Financings of the Fortnight And the Neverending Venture Round

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Financings of the Fortnight Says Up You Worms! You Butterflies!

Forgive us if you don’t have small children, but events of the past fortnight have put a certain Dr. Seuss book in mind.

IPOs are certainly up. Not just the number of biotech firms going public – more than 20 this year, just past the half-way mark – but the pop for companies that, a couple years ago, public investors probably would have sneezed at. Bluebird bio, a gene therapy developer, nearly double its IPO price; Epizyme, doing epigenetic work, more than double its IPO price; rare-disease firm Prosensa Holdings, more than double. US IPO indices, where the bulk of the IPO activity is happening, are up about 20% for the year.

How much are the warm breezes blowing through the IPO window contributing to venture optimism? That’s a question we’re asking START-UP’s third annual life science venture survey. Here are the previous two years’ results. First, 2011:

And 2012:

In Seussian terms, 2011 and 2012 were not great years for up. This year? We don't want to unblind the data yet; the survey is still open. But we can tell you this: So far the VCs who feel positive about the industry say the IPO window is a major factor.

Can it continue? As we write this, yet another preclinical biotech has breached the public barricade; Agios Pharmaceuticals, which only recently filed its first IND, raised more than $100 million (see blurb below). We like to think the early-stage firms – the Agioses, Epizymes, Verastems, and Reguluses (Reguli?) -- are an excellent gauge of investor sentiment. The public side is listening to the early-stage story.

The venture investment data don’t all reflect the same bounce. According to the MoneyTree survey from the National Venture Capital Association and PwC, there have been 202 biotech investments in the US through the first half of 2013. The pace will need to pick up substantially to match 2012’s total of 477 deals, according to the survey (though seeing how pace usually picks up in the second half, don’t bet against it). Total dollars in are about on pace: $2.2 billion invested so far this year, slightly more than half of 2012’s total of $4.2 billion.

The Dow Jones VentureSource data has different numbers but the same trends: 127 biopharma venture deals so far this year, less than half of last year’s total of 279; and $1.9 billion into biopharma so far this year, roughly half of last year’s total of $3.7 billion.

It’s not our job to make predictions, but we're confident that if the IPO issues continue apace, those fair-to-middling half-year venture investment numbers will be a distant memory. The lure of the public markets is strong – even stronger when it’s rewarding companies that are years away from significant clinical data -- and it also should pull investment into companies that want to use IPOs as leverage in acquisition negotiations.

It will be interesting to see how the IPO window affects the need for corporate venture, which has been increasingly important the past few years. In the 2012 START-UP survey, 60% of respondents said it was important to maintain healthy life science industries and 19% said it was crucial. We haven’t closed out this year’s survey, but so far we haven’t seen any indication of those numbers fading. (For results and analysis from the 2011 survey, click here; for 2012, click here.)

On a related note, the current IN VIVO has an inside look at the corporate venture team at General Electric, dubbed healthymagination, which has recruited health care veterans from Kleiner Perkins Caufield & Byers and Mohr Davidow to help the GE behemoth see – and potentially acquire – disruptive technologies before they become billion-dollar acquisitions. They shy away from pharmaceuticals, so you won’t see a lot of FOTF ink spilled about their investments, but it’s an insightful read nonetheless.

You’ll find no greater disruptive technology in children’s literature than Dr. Seuss's Cat in the Hat, by the way. If you’ve never read it, it’s not too late, no matter how old you are. But first, we encourage you to finish the rest of this edition of…

Agios Pharmaceuticals: Chalk up another IPO win for an early-stage biotech. Agios sold 5.9 million shares at $18 apiece July 23 to raise $106 million, a step up from the 5 million shares it hoped to sell in the $14 to $16 range. Working on metabolism targets to treat cancer and rare metabolic disease, Agios just recently filed its first IND for its lead candidate, AG-221, a small molecule that targets cancers with mutations in the enzyme isocitrate dehydrogenase 1, or IDH1. The company expects to start clinical trials this year. Some of the firm’s work is promised to partner Celgene, which signed a broad co-development deal with Agios in 2010, later revised in 2011. Before the IPO, Celgene was Agios’ second largest shareholder with 17% ownership and was expected to buy more shares in the offering, worth $12.75 million, according to regulatory filings. ARCH Venture Partners and Flagship Ventures each held 16.4%. The largest pre-IPO shareholder was Third Rock Ventures (23.7%), and the upsized offering represents the venture firm’s second big IPO haul – at least on paper – this summer. Third Rock was also top owner of bluebird bio, a gene therapy developer which debuted in June at $17 per share and has since doubled its share price. Bluebird and Agios are the first IPOs from Third Rock’s portfolio of mainly early stage biotechs, and it is benefiting from the public markets’ sudden embrace of riskier endeavors based on relatively new area of research. Recent successful debuts include Epizyme, an epigenetics company, OncoMed Pharmaceuticals, working on cancer stem cells (see blurb below), and Prosensa and PTC Therapeutics, with drugs tackling the rare Duchenne’s muscular dystrophy. Preclinical cancer stem cell company Verastem went public in early 2012.  J.P. Morgan and Goldman Sachs led the Agios underwriting team, which has the option to sell an extra 883,333 shares. – Alex Lash

Merrimack Pharmaceuticals: The oncology developer raised $148 million in parallel equity and debt offerings as it moves several compounds through early clinical trials. Both sales closed July 17, the first financings for the firm since its IPO in 2012. The $125 million debt component consisted of convertible notes that bear 4.5% interest a year and mature in 2020. On the equity side, Merrimack sold 5.75 million shares at $5 each, which includes the option exercised by underwriters to sell an extra 750,000 shares. It netted the company $27 million. Merrimack’s science is based on building simulations of cancer pathway networks, which has led them to create several drug types: monoclonal antibodies, bispecific antibodies, antibody mixtures, and nanoparticle-formulated chemotherapies. Its most advanced compound is MM-398, an encapsulated irinotecan currently in Phase III, with orphan designation in the US and Europe for metastatic pancreatic cancer in patients who have failed gemcitabine treatment. The underwriters, led by JP Morgan and BofA Merrill Lynch, also have an option to sell an additional $18.75 million in convertible notes. Before its IPO last year, Merrimack had raised $270 million in private financing. – A.L.

OncoMed Pharmaceuticals: The developer of cancer treatments netted $89 million through its initial public offering on July 17. Including the overallotment, the company sold 5.6 million shares at $17, higher than the anticipated $14-16 range. OncoMed, which targets cancer stem cells with both biologics and small molecules, plans to use the IPO proceeds to advance its key projects through Phase II trials and to support ongoing partnerships. Cancer stem cells are the subset of cells within a tumor that help a cancer regenerate and proliferate even after treatment, although their existence and function is still a matter of debate in solid tumors. OncoMed’s wholly-owned demcizumab, which inhibits DLL4 in the Notch signaling pathway, is in Phase Ib trials for solid tumors including pancreatic and non-small cell lung cancers. Its most advanced partnerships are for OMP59R5, in Phase Ib/II, and the Phase I anti-Notch MAb OMP52M51, both shared with GlaxoSmithKline. OncoMed’s other key collaboration is with Bayer to develop biologics and small molecules that target the Wnt pathway. Since its 2004 inception, OncoMed has raised close to $170 million in two rounds of venture funding. Pre-IPO, US Venture Partners was the company’s largest shareholder (17.3%), followed by Latterell Venture Partners and GSK. OncoMed reported $24.7mm in revenues for 2012 (on a $22 million loss), and had about $60 million in cash on hand as of March 31, 2013. – Beth Detuzzi

Alcresta: The small Newton, Mass.-based nutritionals company has raised a $10 million Series B round that it says will get it to commercialization and provide options when entering partnering discussions. Alcresta’s original three investors – Third Rock Ventures, Frazier Healthcare Ventures and Bessemer Venture Partners – have returned to provide the B round. Founded by former Alnara Pharmaceuticals executives Alexey Margolin and Robert Gallotto, Alcresta is developing a nutritional supplement with omega-3 and omega-6 fatty acids that are more easily digested and absorbable for patients who have digestive problems. The fatty acids are an important part of cardiovascular and brain health. Most nutritional drinks and infant formula include the triglyceride form of the fatty acids, but certain patients – including premature infants, some elderly, and cancer patients – lack the proper enzymes to digest the nutrients in the triglyceride form. Gallotto told our Pink Sheet colleagues that Alcresta has yet to burn through its Series A financing. It chose to raise more money before it receives product approval to keep the option of commercializing its first product on its own. The company currently has two point-of-care products in development, one for patients who need to be fed with a feeding tube and one for patients who can swallow their own food. Both products are designed to be mixed with nutritional supplements that patients are already taking. If they work as planned, they would jumpstart the digestive process. Alcresta has an unusual business model. It shares its staff, headquarters, and investors with a sister company, Allena, which is developing similar enzyme-based products that will be considered pharmaceuticals. Allena focuses on innovative non-systemic oral protein therapeutics to treat nephrologic and urologic conditions. – Lisa LaMotta

All The Rest: In addition to closing a $14M Series A round, Amphivena Therapeutics also secured an option-to-acquire from Janssen…to support Phase II studies of AbGn-168H for psoriasis, AbGenomics received $9.6M in funding…RusnanoMedInvest led a $6.7M add-on to Lithera’s Series C, which now totals $27.3M…transgenic mice producer Harbour Antibodies raised €2.3M and signed a concurrent deal with Pfizer…UK firm ReNeuron grossed £25.35M through a private placement and also received a £7.8M grant from the Welsh government…after closing its reverse merger with Tranzyme, Ocera closed on a $20M PIPE…a sole health care-dedicated investor backed Rexahn in a $5.7M RDO…oral drug delivery company Oramed raised $4.6M in an RDO…to fund lead candidate Arikace for orphan lung infections, Insmed completed a $62.4M FOPO…Verastem, which is targeting cancer stem cells, publicly raised $55M…acute and chronic pain drug developer AcelRx grossed $51M in a secondary offering…microRNA-targeting Regulus closed on a $42.8M follow-on…cancer company TG Therapeutics did a $35M FOPO…with a focus on back-of-the-eye diseases, pSivida raised $10.8M publicly…Oxygen Biotherapeutics completed a $5.7M public offering of Series C 8% convertible preferred stock…Heat Biologics, developer of allogeneic cellular vaccines for cancer and infectious diseases, priced its IPO at $10, the bottom end of its range, to gross $25M…Onconova and Iroko set terms for their IPOs...in advance of a Series B round planned for later this year, Immunomic Therapeutics raised $3M in debt…and Quest Diagnostics gained $485M by selling to Royalty Pharma rights to future royalties on the Phase III cancer candidate ibrutinib. -- Amanda Micklus