JPM Survival Guide: DOTW Keeps the Party Going

The last few years have been quite a bash for biotech. Astoundingly, the NASDAQ Biotechnology Index (NBI) has added more now than it did during the genomics bubble.

Since the current biotech rally started around August 2011, the NBI has increased about 1,500 points. Around the turn-of-the-millennium, the NBI rose around 1,200 points in a year and a half. Then over the following roughly two years, the NBI proceeded to give back all but about 200 points of that gain by mid-2002.

That makes the ongoing, almost two-and-a-half year upswing the longest, highest biotech rally to date. 

Does this make anyone else nervous? Apparently not, at least not yet.  (In December, Mark Schoenebaum of ISI Group circulated a succinct, hypothetical argument for the bear case in biotech. But this is not his view on the sector.)

Going into the 32nd Annual J.P. Morgan Healthcare Conference, optimism in the sector is continuing unabated. The NBI is up over 5% already this year, by market close on Jan. 10.

That doesn’t even include the phenomenal, two-day 516% climb for Intercept Pharmaceuticals after its Data Safety Monitoring Board recommended stopping early for efficacy at an interim analysis of a Phase II trial of its obeticholic acid to treat the liver disease nonalcoholic steatohepatitis. Intercept isn’t an NBI component. In one week, the biotech has leapt from mid-cap into large-cap territory; it now has a market cap of $8.6 billion, up from $1.4 billion ahead of the news.

On the news front at JPM, Wall Street expects Celgene and Acorda will pre-announce 2014 guidance at JPM. Celgene has hinted it may also update its long-term guidance for 2015 and 2017. Exceeding even the very early JPM curve, Eli Lilly and Bristol-Myers Squibb have already pre-announced their 2014 guidance.

Other likely highlights include various details from big biopharmas with recent management changes. We could get hints from Teva about the direction it plans under newly appointed President and CEO Erez Vigodman, as well as some color from Amgen on why CFO Jonathan Peacock is departing.

The above should give you a few talking points, as will the deals discussed below. That’s essential when you run into industry colleagues you are just meeting or seeing for the first time in years.

A list of all the JPM parties is also indispensable. Last year was the first time we saw a spreadsheet of all these events. Despite the fact that the Excel document ran a couple of pages, shockingly there were still a few omissions discovered by us and a hedge fund manager who shall remain anonymous.

One of this year’s versions of the JPM party list, linked to above, has been upgraded to a PDF and carefully annotated to note invitation-only parties. Although we wonder, isn’t this list specifically designed for party crashers? Or, maybe it’s just so we’ll know all the fabulous parties we weren’t invited to? The most prosperous entities at any given time always seem to commandeer the penthouse at the pricey Clift Hotel, but of course no spot is cheap at the height of the conference.

Another JPM must is a lot of hand-washing – someone at the last JPM gave DOTW a horrible case of the stomach flu that felled us by Wednesday afternoon. Not to alarm anyone, but the number of flu cases in the U.S. is peaking right now, with a heavy concentration in the Western states. And a San Jose hospital reportedly set up an over-flow tent because of all the flu patients. So, avoid shaking hands with all those Silicon Valley VCs, unless you really need their money.

And for the ladies: no high heels, please. Unless you’re a former model trained to stand the fourteen hours of pain or you are powerful enough to have a suite where everyone is coming to you. Although JPM has promised it’s working to cut back on some (non-paying) attendees this year, so perhaps there will be ample seating at every major session and the hallway traffic will flow freely. Or not.

Most importantly, remember to 'slip' at least once and call the conference H&Q. So, everyone will know you’ve been coming to the conference for a long, long time.

As promised, we continue below to give you ample party-chatter fodder with the latest on biopharma wheeling and dealing in this week’s missive of  . . .

Forest/Aptalis: Forest Laboratories continues to build on the business development strategy of new CEO Brent Saunders with its $2.9 billion buy of privately-held Aptalis on Jan. 8. The specialty pharma has been trying to flesh out its key therapeutic areas – CNS, CV, GI, respiratory, and anti-infectives – since Saunders took over the top slot in October. This strategy began with Forest’s $240 million purchase of the antipsychotic Saphris (asenapine) from Merck & Co. in December; building on the company’s central nervous system franchise, which includes the antidepressants Viibryd (vilazodone) and Fetzima (levomilnacipran). Aptalis will give Forest multiple products in the GI space – Carafate (sucralfate) for duodenal ulcer disease and Canasa (mesalamine) for ulcerative proctitis, as well as others. The privately held company also has a strong presence in the cystic fibrosis space in Europe, where it owns three of the five approved drugs for pancreatic enzyme insufficiency: Zenpep, Ultrase and Viokase (pancrelipase, in three formulations). Forest sees this as a way of bolstering its Colobreathe (colistimethate sodium) business. The drug was approved in February 2012 in Europe for the treatment of cystic fibrosis patients aged 6 years and older with chronic lung infection caused by P. aeruginosa. The spec pharma hopes eventually to bring those products to the U.S. market. Forest is acquiring all outstanding shares of the TPG Capital-backed Aptalis with a mixture of cash and debt. The company has secured a $1.9 billion bridge loan to close the deal within the first half of the year, pending regulatory review. The acquisition is expected to add $700 million to 2015 revenues and be immediately accretive to earnings. -- Lisa LaMotta

Royalty Pharma/Fumapharm investors: Royalty Pharma – the investment firm that buys up royalty streams on marketed drugs – is doubling down on its investment in Biogen Idec’s multiple sclerosis drug Tecfidera (dimethyl fumarate), the stand out drug launch of 2013. The firm announced Jan. 6 it would acquire more interest in the earn-outs payable to the former shareholders of Fumapharm for $510 million. Biogen Idec gained dimethyl fumarate with the acquisition of Fumapharm in 2006. Royalty Pharma already owns an interest in Tecfidera from a deal inked with Fumapharm investors in 2012, when it paid $761 million for some rights, back before the drug was approved by FDA. Now it’s obvious why Royalty has come back for more. Tecfidera, which launched in April, appears on pace to generate more than $1 billion in its first 12 months on the market. The royalty company won’t say how much of the sales it stands to receive. Fumapharm investors still own rights to a “substantial portion” of the earn-outs, Royalty said. Under a complicated payout scheme laid out in Biogen Idec’s SEC filings it appears the entire earn-out is worth about 10% of Tecfidera sales annually if the drug reaches $3 billion in sales, which it now seems likely to do. -- Jessica Merrill

Biogen Idec/Sangamo: In a move that could help validate its proprietary genome-editing technology and further strengthen its balance sheet, Sangamo BioSciences signed a worldwide collaboration and licensing agreement with Biogen Idec on Jan. 9 to co-develop potentially curative stem cell therapies for sickle cell disease (SCD) and beta-thalassemia. During a same-day conference call, Sangamo President and CEO Edward Lanphier noted that those two hemoglobinopathies are serious diseases with sub-optimal current treatment options. There are a number of symptomatic approaches to treating the two conditions that do not address the underlying cause of the disease. And while a bone marrow transplant of hematopoietic stem cells can be curative, such procedures are rare due to a lack of ideal matching donors and the risk of graft versus host disease. Biogen is paying $20 million upfront for worldwide license to both Sangamo’s zinc finger nuclease technology platform and its preclinical intellectual property for treating the two diseases. Richmond, Calif.-based Sangamo also can earn up to $300 million in development, regulatory, commercialization and sales milestones under the agreement with Biogen, along with double-digit royalties on any product sales. In addition, the biotech has an option to co-promote for either indication in the U.S., a decision which the company will not need to make for some time, Lanphier said. Sangamo will continue to perform all R&D activities through the first clinical proof-of-concept trial in beta-thalassemia, while the companies will work together on the IND-enabling work for the program in SCD. Biogen will be responsible for all subsequent clinical development and commercialization of both programs, and will reimburse Sangamo for its internal and external R&D costs related to both programs. -- Joseph Haas

Johnson & Johnson: To bolster its network of innovation centers, the global health care company said this week it has helped establish a new incubator in Israel and has signed early stage collaborations or made investments with eight biotech and academic groups. Johnson & Johnson is teaming with the Israeli government, Takeda, and venture firm OrbiMed Advisors to open the facility in early 2014, adding to incubators J&J has opened with partners in Montreal, Toronto, San Francisco, and Boston. J&J’s Janssen group also runs an incubator in San Diego. The collaborations or licenses are with Cambridge, Mass. biotech Scholar Rock, to pursue new biologics that target TGF-beta 1 for immune-mediated disease; Intrexon, to develop new consumer hair and skin products; University of Texas's MD Anderson Cancer Center, to develop a translational program for cancer immunotherapy; diagnostic firm Nodality, to hone J&J’s immunology R&D, particularly in rheumatoid arthritis and inflammatory bowel disease; and Dutch firm Bioceros, for exclusive rights to develop a monoclonal antibody against an immune checkpoint modulator. Through its venture arm Johnson & Johnson Development Corp., the J&J Innovation group also announced investments in Assembly Therapeutics, which is developing allosteric modulators to treat Hepatitis B and other viral infections; TopiVert, which is working on topical medicine for inflammatory diseases; and SutroVax, a new entity spun out from antibody platform company Sutro Biopharma to pursue vaccines. -- Alex Lash

Financings Of The Fortnight Does Bollywood On A Budget

With IPOs still the twitter, er, talk of the town, the relative lack thereof the past couple weeks in our little corner of the world was noticeable. So forgive us if we were distracted from our IPO perusings by a particular firm that emerged from the roadshow scrum: top Indian film producer Eros International. Your FOTF correspondent has a soft spot for Indian cinema, having visited a couple local movie houses for the full Bollywood experience on a monthlong trip to India in late 2004. (We’ve ever since lobbied for chaat vendors to roam the aisles, sport stadium style, in American movie theaters.)

Eros went public this week, but only after taking a small haircut, so we figure a more budget-conscious approach to Bollywood spectacle is a better way to go.

FOTF is all about self-improvement, if you hadn’t noticed. We always make the healthy lifestyle choices: organic sustainable olives in the martini, strengthening those abs and buns to a bhangra beat, and regular salon visits.

Haircuts have been in the news for biotech, too, after a summer of letting it all hang out. Considered the highest profile of the current road-show warriors, Relypsa finally priced late last night after a couple of downgrades – or, if you prefer, a haircut a la Sweeney Todd. (For more, see our roundup below.) Antibody firm Xencor has amended terms, too, looking to raise $75 million by doubling its shares offered to 10.7 million and cutting its proposed price range in half. (As of this writing it hasn’t yet priced. 

Others have flat-out tabled their IPO efforts: Both gene therapy firm Celladon and diagnostic firm CardioDx postponed due to market conditions. That makes three four withdrawals or postponements in the past month. [UPDATE - On November 15 Xencor postponed its IPO.]

Companies that have made it out this year are also feeling a pinch. At the end of October, the biotech IPO class of 2013 was the best performing industry sector, up 47% as a group. (High tech, by comparison, was up 41%.) The past two weeks, however, those post-IPO biotech gains have slipped to 27% and now trail several other sectors. Still not too shabby. Who wouldn’t want a portfolio of stocks that are up 27% for the year? But the biotech slump, which actually started at the end of summer, is unmistakable.

Is it just a blip, a bump, or is it a big yellow flag? If we knew the answer, we wouldn’t be journalists, we’d be day traders working from home in our sweatpants, leaving after the final market bell at 1pm (FOTF is a West Coast shop all the way, dude) to do our Bollywood workout.

But here’s something to chew on. All those biotechs that went public this spring and summer? From right about now through December or so, their lock-ups are about to end. And a whole bunch of VCs who feel the hot breath of limited partners on their necks (yuck) will be looking to cash out. It won’t happen all at once, of course. Many venture investors can afford to cool their heels, as our colleague Stacy Lawrence reported in June.

But many can’t. And what might that do to stock prices? In an upcoming feature in Start-Up, Stacy dives into three recent biotech IPOs as well as the recent market dynamics. Two biotechs from the class of 2012 IPOs, Intercept Pharmaceuticals and Chimerix, recently saw their VCs sell directly into the public market, with mixed effects on the company’s shares. Will other VCs looking to sell to the public be staring down the barrel of a buyer’s market in the coming months? OrbiMed Advisors’ co-head of global equity Jonathan Silverstein doesn’t think so. “We’ve been approached on a number of IPOs by public investors who say they only have a 2% position and they want 5%. We are not necessarily interested in selling, but it’s nice to hear now.” OrbiMed's LPs don't seem too worried. That Silverstein quote comes from a recent story in “The Pink Sheet” DAILY about the firm’s new $735 million venture fund.

In the next START-UP, we break down the recent IPOs and acquisitions in OrbiMed’s portfolio to see what helped them sell that new fund. Until then, break it down old school style. Time for the Electric Slide.

At least it’s better than doing the Biotech Slump. If you prefer the Harlem Shake, well, there’s not much we can do for you. Get it out of your system, then crunk on over to the latest edition of…

Relypsa: The polymeric therapeutic specialists priced their initial public offering late Thursday, November 14, selling 6.85 million shares at $11 each for net proceeds of $67.4 million. It’s quite a comedown from the firm’s initial plans, which aimed for a top goal of $138 million back in October. The ambitious target was driven in large part by the amount of cash venture backers have sunk into the company:  more than $180 million over three financing rounds, according to Strategic Transactions. The firm spun out of Amgen in 2007 after that company bought Relypsa’s predecessor Ilypsa for its phosphate binder to treat hyperphosphatemia. That drug stalled soon after, but Relypsa carried on with former Ilypsa employees. 5AM Ventures and New Leaf Venture Partners led the $33 million Series A and were joined by the Sprout Group, Delphi Ventures, CMEA Ventures, and Mediphase Venture Partners. OrbiMed Advisors, which came in to lead the massive $70 million Series B round, is the largest shareholder going into the IPO, with a 44% stake. 5AM is next with 22%. Existing investors – including a limited partner of the venture investors – have said they could buy as much as $20 million worth of the IPO shares, according to the company’s final registration statement. Underwriters led by Morgan Stanley, BofA Merrill Lynch and Cowen have the option to sell 1.03 million additional shares. – A.L.

Synta Pharmaceuticals: The small molecule oncology developer raised $52 million in a sale of 14 million shares of common stock at $3.75 each as it moves toward a pivotal trial for its lead program, ganetespib in non-small cell lung cancer. It’s the second time around for the Massachusetts firm, whose first lead drug, elescomol, failed in Phase III trials for stage IV metastatic melanoma. The company learned in 2009 that more people died on an elesclomol/chemotherapy combination than on chemo alone. It went into restructuring mode and emerged with ganetespib, a heat shock protein 90 (hsp90) inhibitor. Its most advanced hsp90 competitor, retaspimycin from Infinity Pharmaceuticals, has been terminated, which leaves ganetespib breathing room but also raises questions whether the entire class is compromised. Synta told analysts earlier this month about adjustments to its Phase III trial, dubbed GALAXY-2, that will shift the patient enrollment away from Eastern Europe and boost the study population. The disclosures didn’t stop the slide in Synta’s share price, which has fallen nearly 50% since late October. The firm is also working on a small molecule drug conjugation platform to link an hsp90 inhibitor to a toxic payload. Underwriters led by Jefferies have the option to buy up to 2.1 million more shares. – A.L.

ArGEN-X: The Belgian antibody company has raised 5 million Euros ($6.8 million) to extend its Series B round to $44 million. The new infusion of cash comes from Flemish regional investment firm PMV. The cash will go toward ArGEN-X’s preclinical compound ARGX-113, being developed to treat autoimmune disease. The compound is an antibody fragment that aims to clear autoantibodies – the antibodies produced by a patient’s own immune system that go haywire and cause autoimmune disorders. The company’s technology used to create ARGX-113 is dubbed “ABDEG,” or antibodies that enhance IgG degradation. The firm also has two antibodies in the clinic, an anti-CD70 agent and an anti-cMET agent, both in Phase Ib. Both were discovered using a different platform, SIMPLE, based on the immune system of llamas.  The first tranche of ArGEN-X’s B round was co-led by OrbiMed Advisors and Seventure Partners and included existing investors Forbion Capital Partners, Credit Agricole Private Equity, LSP, BioGeneration Ventures, the Erasmus Biomedical Fund, Thuja Capital and VIB. Its Series A round brought in $19 million over two tranches. – A.L. 

Karyopharm Therapeutics: In the fortnight’s only other IPO, Karyopharm netted $101 million by selling 6.8 million shares at $16 a piece. Despite all the talk of haircuts and postponements elsewhere, the offer priced at the top end of its proposed range. The IPO cash matches what Karyopharm raised in two private rounds from institutional investors (Delphi Ventures) and wealthy individuals. Before IPO, Karyopharm was 46% 61% owned by Chione and Plio, two investment vehicles that share the same address on the island of Cyprus and are linked to Slava Smolokowski, a Polish energy baron who has also put his considerable fortune into Broadway. (His big hit was as a producer was Fela!, a hugely acclaimed Broadway show about the legendary Nigerian musician and political activist. According to Playbill, Smolokowski was educated as a musician and played in a rock band for some time.) The firm says it has discovered and developed small molecules to inhibit the nuclear export protein XPO1, which cancer cells amplify to promote the transmission of tumor suppression proteins from the nucleus to the cytoplasm. Getting those suppression proteins out of the nucleus gives a tumor cell a better chance to survive. By inhibiting XO1, Karyopharm believes it can trap the suppression proteins in the nucleus and let them do their job – trigger apoptosis. Karyopharm’s technology was brought out of Epix Pharmaceuticals, which was liquidated in the late ‘00s. Epix CEO Michael Kauffman and SVP of drug development Sharon Shacham are behind Karyopharm, and they licensed key IP from Epix. The company says half the IPO proceeds will help pay for Phase II/III trials for selinexor, its lead candidate, which Karyopharm says in its filing documents has already administered to more than 170 patients in three Phase I trials for various malignancies. Phase II/III could start in two cancer indications in the first half of 2014. – A.L.

Best of the Rest (Highlights of Other Financing Activity This Fortnight): Liquidia Technologies spun out ophthalmic-focused start-up Envisia Therapeutics, which received $25M in Series A financing and will use Liquidia’s PRINT technology to develop a new glaucoma treatment…less than a year after reverse merging to go public, Ocera Therapeutics completed a $28M PIPE to fund studies of its oral and IV hepatic encephalopathy candidate OCR002…to fund commercialization of Esbriet in Europe and various other development and regulatory activities surrounding the IPF drug, InterMune raised $84M in a FOPO…After reporting growth in the Q3 2013 net product sales for its sold marketed myelofibrosis product Jakafi, Incyte sold two $350M series of convertible senior notes…TVM Capital officially announced (as Start-Up reported in September) that it is no longer investing in IT,  but instead focusing on life sciences and health care. -- Amanda Micklus