the first companies to gain support from the National Institutes of Health's "TRND" program, or Treatments for Rare and Neglected Diseases. As our sister publication START-UP noted in late 2011, CEO Rick Hawkins, a serial biotech entrepreneur, turned to TRND for help in what he called the worst disruption in the capital markets he'd seen in 35 years. CTD is an inborn error of metabolism that results in a profound lack of creatine in the brain. It's an x-linked disorder, which means boys are more affected than girls, with severe autism-spectrum symptoms such as language and speech delay, epilepsy and destructive behavior. Lumos is repurposing a drug -- what it calls a kinetically similar analog of creatine -- previously studied as a solid tumor treatment, and tested in knockout mice at the University of Cincinnati. Kevin Lalande, Managing Director of Sante Ventures, and NEA Partner Ed Mathers will join the Lumos board. – Alex Lash

NightstaRx: We admit we first thought about writing up NightstaRx to poke gentle fun at its name. (It apparently is pronounced "Nightstar," which makes for the first silent "X" in the English language.) But we would never be that shallow; the firm merits a write-up for other, more legitimate reasons. First, the company is the initial therapeutic investment from Syncona Partners, the new £200 million ($325 million) evergreen venture fund of the mighty Wellcome Trust, which has been rather slow to get cranking (it was first announced nearly two years ago). Once known as Project Sigma, Syncona aims to fund private biotechs and keep full ownership, at least for a while. It's for-profit and although fully funded by Wellcome, it's separate from the Trust's investment division, which has billions of pounds of private equity holdings. Now that Syncona is truly up and running, it should b be a significant source of early stage funding for European biotechs. Our second reason to highlight NightstaRx, a spinout from the University of Oxford, is that Syncona's £12 million ($20 million) will help move forward a gene therapy treatment for choroideremia, an inherited form of progressive blindness. It's the latest entry in a venture-backed field of ocular gene therapy companies, as The treatment uses a small modified virus, AAV.REP1, to deliver the correct version of the mutated gene that causes to cells in the retina of the eye. Six months after treatment with this therapy, the first six patients showed improvement in their vision in dim light and two of the six were able to read more lines on the eye chart, according to a January 16 paper in the British medical journal Lancet. The vector is currently in Phase I trials and follow-on tests are expected to begin in 2016. – Sten Stovall and Alex Lash

Best of the Rest (Highlights of Other Activity This Fortnight): Cancer MAb company Igenica announced a second closing of $14 million to its June 2012 Series C round, raising the total proceeds to $47 million…In another add-on, Sialix, which is focused on sialic acids to treat cancer and inflammatory-mediated diseases, tapped angel investors to supplement its August 2011 Series B financing with a $1.2 million tranche, bringing the round total to $4 million…Through a public offering, renal drug developer Keryx Biopharmaceuticals netted $108.2 million (including the overallotment)… Large FOPOs were also completed by other cancer-focused biotechs: Geron ($97.3 million) and Tesaro ($94.8 million)… While numerous initial public offerings were completed, there are still an abundance of filers in the wings, hoping to go public soon; among them is UK biotech Circassia, intending to float on the London Stock Exchange's Main Market, which, if successful, would be the first UK-market IPO since Clinigen Group’s £6.6 million flotation on AIM in October 2012 (UK biotech Egalet just completed its $50 million IPO, but on Nasdaq)… Canadian spec pharma Aptalis Holdings withdrew its December 2013 IPO filing on Nasdaq in favor of a $2.9 billion buy-out by Forest Laboratories… Through the sale of debt, Emergent BioSolutions raised $250 million to fund its acquisition of Cangene… Also through a debt offering, Fluidigm brought in $170 million to finance its takeover of DVS Sciences. – Maureen Riordan

Many thanqkxs to Mr. Thomas for the Scrabble photo via a Creative Commons license.

2013 Financing of the Year Nominee: CHOP Launches Spark

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

In October, the Children’s Hospital of Philadelphia launched Spark Therapeutics with $50 million in funding, enough to carry its lead program to market, a gene therapy for an inherited form of blindness. In doing so it is riding a wave of recent high-profile investment in gene therapy, as witness the hefty series A rounds for Audentes Therapeutics and GenSight Biologics.

So gene therapy is gaining steam (again); but Spark is unique, or at least unusual, and we think it deserves your vote for Financing of the Year. First, it has sprung, nearly fully formed (with a Phase III asset), from a research hospital. CHOP is neither the first nor the only hospital to incubate a technology and commercialize it through a wholly-owned company. Cincinnati Children’s Hospital, Boston Children’s Hospital, and Cleveland Clinic Innovations have all engaged in various flavors of company creation.

But CHOP has taken it to another level. The RPE65 gene was first cloned in the 1990s; in 2004, Dr. Katherine High persuaded CHOP to take on the research that culminated in the launch of Spark a decade later. Think about it: a research hospital deciding to pull the trigger on a program that it has nurtured to Phase III, and to launch it into the rough and tumble commercial world with enough cash and with the right mix of clinical/regulatory/manufacturing/commercial capabilities to bring it to market.

Venture companies don’t typically do that. Their cash is too impatient. In fact, the investment is also noteworthy for what it may portend for the beleaguered world of life science VC or technology-hungry pharma.

Note that CHOP did not seek venture funding for its technology. Though Spark is free to turn to venture or other sources of support in the future, including a pharma partner, CHOP apparently felt that Spark the newco, like the decade-long R&D that CHOP sponsored around the RPE65 gene, needed time and a shielded environment to succeed.

And where research hospitals have traditionally licensed their technologies to for-profit companies at bargain-basement single-digit royalty rates, CHOP may be re-writing the book on how better-capitalized hospitals could monetize their inventions in the future. Not that it has foregone its traditional avenues for raising money – clinical activity is still the biggest source of revenue, along with royalties on its proprietary research. But there’s no doubt it’s getting smarter. In 2008, the hospital sold the royalty on its rotavirus vaccine, now Merck’s Rotateq, to Royalty Pharma for $182 million.
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CHOP, as majority owner, gets a healthy cut of Spark’s revenue, a not inconsiderable boon to a research institution in a time of uncertain support from Federal funding. CHOP CEO Steve Altschuler said that the spin-out of a for-profit vehicle like Spark is part of a broad process of diversifying its revenue streams.

Talk about diversification – Spark has a full pipeline of gene therapies. It has a Hemophilia B program in Phase I/II, as well as other hematological programs, and preclinical programs in neurodegenerative diseases that take it out of the orphan monogenic space. In fact, Spark is following in the footsteps of uniQure BV, which won EU approval of the first gene therapy, the first such approval in the major markets. uniQure has helped investors to visualize a clinical and regulatory path to market for gene therapy.

Now Spark is competing with uniQure to bring the first FDA approved gene therapy to market.

We’ll know soon if the blindness program gets a regulatory nod. If so, it will derisk Spark’s other programs, providing CHOP/Spark with lots of potential exit options for its pipeline, and possibly whetting CHOP’s appetite for more company creation. We’re nominating the launch of Spark Therapeutics because it stands at the crossroads of tomorrow’s medical treatments and how they get funded.

spark image via flickrer adeak reprinted under creative commons license

2013 Financing of the Year Nominee: Editas

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

One of the financings of the year, in our humble opinion, comes from three venture firms you should all know well: Polaris Venture Partners, Third Rock Ventures and Flagship Ventures. The trio "locked arms," in the words of Polaris principal Kevin Bitterman, to commit $43 million to Editas Medicine. We've nominated this deal for two reasons.

First, Editas -- of which Bitterman is serving as interim president -- is the first startup to declare its intent to turn one of the hottest research tools around into a new wave of therapeutics. One might call it gene therapy, version 2.0: the technology known as CRISPR/Cas9 allows researchers working with cells or model organisms to delete genes or replace them with new ones, but in ways considered more precise than other gene-editing systems currently in use.

Got genes?

The answer to whether the CRISPR/Cas9 modification system can become a basis for pharmaceutical products is years away. It is, relative to most venture-funded efforts, a brand-new field. Most of the critical developments have been described in academic papers only in the last twelve months, and many more will undoubtedly come in the next twelve.

The second reason we've spotlighted this deal is the syndicate. The VC trio involved more often than not will work in stealth on new potential breakthrough technologies on their own, as our START-UP colleagues detailed earlier this year here and here. In the past year, for example, Flagship has done solo work in launching a microbiome company (Seres Health), an epigenetics company (Syros Pharmaceuticals), a patient-as-protein-factory firm (Moderna Therapeutics, also to be nominated in this year's contest), and a nutritional supplement and drug maker (Pronutria).

With advances in CRISPR technology coming quickly from several academic sources, however, the VCs felt it was better to join forces. “Once a decade, it makes more sense to pool the expertise and resources of investors and the technology and expertise of the academic founders instead of creating three, four, or five different companies positioned against each other,” Bitterman told our Pink Sheet Daily colleagues when the company launched. (Also joining the syndicate is the Partners Innovation Fund, the venture arm of Boston-based Partners Healthcare.)

How far have they gotten in front of the competition? Check back around this time next year. Other CRISPR/Cas9 start-ups should soon emerge, and a CRISPR tools company in Berkeley, Calif. hopes to land a Series A round early next year to help it move into therapeutics as well as industrial and agricultural applications. The Berkeley company, Caribou Biosciences, lays claim to all the IP from the lab of University of California professor Jennifer Doudna, according to Caribou CEO Rachel Haurwitz. (This, despite Doudna being one of Editas' scientific co-founders.) As we said, the IP race is afoot.

CRISPR stands for “clustered, regularly interspaced short palindromic repeats.” It describes a nucleic acid system, first discovered in bacteria by Japanese researchers 25 years ago, that banks bits of foreign viral DNA to serve as an immune-system reminder when the pathogen invades again. Re-infection triggers production of RNA associated with the foreign DNA, which seeks out a match. The RNA doesn’t destroy the invading DNA on its own; the CRISPR RNA (crRNA) brings along an enzyme to make a double-stranded break. Scientists have zeroed in on the nuclease Cas9, or “CRISPR-associated protein 9."

Come to think of it, there's a third reason to nominate Editas. If it succeeds, it will have to improve upon two different strands of biotechnology that have proved extremely frustrating the past decade: gene therapy and RNA-mediated drugs. Therapies based on CRISPR/Cas9 will also be RNA-mediated, which has implications both pro and con. One benefit is that, theoretically, there is less engineering required as a company targets more than one disease. That’s because the “scissors” of Cas9 can cut DNA at any juncture; only the RNA guides need to be changed, a simpler engineering problem.  But the molecules are tough to deliver. Companies have struggled to formulate agents that don’t break down in systemic applications. Bitterman said one of Editas’ “core competencies” will be delivery: “We’ve spent a lot of time thinking about it, and we don’t need to reinvent the wheel.”

In addition to Doudna, Editas’ scientific co-founders are Feng Zhang of the Broad Institute and three Harvard researchers, including George Church; Keith Joung, also of Massachusetts General Hospital; and David Liu, also of the Howard Hughes Medical Institute.

Deals Of The Week Looks At Pricing Conundrums

Some technologies are so unprecedented, so spanking new that they present hitherto unknown and formidable commercial hurdles.

Consider gene therapy and non-invasive vagus nerve stimulation. The pricing challenges remain significant, even as these therapies gather regulatory approvals, high-caliber partners and investors.

uniQure BV is the scrappy Dutch biotech that spun out of Amsterdam Molecular Therapeutics BV to win approval for the first gene therapy to be accepted by regulators in the major world markets. After several false starts and near-death experiences, Glybera (alipogene tiparvovec) got EU approval in November 2012 for the ultra-orphan disease lipoprotein lipase deficiency. LPD is a childhood genetic disorder in which a protein needed to metabolize fat molecules is missing, causing a large amount of fat to build up in the blood.

The company has partnered commercial rights covering Europe and selected major emerging markets for Glybera and a mid-stage hemophilia B gene therapy to Italy’s Chiesi Farmaceutici SPA. It has forged ahead with building U.S.-based manufacturing capacity, particularly in advance of an FDA filing for Glybera pending ongoing discussions with the agency. It has hired a CEO and preliminary staffing for its Boston-based U.S. operations, to build out clinical, regulatory, and commercial infrastructure. It’s busy planning launch strategy, identifying patients, and meeting with payers.

But there’s a problem. We asked uniQure’s CEO, Jörn Aldag, how he planned to price his gene therapies. Our discussion focused on the hemophilia B treatment, next in line for approval. Aldag noted that, unlike the long-acting factors being readied for market by Biogen Inc. and others, where patients may be able to infuse every other week, “we’re offering a one-shot treatment. The patient would not have to come back to the hospital for many, many years.”

Aldag said ten patients in the first hemophilia B Phase I/II trial, still ongoing at St. Jude Hospital in Memphis, TN, have been treated and required no or significantly reduced prophylactic treatment for up to three years.

This is truly wondrous news for patients with hemophilia B. The issue is that each gene therapy carries an unknown duration of effect.  Will those patients enrolled in the St. Jude trial require a booster next week? Or will they continue for another 3 years, 10 years, indefinitely?

Aldag is grappling with the same issue with Glybera, and now Chiesi is weighing in on the discussions. The options they’re considering boil down to whether to ask for a front-loaded “down payment, or do we ask for annuity payments,” says Aldag, describing a system of payments over time. He allows that the pricing paradigm will change when he moves beyond orphan monogenic diseases, for instance, into larger-population neurodegenerative disorders, such as Parkinson’s disease (uniQure has a Parkinson’s gene therapy which is currently in Phase I/II). “Those would not command as high a price.”

New-Jersey based electroCore LLC (which, like uniQure, was absent the day the teacher taught proper capitalization) is at the forefront of companies developing noninvasive vagus nerve stimulation (VNS) devices – DOTW is typically all-pharma, all-the-time, so forgive our excursion into the world of medical devices. These are small, hand-held devices that deliver a mild electrical charge to the cervical branch of the vagus nerve. VNS technology has been around for decades in implanted devices – some are even FDA approved for partial-onset epilepsy and refractory depression. But implanted VNS is expensive and carries the risk and inconvenience of surgery. And that has inhibited adoption of the technology.

But VNS has been validated as a safe and effective alternative to drug therapy in a broad range of indications, says Mir Imran, a device inventor and founder of InCube Ventures. Imran told us that, with regard to epilepsy, the efficacy of VNS is comparable to pharmacotherapy, with similar success rates of 30% to 40%.

So noninvasive VNS, electroCore CEO J.P. Errico believes, “is something that can compete [with drugs] at the front end of the continuum of care.” Merck & Co. Inc.’s Global Health Innovation Fund, which was attracted to electroCore’s technology because it can be used in the home setting, fitting in with the fund’s focus on technologies featuring flexible access to care, apparently agrees. Merck’s fund joined with two other private equity groups to fund electroCore’s $40 million series A round earlier this year.

electroCore is currently in four registration trials for indications including cluster and migraine headache. It expects to launch its first product, gammaCore, in the U.S. in the next two years. Besides headache, electroCore is developing gammaCore for anxiety, epilepsy, depression, as well as for inflammatory conditions like gastroparesis, COPD, and asthma.

But there’s a rub. Because essentially the same device would be used across all indications, patients using it for migraine who hear about a trial testing the device in, say, gastroparesis, might try to self-treat for gastroparesis. Patients using the device for one indication may also experience the unintentional resolution of symptoms in other indications. Patients could possibly even share devices. Any of these scenarios could cut into the commercial opportunity for electroCore.

Errico says electroCore might offer different products based on specific usage. “If the person’s going to use it only to treat acute headaches, there may be a cheaper entry point for them than if they’re going to need the device to last for a very long period of time and use it over a period of years,” he says. But usage could be further complicated by electroCore’s preliminary finding that the amount of required treatment is not so much dependent on the specific disease state or severity; it’s more related to individual patient response.

All of this informs how the company will model usage of its products, and therefore, how to appropriately price them.

Both uniQure and electroCore need to proceed carefully. A miscalculation could be costly. -- Mike Goodman

Here are some of the deals that caught our eye this week . . .

Celgene/OncoMed: Celgene Corp. struck again Dec. 3, inking its ninth deal this year and adding to its impressive roster of oncology partners. This time, the company will put up $155 million upfront in a six-program partnership with OncoMed Pharmaceuticals Inc. centered on a Phase Ib monoclonal antibody being tested in pancreatic and non-small cell lung cancer. Celgene will also make a $22.3 million equity investment in OncoMed. In exchange, Celgene will receive option rights on six novel anti-cancer stem-cell therapeutic candidates, including the lead asset, demcizumab (OMP-21M18), a humanized MAb inhibitor of Delta-Like Ligand 4 (DLL4) in the Notch signaling pathway.

The deal also covers five preclinical or discovery-stage large-molecule programs - Celgene gets full license to one of the preclinical programs, while OncoMed retains U.S. co-development and co-commercialization rights on the other assets. If Celgene options demcizumab, the companies will share global development costs, with Celgene covering two-thirds of the expense. If the drug is approved by FDA, they will co-commercialize it in the U.S., with 50/50 profit sharing. Outside the U.S., Celgene would develop and commercialize the antibody, with OncoMed eligible for milestones and tiered double-digit royalties.

Celgene also gets rights to OncoMed’s preclinical anti-DLL4/vascular endothelial growth factor bispecific antibody, as well as four preclinical or discovery-stage biologics programs that target other cancer stem cell pathways, including RSPO-LGR. Celgene’s exclusive license is to one of those four biologics programs. For the four programs not outright-licensed by Celgene, the Redwood City, Calif., biotech gets terms similar to those negotiated for demcizumab – two-to-one global development cost-sharing with Celgene covering the larger portion, 50/50 U.S. co-commercialization with profit-sharing, and mid-single-digit to mid-double-digit royalties on sales outside the U.S. For the licensed program, OncoMed can earn mid-single-digit to mid-double-digit royalties on worldwide sales. Total earn-outs could exceed $3 billion.-- Joe Haas

Forest/Merck: Forest Laboratories Inc. will acquire U.S. commercial rights to Merck & Co.’s antipsychotic Saphris (asenapine) for $240 million upfront and undisclosed sales milestones, marking CEO Brent Saunders first business development initiative since becoming CEO in October. The companies announced the deal Dec. 2, the same day Forest announced a $500 million cost reduction program intended to right-size the company and $1 billion in new financing to fund share repurchases and additional bolt-on acquisitions.

Saphris, which was approved by FDA in 2009, generated sales of $150 million in the 12 months ended September 2013, according to Forest. Forest expects its expertise in marketing drugs for central nervous system disorders will help to drive growth of the brand. The drug will be marketed by Forest’s existing commercial team, which already sells the antidepressant Viibryd (vilazodone) and expects to soon be selling Fetzima (levomilnacipran), a serotonin and norepinephrine reuptake inhibitor (SNRI) that was approved for depression in July.

Having the three CNS drugs together in one portfolio is a powerful proposition that creates upside without adding cost, Saunders said. It is not only more efficient, but it also improves the quality of Forest’s sales team, he added. “When our rep walks into a psych office, they are not just a one-product detail. They have a whole portfolio of products to talk about depending on what is on the physician’s mind, and it creates a much more relevant rep,” he said. That multi-product commercial strategy is one Saunders would like to carry over to areas like gastrointestinal disease and cardiovascular disease.-- Jess Merrill

The Medicines Company/Rempex: The Medicines Co. has lost no time enlarging its fledgling infectious disease franchise by acquiring Rempex Pharmaceuticals Inc. and its pipeline of assets targeting serious bacterial infections. For $140 million upfront and $434 million in development, regulatory, and commercial milestones, MDCO acquires several anti-infective assets in varying stages.  Chief among them is Carbavance, a Phase II-ready drug for IV treatment of hospitalized patients with multi-drug resistant gram negative infections. It will enter registration studies in 2014. MDCO will market Minocin IV (minocycline for injection) for resistant infections due to Acinetobacter, a pathogen that is especially prevalent in intensive care units. MDCO plans to submit for U.S. approval an improved formulation of Minocin IV in 2014. Finally, MDCO will continue Rempex’s discovery programs focused on beta-lactamase inhibitor-based combination products designed to overcome resistance mechanisms in gram-negative organisms. The Rempex assets complement MDCO’s oritavancin, which targets gram positive complex skin infections and which is slated to file for a late 2013 NDA and a first quarter 2014 MAA in Europe.

The acquisition gives MDCO high-caliber antibiotic discovery and development capabilities to supplement its own development and commercialization strengths. It also gives MDCO a marketed product to better leverage its infectious diseases salesforce, which is typical of the hospital specialist’s deal style, while continuing its interest in early-stage assets that first came to notice with its licensing last February of Alnylam Pharmaceuticals Inc.’s ALN-PCS, a PCSK9-targeting RNAi agent for dyslipidemias. -- Mike Goodman

Roche/Molecular Partners: Roche and the Swiss biotech Molecular Partners AG have signed a research collaboration and licensing pact to discover, develop and commercialize therapeutics using the privately-held biotech’s DARPin platform. DARPins are non-antibody-based small proteins engineered for target binding to hone in on and penetrate deep into solid tumors, making them ideal targeting vehicles to deliver toxic agents to tumors to kill cancer cells. Under the deal, Roche has rights to develop and commercialize several DARPin-based products. Molecular Partners will get a starting payment of $60 million, research funding to support the partnership, and potentially more than a billion dollars in milestone payments, as well as tiered royalties on any successes.

The alliance signals growing interest in the DARPins which, due to their ability to bind to different epitopes than antibodies do – and to bind to multiple epitopes or targets in parallel at the same time – might offer a higher selectivity for tumor cells compared to other biologics, including antibody-drug conjugates.  DARPins are based on a class of proteins found in the body called ankyrin repeat proteins, which contain specific amino acid sequences, including a repeated sequence, which bind to proteins. They are easy to manufacture in E. coli, and are highly soluble and stable, according to Molecular Partners. The strategy is similar to that of using armed antibodies to fight cancer, like Roche's antibody-drug conjugate Kadcyla (ado-trastuzumab emtansine). Molecular Partners has already established alliances with Allergan Inc. and Janssen Biotech Inc., among others. -- Sten Stovall

Theraclone / PharmAthene: Theraclone Sciences Inc. and PharmAthene Inc. have called off a merger, announced in August. Under the plan, privately-held Theraclone would have absorbed publically held PharmAthene in an all-stock, merger of equals. The surviving company, which would have retained the PharmAthene name, would have had a clinical-stage pipeline of four assets and several pre-clinical compounds, centered around infectious diseases. According to news accounts, PharmAthene opted out of the deal. Neither party disclosed reasons, but the decision came a week after the federal government’s Biomedical Advanced Research and Development Authority (BARDA) rejected TheraClone’s application for a grant for its pandemic flu program, TCN-032, which has completed a Phase IIa trial. TheraClone will pay PharmAthene a $1 million termination fee. [CORRECTION: PharmAthene will pay TheraClone the $1 million termination fee. Thanks to IVB reader David for pointing out the mistake.]

Theraclone’s pipeline is built from its antibody platform I-STAR (in-situ Therapeutic Antibody Rescue), which rapidly screens memory B cells for rare human antibodies that may be developed into next-generation antibody-based drugs. TCN-032, a recombinant, fully human monoclonal antibody, is also in development for patients severely ill with seasonal influenza. TCN-032 is partnered in Japan with Zenyaku Kogyo Co. Ltd., and the company is evaluating “opportunities to advance TCN-32 with other potential strategic partners for commercial markets,” CEO Clifford Stocks said in a press release disclosing the bad news about BARDA. In addition, the company has asked to meet with BARDA to gain further insight into the reasons for the decision. Theraclone also has an ongoing partnership with Pfizer Inc.  to identify three targets in infectious disease and / or cancer. 

Theraclone also has a recombinant fully human MAB for treatment and prevention of cytomegalovirus (CMV) infections.    PharmAthene, a biodefense company, is developing a recombinant protective anthrax vaccine, SparVax, which is set to enter Phase II trials, and a medical countermeasure for nerve agent poisoning.  It is also developing Valortim, a fully human monoclonal antibody for prevention of anthrax infection.  CEO Eric Richman said the company will continue to “seek to identify opportunities to maximize value for shareholders.” -- Wendy Diller

Single, Early-Stage Financings of the Fortnight Seeks Attractive Exit Correlation

One month ago, as the government shut itself partially down, this column wondered if the IPO window might undergo a similar fate.

Since then, the same number of biopharmas has gone public (one) as has withdrawn their registration. The former is Aerie Pharmaceutical, and the latter is GlobeImmune, which said in its SEC filing, “The terms currently obtainable in the public marketplace are not sufficiently attractive.”

A second life sciences company actually went public, the cancer diagnostic firm Veracyte (see description in the roundup below). And several more companies filed their S-1s in October. And yes, the shutdown's been shut down and we're temporary passed the budget impasse. Six weeks ago, we would have taken GlobeImmune's lawyerese excuse as a fantastic joke -- C'mon, counsel, stop it! You're killing us! -- but as we wait for the likes of Relypsa, Karyopharm and GlycoMimetics to take the plunge, well, let's just say we're still waiting to exhale.

To distract ourselves for a moment, we'd like to draw your attention to an interesting back-and-forth that occurred recently on the high-tech VC side. Well-known investor Fred Wilson blogged in September that the more cash a startup raises in seed and Series A rounds, the less successful it will likely be. Data house CB Insights decided to fact-check Wilson, and it pronounced him wrong: there is no correlation.

This was all about high-tech, though, so START-UP decided to run the numbers for biopharma, where the investment dynamics are worlds apart from high-tech strategies. The article won’t be out for another week or two, but we’ll give you the high level answer: There's no correlation in biotech, either. (See above. R² = 0.0261, in case you're wondering.)

We found other interesting data around that answer, too. For example, of the 307 Series A rounds we found between 2002 and 2007 with disclosed value, 57, or 18.5%, of those companies went out of business. Those that exited via IPO (9%) and acquisition (31%) combined nearly equal those that remain private and independent (41%). Or sliced another way, of the 5-year cohort of companies we looked at, exactly half are still around, either public or private. (We'll save the rest for the Start-Up article, co-authored by Amanda Micklus.)

Since there's no correlation between size of exit (or, in the case of public companies, current market cap) and their Series A commitment, how much cash should an investor group front a new company? That question is driving much of the exploration of new biotech funding models that we're seeing from groups like Atlas Venture, Index Ventures, and Versant Ventures – whose new fundraising efforts we note in our roundup below. (And too late for inclusion here, but, ahem, speaking of fundraising efforts... our Pink Sheet colleagues will have all the details on the OrbiMed news later today.)

Even though venture returns across various timelines showed some improvement halfway through 2013, according to the NVCA, biotech VCs are still under tremendous pressure to shorten their investment timelines and take less risky bets. Tranching rounds, of course, is de rigueur, and sometimes those big Series A numbers announced with great fanfare never fully materialize. That could be a good thing: when Shire bought Lotus Tissue Repair early this year, its sole backer Third Rock Ventures had only funneled a sliver of its $26 million Series A commitment into the company.

Or, the company’s original plan could fizzle, as we note in this week’s note about Calithera in the roundup below.

Of course, how much VCs put into a company, and in what configuration, is driven by how much they’re getting out at the other end. The IPO bounty of recent months has LPs impatient for returns, and VCs need to “put some points on the board,” as Atlas Venture partner and bloguero Bruce Booth puts it in his latest Forbes column. How they manage those post-IPO exits when trading volume is limited, however, is a delicate complicated dance, which Booth explains in detail. (Whether to distribute cash or stock to LPs is just one of many considerations.)

With so many biotech exits these days coming via IPO -- have you noticed the dearth of private companies? So have our blogmates at Deals of the Week -- it makes us curious to see if the correlation between Series A size and exit success will shift in a few years, when we use a different cohort of companies that weren't forced to brave the Great Recession. We certainly acknowledge that the times we live in, and the data we collect, could be of our moment. Or, there could be a shift in correlation with more acquisition-heavy exit data if the IPO wave recedes -- perhaps we should say “when,” since all waves must eventually recede from the shore. We’re keeping an eye on the surf line, because, as anyone who grew up along the Pacific Coast knows, the worst time to gather shells is when the water suddenly disappears.

Where else can you get your safety tips and Zen koans all at once? Sit down, grasshopper, and open your mind to…

Veracyte: The diagnostics firm launched an initial public offering of its stock October 30 and raised $65 million by selling 5 million shares at $13 each. It’s one of the few diagnostics companies to tap the public markets this year, as most of the life-science activity has benefited the biopharmaceutical sector. (Foundation Medicine is another exception.) As we described in detail in February’s IN VIVO, Veracyte of South San Francisco, Calif., was founded to help resolve the ambiguity that often comes from a cytology sample of thyroid nodules that are possibly malignant. When looking at the cells isn’t enough to determine course of action – about 25% of the time -- Veracyte’s test is meant to guide an endocrinologist in the decision for or against surgery, which otherwise is recommended for cancerous, suspicious, or even indeterminate modules. Its test, Afirma, uses 167 biomarkers, and has also begun to identify rare types of thyroid cancer that aren’t evident under the microscope but reveal themselves in genomic analysis. Veracyte launched Afirma in 2011, and in the twelve months leading to June 30, 2013, the company tallied revenues of $17 million but with a net loss of $23 million. Its main shareholders before the offering were Kleiner Perkins Caufield & Byers (22%), TPG (22%), Versant Ventures (23%), and Domain Associates (19%). Just before the IPO, on October 9, Veracyte enacted a 4-to-1 reverse split of its common stock. Underwriters were led by Morgan Stanley and have the option to buy up to 750,000 more shares in the 30 days after the IPO date. It closed on its first day of trading up 2% to $13.25 a share. – Alex Lash and Mark Ratner

Calithera Biosciences: Calithera is hardly the same company that announced a $40 million Series A round of funding in 2010. The high-flying start-up, which made our A-List that year, is now heading in a different direction. As announced October 29, the company is shifting focus with $35 million in fresh cash in a Series D round that includes some, but not all, of its original investors. Moreover, the company never raised the full $40 million initial round, designed to arrive in tranches. Founded by University of California, San Francisco professor Jim Wells to commercialize research on the role of caspases in inducing apoptosis of cancer cells, Calithera is now turning to an oncology program centering on glutamine metabolism that CEO Susan Molineaux tells FOTF was internally developed. Meanwhile, scientific co-founder Wells has left Calithera’s board of directors, as has U.S. Venture Partners’ Larry Lasky, an early investor. Another Series A backer, Mission Bay Capital, also did not participate in the new round; USVP and Mission Bay area still shareholders, however. In addition, Molineaux described the interim Series B and C rounds in an email as “tranches of the original $40 million Series A financing in June 2010,” and added that the total amount Calithera raised in all three rounds amounted to just $30 million. Two first-time investors, hedge fund operator Adage Capital Partners and VC firm Longwood Fund, joined existing backers Morgenthaler Ventures, Advanced Technology Ventures and Delphi Ventures in the Series D funding. Since backing Calithera initially, Morgenthaler and ATV’s life sciences teams have created Lightstone Ventures; Morgenthaler and ATV have ceased making new life sciences investments. – Paul Bonanos

Spark Therapeutics: For the first time, the non-profit Children's Hospital of Philadelphia has spun out a privately held, for-profit company. As our colleagues at "The Pink Sheet" described, the hospital has budgeted $50 million to support the launch of Spark Therapeutics, created to house a pair of gene therapy programs that the hospital’s Center for Cellular and Molecular Therapeutics has been working on for several years. CHOP chief executive Steve Altschuler said the hospital will supply Spark with cash when needed, and only when Spark executives can justify expenditures. Spark has a Phase III program for a type of inherited blindness attributable to a malfunctioning RPE65 gene, and a Phase I/II program for hemophilia B. Spark CEO Jeffrey Marrazzo said it also holds rights to other preclinical programs, including at least one in-licensed from another source. The cash commitment is designed to fund the opthalmological program all the way to the market, Marrazzo said. While considerable uncertainty remains in the gene therapy field, barriers have begun to fall, leading to more fundings recently. Paris-based GenSight Biologics, another ophthalmological gene therapy developer, received one of 2013’s largest Series A rounds to date, a €32 million ($41.4 million) commitment in April. – P.B.

Versant Ventures: The life science firm headquartered in Silicon Valley slipped toward the bottom of this year’s annual VC “gas tank” chart in Start-Up, not having raised a fund since 2008.

That’s apparently about to change. According to a regulatory filing, the firm is aiming for a fifth fund of at least $250 million, which would be half the amount of its 2008 vintage fund. If successful – the October 18 filing says none of the offering has been sold -- the new fund would come after a couple years of big changes at the firm. In late 2011 Start-Up reported the firm would head into fundraising mode without four veteran partners, two each from the biopharma and device sides of the firm. In the interim, its biopharma team began a shift toward smaller scale investments by building an unusual investment-R&D hybrid called Inception Biosciences. Inception is run by a drug discovery team that scouts for early-stage programs and works them into assets that could move forward in spun-out entities, some with pharma partners holding acquisition rights, some with more traditional backing. With the pharma team building Inception in San Diego and expanding it to Vancouver, the device team got START-UP’s attention with an industry-high quartet of Series A investments in 2012. Assuming Versant’s new $250 million target is a ceiling, not a floor, it stands to reason the biopharma side will continue to explore cost-sharing (and -saving) models like Inception. (Managing director Brad Bolzon declined to comment on the document or the new fund.) The SEC document, which you can view here, has other interesting tidbits. The firm is using three names: Versant Venture Capital V, Versant Affiliates Fund V, and Versant Ophthalmic Affiliates I. Our colleagues reported this spring that the first spin-off from the Vancouver team was in the works, so perhaps that last name holds a clue to what Versant’s Canadian team has been eyeballing. – A.L.

Best of the Rest (Highlights of Other Financing Activity This Fortnight): Immune Design headed up the late-stage venture financing category with its $49mm Series C round led by the Column Group and Topspin Partners (and five additional backers, including Sanofi-Genzyme BioVentures, also participated); the funds will progress proof-of-concept studies for its lead solid-tumor candidates IDLV305 and IDG305…with a $31mm private placement including a debt conversion and a 1-for-8 reverse stock split, another oncology drug developer, Arno Therapeutics, hopes to advance its breast and prostate cancer compound onapristone into the clinic…Dynavax Technologies raised funds to support Phase III development of its Heplisav hepatitis B vaccine, netting a total of $125mm through concurrent offerings: in a FOPO it sold 79.6mm shares at $1.075 (for $81mm) and brought in another $44mm through the sale of 43k shares of Series B convertible preferred stock at $1,075…Aerie Pharmaceuticals (ophthalmology therapeutics) netted $71.8mm in its IPO, selling 6.72mm shares at $10, below its anticipated $12-14 range. – Maureen Riordan