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 Explores the Alternatives

With all the noise this year about IPOs in our little corner of the world, it’s been easy to forget that most biotechs out there are scrambling for any source of cash they can lay hands on. Assurances aside that traditional biotech VC is making relative bank, the overall pool of traditional venture capital available to invest will continue to dwindle, as respondents in START-UP’s 3rd annual life science VC survey were quite adamant about.

(The survey is now available, by the way.)

This week we got a taste of the post-VC world; or at least, a reminder of the various types of alternative funding out there for health care and biotech that, in a few years, could replace a significant chunk of traditional venture and interrupt for good the boom-and-bust cycle.

First, the elephant in the room: Google announced it would fund a new health care company, Calico, dedicated to anti-aging. The search-and-so-much-more giant is clearly obsessed with health, and doing something about the drastic – dare we say “tragic” – flaws in the care system. Our correspondent Paul Bonanos did a great job delving into Google Ventures’ health care investment strategy in this feature earlier this year, and we recommend reading it (non-subscribers can sign up for a free trial) as background to what might be going on with Calico.

Fly-on-wall fantasy: Page: How do we increase Google searches over a person's lifetime? Brin: What if we just increased the lifetime?
— Josh Berlin (@BioPharmaJosh) September 18, 2013

Paul also reminds us that the Googlers aren’t the only tech-heads with health-care ambitions: Peter Thiel, Yuri Milner and others are shifting their fortunes in small measures. And bully for them; we could certainly use fresh minds and tech-savvy strategies (Tech Tonics?), what with the data-intensive nature of health care these days.

But Silicon Valley’s libertarian streak is often at odds philosophically with another important source of biotech funding that we were reminded of this week. The National Institutes of Health announced the recipients of $45 million from the funds dedicated in 2012 to Alzheimer’s research. Those funds aren’t going directly to biotech companies, but the trials and other efforts they’re backing are much needed in an area that seems practically abandoned by industry – at least in proportion to the level of the dire medical need Alzheimer’s represents. So, indirectly, one can only hope the NIH funding can move the needle enough for biopharma, big and small, to see clearer pathways that deserve cash outlays from the private sector, as well.

Finally, we’re about to see a small but significant step toward equity crowdfunding. Title II of the JOBS Act, which loosens the rules for general solicitation of accredited investors, takes effect next week. It’s not quite crowdfunding nirvana – or the apocalypse, depending on your viewpoint – because we’re still a ways away from Mom and Pop, Joe Sixpack, and the Joneses being able to participate.  (That’s Title III.) But all manner of folks are lined up, ready to provide investment platforms for those with an eye on biotech, as our colleagues have written about here.

If you happen to be at PSA: The Pharmaceutical Strategy Conference in New York next week, you can ask Greg Simon, who’s running the equity crowdfunding site Polliwogg, all about the latest developments. (Or you can catch him on the panel “Funding Biotech: New Ways To Create Value.”)

Or, if you hate going anywhere near New York because you’re convinced it’s about to be overrun by giant drooling sea-dragon spiders, well, the people we write about have products that can help you. Until then, relax in the safety of your home or office, avoid the crowds (and their funds), and enjoy the latest edition of….



Civitas Therapeutics: From the ashes of the inhaled insulin efforts of the previous decade comes Civitas, which said September 11 it has raised a $38 million Series B financing to fund late-stage development of the company’s lead program, CVT-301, an inhaled formulation of levodopa (L-dopa) to treat debilitating motor fluctuations – known as “off episodes” -- associated with Parkinson’s disease. Civitas spun out of Alkermes' pulmonary business in 2010, then the latest casualty in Big Pharma’s complete retreat from several efforts to create inhaled insulin products. But Longitude Capital and Canaan Partners raised $20 million for a Series A, and in early 2011 new CEO Glenn Batchelder told FOTF he hoped to bring a Parkinson’s-related treatment to clinical proof of concept by the end of 2012. (Why an inhaled L-dopa for Parkinson’s? During acute “off periods,” characterized by halting or frozen movement, the Civitas technology aims to deliver drug even when it might be difficult for patients to draw a sustained breath.) CVT-301 is being positioned as an adjunct therapy to oral L-dopa. Bay City Capital led the round and was joined by crossover hedge fund RA Capital, an undisclosed blue chip public investment firm, and all returning shareholders including Alkermes, Canaan Partners, Fountain Healthcare Partners, and Longitude Capital. Partners from Bay City and RA Capital joined the company’s board. Civitas will also explore pipeline expansion with its ARCUS delivery platform for other diseases where what the company defines as a “large, precise” dose delivered from an inhalation device “would provide a significant clinical advantage.” – A.L.

DRI Capital: The Toronto health care royalty investor said September 9 it has raised a new $1.45 billion fund, its third following $240 million and $926 million vehicles, raised in 2006 and 2010 respectively. Investments under the first two funds followed a fairly straightforward set of criteria: drugs with FDA or EMA approval that offer strong efficacy and an attractive pharmacoeconomic profile and that are used to treat very serious, chronic conditions, DRI President and CEO Behzad Khosrowshahi told our “Pink Sheet” colleagues. For the third fund, however, DRI also plans to consider investments in Phase III assets and the higher returns that might come from higher-risk investments. It’s part of a larger but still subtle trend of royalty firms dipping toes into pre-commercial assets, even as traditional venture firms cross the other way and dabble in royalty investments. Khosrowshahi said that DRI has “a decent level of internal expertise” to evaluate pre-commercial risks. The drug royalty business has certainly attracted the capital to lure health care specialists, with DRI joined by competitors such as Capital Royalty L.P., Orbimed Advisors LLC and Healthcare Royalty Partners. Earlier this year, Capital Royalty raised more than $1 billion for its second fund, announcing a revised strategy under which it would emphasize debt instrument financing that would offer its deal partners a more concrete sense of the cost of capital. -- Joseph Haas

Five Prime Therapeutics: The protein therapeutic company notched on September 18 the first biotech IPO of the fall season. More than a dozen are waiting in registration, and an unknown number are also still under wraps with confidential filings. Five Prime raised $62 million by selling 4.8 million shares at $13 each, right within its projected range of $12 to $14 a share. Insiders bought about 408,000 shares. Five Prime was founded in 2001 and built at a time when VCs were more willing to wait for long-term payoffs for platforms. Five Prime’s platform consists in part of a library of 5,600 extracellular proteins to yield novel targets, and biotech or pharma partners have signed on with more than $220 million in partnership or licensing money. Its most advanced candidate FP-1039 is a selective FGF inhibitor that Five Prime and its partner GlaxoSmithKline put into a Phase Ib trial in July.  “If you were to tell a VC, ‘Give me four or five years and a chunk of money to develop this kind of platform,’ it might be a tough sell these days,” Five Prime VP of Biology Brian Wong told our sister publication START-UP earlier this year. Befitting a company that’s taken 12 years to reach the public markets, the pre-IPO ownership was spread rather widely. Only Pfizer had more than a 10% stake, with 13.7%. Venture or priate equity groups Advanced Technology Ventures, Domain Associates, Kleiner Perkins Caufield & Byers, HealthCap, Versant Ventures – from the firm’s very first fund -- and Texas Pacific Group all owned 9%. Founder and CEO Rusty Williams owned 6.8%. Jefferies led the underwriting team, which has the option to sell an additional 720,000 shares. – Alex Lash

Cubist Pharmaceuticals: The antibiotic maker said September 16 it bought $25 million in Series A preferred stock from Optimer Pharmaceuticals, a sale that was negotiated this summer as part of Cubist’s agreement to buy Optimer. That acquisition, not yet consummated, hasn’t gone over well with Optimer shareholders, who have filed suit to stop it because Optimer shares have actually been climbing since the company dumped its CEO and put itself up for sale in February. The $10.75-per-share offer, or $535 million, was at a 19% discount to Optimer’s July 30 closing price. Shareholders could earn more post-acquisition if Cubist hits sales milestones with Optimer’s Clostridium difficile treatment Dificid (fidaxomicin), a product it has been selling in the U.S. since 2011, when it signed an exclusive co-promotion deal with Optimer. The $25 million stock sale is essentially a bridge to help Optimer pay the bills – or as a Cubist spokeswoman told FOTF, “to address Optimer’s near-term cash needs” -- until the merger takes effect. The purchase repeats quarterly, so if the deal hasn’t closed in three months, Cubist will pay another $25 million, and another $25 million three months after that. As of June 30, Optimer had $73 million in cash on hand, down from $119 million at the end of 2012. Seeing how the deal was unusual for its discounted price, there certainly is a chance that the lawsuit will have legs and hold matters up for some time. The Cubist spokeswoman declined to comment on the suit. – A.L. and Jessica Merrill 

All The Rest: myoscience, developing Focused Cold Therapy devices for peripheral nerve conditions, closed on a $25M Series E round…Index Ventures is initially investing $10M into Egalet to support work on abuse-deterring pain meds, with the option for another $10M…Emmaus Life Sciences raised $7.5M to complete Phase III studies for its sickle cell candidate…to pay for its acquisition of CNS assets from Merck, Cerecor got $6.8M in Series A-1 financing…Taglich Brothers led a $3.2M round for screening and assay development services company Caldera Pharmaceuticals…Sanofi was an investor on Hadasit Bio-Holdings-portfolio company KAHR Medical’s $2.5M fundraise…BioMotiv and the NYU Innovation Fund launched autoimmune start-up Orca Pharmaceuticals…KV Pharmaceutical emerged from Chapter 11 bankruptcy, simultaneously closing on a $100M credit facility and $275M rights offering…Cell Therapeutics sold $15M in 15k Series 18 convertible preferred shares…Taiwanese biotech Amaran provided half of the $10M private investment in Stellar Biotechnologies…A $10M PIPE by NanoViricides gives the company a total of $22M in cash for the next two years to fund its FluCide and DengueCide candidates…A day after revealing positive outcomes in its Phase II glioblastoma multiforme vaccine study, Agenus raised $6.5M in an at-the-market registered direct offering…injectables developer Sagent Pharmaceuticals closed on a $75M FOPO…to continue work on ZFP Therapeutic candidates, Sangamo BioSciences completed a $64.5M secondary offering…Galena Biopharma’s $35M FOPO will help to commercialize its first product, Abstral…electroporation drug delivery company OncoSec publicly raised $12M…protein therapeutics company Acceleron priced its IPO at the top end of its range to gross $83.7M...glaucoma drug developer Aerie Pharmaceuticals filed for its IPO, while Bind Therapeutics, Ophthotech, and Enzymotec set terms for their offerings…Cubist offered $800M in two series of convertible senior unsecured notes…therapeutic protein maker Protalix BioTherapeutics closed on $69M in 4.5% convertible notes due in 2018…ProMetic Life Sciences’ $Cdn10M debt financing will help put its plasma purification facility into operations for manufacturing plasma-derived orphan drugs…Benu BioPharma established Benu BioVentures for investments in preclinical to proof-of-concept candidates…and Daiichi Sankyo teamed up with Mitsubishi UFJ Capital to launch a new fund for start-up creation; Daiichi gets rights to buy the companies and IP. -- Amanda Micklus 

Image courtesy of flickr use Kitschweb through a Creative Commons license. 

Deals Of The Week: Isis Rethinks Its Partnering Strategy

 

In its last few earnings calls Isis Pharmaceuticals Inc. has touched on a significant change in its partnering strategy. We spoke with CEO Stan Crooke recently to better understand the implications of these changes for Isis’s top line and operating expenses, and also how they might allow the antisense specialist to enter into more strategic relationships with a few well-chosen partners. 

Isis has been on a deal tear. It out-licensed 5 candidates in 2012, striking three of those deals with Biogen Idec Inc., according to Elsevier’s Strategic Transactions Database. Since 2008, it has collected over half a billion dollars in upfront cash, and hundreds of millions more in milestone payments, not to mention $175 million on the sale of its satellite subsidiary Ibis Biosciences Inc. to Abbott Laboratories Inc.

The new approach was enabled by the size and renewability of Isis’s pipeline – some 28 antisense compounds in clinical development, and about seven in preclinical – and also by recent improvements in antisense technology that have raised the value and attractiveness of Isis’s assets and allowed it to pursue targets in a broad array of diseases including larger population diseases.

Isis puts its candidates into three buckets. The first bucket includes drugs in indications where there’s high target risk and costly and inconclusive Phase II studies.  Its goal is to partner these assets early, sometimes during preclinical development, in option deals where Isis controls development through Phase I or II. Recent agreements in neurology with Biogen (spinal muscular atrophy) and Roche (Huntington’s disease), and in cancer with AstraZeneca PLC (various tumors), conform to this model.

The second bucket is for drugs in indications where Phase II studies are dispositive and predictive of Phase III success, but where Phase III programs are very expensive and complex – for instance, due to a requirement for cardio outcome studies. These indications, typically metabolic disorders or certain cardiovascular diseases, have large patient populations and require a significant commercial effort. Isis’s unpartnered candidates against targets involved in insulin resistance, lipid control, fat metabolism, clotting disorders and coronary artery disease fall in this bucket. “Because we’ve kept them longer, through Phase II proof-of-concept, the terms are more lucrative,” said Crooke.

The third bucket signals the greatest change in Isis’s partnering strategy. From the firm’s founding in 1989, it has focused primarily on partnerships in which it had limited financial flexibility and where its partner controlled development. Beginning around 2010, Isis began to strike deals where it retained developmental control through early and mid stages, and generally took a bigger payment, both upfront and in milestones and royalties.

This third group comprises drugs in indications with clear Phase II and Phase III clinical paths, low-to-moderate total development costs, and the potential for initial rare disease opportunities, with larger-population indications downstream. Crooke said Isis is looking for “a Phase III program that we think we can manage without growing the organization enormously.” In fact, Crooke said Isis may hold onto candidates in the third bucket partway or all the way through Phase III.

The company might even control some drugs through filing, though he conceded that the timing would get tricky. The art is to partner early enough so that the licensee can prepare for launch, but late enough to maximize the value of the asset. Deals over Phase III assets might include a one-year option, though Crooke said he and his team are still evaluating different deal structures.

The first experiment in Phase III out-licensing will be ISIS-APOCIIIRx for patients with high triglycerides; its Phase III trial is slated to begin next year. The Kynamro (mipomersen) deal with Genzyme Corp., in which Isis took $325 million in upfront cash and equity for an asset it had funded through Phase II, may have woken it to the commercial opportunity of holding drugs longer, particularly ones that play out in multiple indications. But where mipomersen’s Phase II trial had to be funded via a private placement and an innovative financing with Symphony Capital, Isis is no longer cash-constrained and will have no trouble managing the late-stage development program for APOCIIIRx and other appropriate candidates. Similar deal terms and a big pharma partner are likely if Isis is successful in licensing APOCIIIRx.

The new deal strategy calls for Isis to crank out three to five drugs per year. At that rate, said Crooke, it will need to grow the organization a bit. And R&D spending, which has until now been relatively stable, will begin to rise as it moves drugs forward faster and retains some into Phase III.

But the river of cash that will be generated by Isis’s numerous existing deals – upfronts, milestones, licensing fees, royalties – should easily cover the costs. Its cash hoard, announced at its August 6 second quarter earnings call, is $590 million. The money will also make possible the next iteration of Isis’s partnering strategy. “What we look forward to in the future,” said Crooke, “is a few strategic partners where we’ll have a partner in a specific space who really knows us and the technology. And we know the partner and what we’re getting.”

Clear sailing, then, as long as the deals keep coming in. However, 2013 has seen a pause in the torrid pace of Isis’s deals. So far into the year, it has struck only the Roche agreement in April.

Still, all that cash set to pour in, and all those changes in the way it does business development, could nudge Isis to rethink its platform business model.  We’ll be examining that possibility in an upcoming issue of IN VIVO. - Mike Goodman

Until then, here’s what the rest of the biopharma world has been up to, deal wise . . . 

Novartis/Ensemble Therapeutics: Building on its research into the inflammatory cytokine interleukin-17, Novartis AG has partnered with Ensemble Therapeutics Corp. to develop an oral small molecule targeting the pathway. The big pharma is one of the leaders in this field of research and has a biologic drug that blocks IL-17, secukinumab, poised for a near-term regulatory filing for the treatment of psoriasis. Several competitors are also looking to bring similar drugs to market, and an oral alternative would represent a compelling commercial opportunity. The terms of the discovery-stage deal, announced Aug. 5, were not disclosed, though it will include an upfront payment, milestones and research funding payable to Ensemble.  For the private drug discovery company, the deal involves its latest-stage asset.  Much of the value of its macrocycle discovery platform, from which it has built a library of more than five million synthetic macrocylic compounds called Ensemblins, is at an early stage. The orally available compounds permeate cells like small molecules do, but like biologics, also bind to protein targets. The company has partnered with several other pharmas including Pfizer Inc., Bristol-Myers Squibb Co., Genentech Inc., Boehringer Ingelheim GMBH and, most recently, Alexion Pharmaceuticals Inc.- Jess Merrill

Bayer/Compugen: Israeli drug developer Compugen Ltd.  landed a drug development deal with Germany’s Bayer AG for two potential cancer treatments whereby the Tel Aviv-based biotech will get an upfront payment of $10 million and could get more than $500 million in milestone payments, not including milestone payments of up to $30 million for preclinical activities, plus royalties on resulting drug sales. Compugen, which has a pipeline of preclinical protein therapeutics and monoclonal antibodies, uses predictive discovery technologies to discover antibody therapies that use the body's natural immune defenses to fight tumors. The NASDAQ-listed biotech’s computational platform uses algorithms to predict which surface membrane proteins could be used as antibody drug targets; these are later validated in the laboratory. The collaboration, announced Aug 7, will focus on two novel immune checkpoint regulators that may play a role in immunosuppression.  Its scientists are developing specific therapeutic antibodies geared to block the immunosuppressive function of these targets and to reactivate the patient's anti-tumor immune response. It’s an area that is drawing increasing attention from drug makers. Compugen depends to a large degree on partnerships to progress its R&D program. Under its latest arrangement, Bayer will get control over further development and global commercialization rights to any new antibody-based cancer immunotherapies the collaboration generates. - Sten Stovall

Oncobiologics/InVentiv Health: N.J.-based Oncobiologics Inc. has entered into a risk-sharing agreement with contract research organization inVentiv Health Inc. in an effort to move its biosimilars pipeline forward. Oncobiologics is a small privately-held company, founded in 2011, that has relied on government grants, partnering opportunities, and angel investors for funds. It currently has no drugs in the clinic, but has several preclinical biosimilars and three innovative molecules still in discovery. The two companies will collaborate to develop five biosimilars, beginning with a generic version of AbbVie Inc.’s blockbuster rheumatoid arthritis drug Humira (adalimumab). The collaboration will involve biosimilar versions of four oncology drugs, including Roche/Genentech Inc.’s Rituxan (rituximab), Bristol-Myers Squibb Co./Eli Lilly & Co.’s Erbitux (cetuximab), Roche/Genentech’s Herceptin (trastuzumab), and Roche/Genentech’s Avastin (bevacizumab). inVentiv will share the cost of Phase III development. Oncobiologics was founded by individuals with business, R&D, and process engineering experience in the biologics divisions of major pharma companies. The firm intends to find commercialization partners in the U.S., Europe, and emerging markets, and has struck several deals to that end, but will work with inVentiv to commercialize the products in any territories without partnership agreements. inVentiv’s share of the profits will be dependent on its involvement in those unpartnered territories. Financial details of the transaction were not disclosed.- Lisa Lamotta

Amgen/Array: In this week’s “No Deal,” Amgen Inc. will return glucokinase activator AMG 151 to original owner Array BioPharma Inc., ending a December 2009 collaboration in which the companies jointly studied type 2 diabetes drugs. The tie-up officially unravels October 5, when rights to AMG 151 will revert to Array. Boulder, Colo.-based Array revealed the deal’s termination along with second-quarter earnings on August 7. The Phase II candidate, originally and henceforth known as ARRY-403, was the centerpiece of a deal that netted Array $60 million up-front. Array also received an $8.5 million milestone payment during the life of the deal, which included an additional $658 million in unrealized payments. The collaboration included a two-year research agreement that ended in 2011. The deal was forged when ARRY-403 was still in Phase I. Since then, some doubts have arisen that glucokinase activators can produce sustained glycemic improvement, while further risks of hypoglycemia and increased blood pressure have cast doubt on the drug class’s future in diabetes. Moreover, both companies have replaced their CEOs in the intervening years, and Amgen research and development head Roger Perlmutter has moved on to Merck & Co. Inc. The companies recently completed a Phase IIa study of the drug, and plan to share its results with the scientific community, according to an Array statement. - Paul Bonanos

Financings of the Fortnight Looks for Its Shadow

We are always on the lookout for leading indicators, no matter how faint the signal. If you tend an herb garden on your back porch, you might prefer the "green shoots" metaphor. Ever hopeful that the second law of thermodynamics isn't really the guiding principle ruling our lives, we humans also imbue natural events and public rituals with significance. Earthquakes as divine punishment! The groundhog's shadow! That said, we should say right off the bat that Genmark Diagnostics is no Punxsutawney Phil.

Yes, Virginia, there was an IPO last week, and its name was Genmark. But it wasn't the sort that necessarily means a damn thing. An obscure UK diagnostics firm formerly known as Osmetech that creates a US subsidiary, reverse-merges into it to reach US shareholders -- and only pulls in $28 million after shooting for as much as $45 million, for that matter -- is only that. An N of one.

Yet it came at a time when we were already thinking about diagnostics, and funding, and the funding of diagnostics. The low-profile offering, tucked just in front of the long holiday weekend, was also sandwiched between two conferences that opened different windows on the application of genetic information. At a consumer genetics show in Boston this week, funding strategies weren't explicitly on the menu, but as our correspondents noted, it's becoming ever more clear that cost breakthroughs in sequencing will lead to identification of medically significant genetic variations in patients. The question then becomes, what do you do with them?

That was the topic last week at the C21 venture conference in California's Napa Valley, where the diagnostics panel drew an eager crowd looking for ways to put money into -- buzzword alert! -- low-cost innovation. (That is, really cool stuff that doesn't cost a lot to make.)

And as our colleague Mark Ratner noted in his recent IN VIVO feature, despite the early days of most genetic research, a trio of well-known VCs -- Kleiner Perkins Caulfield & Byers, Mohr Davidow Ventures, and TPG -- have spread their diagnostic bets further, particularly into cardiology, after hitting the jackpot with breast-cancer test maker Genomic Health. Genmark isn't in their portfolios, but as we've seen on the drug side, any IPO activity after the long dry spell of 2008-2009 is worth scrutiny, not just as an indicator for current portfolio companies but for investors looking to jump in. One of the keys to diagnostics is getting pharma's attention in a variety of ways, such as using tests as a marketing tool when a drug rep is out detailing. We'll let Ratner explain:

The raison d'etre of new molecular tests is to significantly add to the information available to physicians to enable or change critical clinical decision-making. Especially at a time when the pace of new drug introductions is slowing and the opportunities to meet face-to-face with physicians therefore diminishing, as molecular diagnostics moves into new and broad markets like cardiology and metabolic disease, pharma could use this opportunity to its advantage in many settings.

In the case of a specific cardio test called Corus CAD, Ratner writes, "There's sufficient novelty and interest in genetics and genomics associated with coronary disease that [drug reps] could start a dialog with a physician about Corus CAD and at some point change to their drug-oriented message."

Diagnostic brethren such as LabCorp, Roche and Qiagen make splashy acquisitions; pure-play pharmas probably won't, though some are keeping their options open. Other deals will come from industrial giants such as General Electric and Procter & Gamble. But with massive hoards of cash to spend, any sign of pharma opening its coffers for diagnostics deals could mark a big change in the way VCs invest, which despite a few high-profile deals hasn't been that stunning. According to the Elsevier Strategic Transactions database, investment in diagnostics, over $1 billion annually for most of the past decade, is trending lower this year with $273 million through May.

Then again, life-science investing is down across the board this year. Have no fear, there's always plenty of material to bring you...



Tetraphase Pharmaceuticals: The antibiotic developer pulled in a $45 million Series C round to push its lead candidate into Phase II trials later this year, marking another step toward filling what public-health officials say is a ever-growing need: next-generation treatments to fight drug-resistant Gram-negative bacteria, as noted by our colleagues at START-UP. Tetraphase starts with a tetracycline backbone and then modifies the molecule at multiple positions to create an extremely large library. These molecules then can be screened for both their anti-infective properties and their potential to cause off-target toxicities. The lead compound, the intravenous TP-434, will likely focus initially on intra-abdominal infections. The Series C cash will also help push two more compounds -- TP-2758, for complicated urinary tract infections and TP-834, for the treatment of community acquired bacterial pneumonia -into Phase I. Excel Venture Management, a new investor for the biotech, led the round joined by existing backers: CMEA Capital, Fidelity Biosciences, Flagship Ventures, Mediphase Venture Partners and Skyline Ventures. Steve Gullans, managing director of Excel Venture Management, will join Tetraphase's board of directors. -- Carlene Olsen

NormOxys: The developer of small-molecule oxygen-enhancing drugs to treat a variety of diseases announced on May 24 a $17.5 million Series B financing. In addition to existing backer Index Ventures, Care Capital participated in the most recent financing round, with partner Argeris "Jerry" Karabelas joining the start-up's board of directors. It brings the firm's total funding to $30 million. With its novel platform technology and top-notch scientific pedigree, NormOxys has raised a sizeable but not extraordinary amount of additional cash from A-list backers and avoided too much dilution. It can now also aim for a more lucrative big pharma partnership -- whether it's a licensing deal or acquisition -- once the lead molecule, and thus the company's platform, have been derisked. The lead molecule is OXY111a, which the firm calls an "oxyren," for its oxygen-releasing capabilities. It changes the offloading capacity of hemoglobin so that more oxygen can be delivered to tissues where needed. If all goes to plan, it shouldn't result in excess oxygen delivery to normal tissue, which can cause damage because of free radical production. Equally important, say officials, is that the molecule triggering the actual physiological changes is oxygen itself, not the oxyren. Thus, potential off-target side-effects that have scuppered artificial blood substitutes such as Biopure's Hemopure, Northfield Laboratories' PolyHeme, and Baxter Healthcare's HemAssist, should be less problematic. OXY111a is entering Phase I trials with a later goal of testing it against chronic heart failure and an undisclosed cancer indication. -- Ellen Foster Licking

Exelixis: The San Francisco Bay Area public biotech is no stranger to all kinds of financing deals, and now it's turned again to debt to help expand the late-stage development of lead candidate XL184. Exelixis said June 3 it has secured loans worth $160 million from two lenders at an aggregate cost of capital under 10%. Part of the cash will pay back a loan from GlaxoSmithKline, a remnant of the firms' broad, six-year license-and-option deal signed in 2002. It will also fund XL184, which should enter Phase III trials for second-line glioblastoma by the end of 2010, with more Phase III trials possibly coming in 2011. XL184 was rejected by GSK before the six-year deal expired in late 2008, but Exelixis pivoted into a lucrative deal with Bristol-Myers Squibb, which pays 65% of XL184 development costs. It is currently in Phase III for medullary thyroid cancer and earlier-stage trials for glioblastoma. Exelixis is tapping Silicon Valley Bank for $80 million with a seven-year term loan at 1% interest. It's also borrowing $80 million from Deerfield Management, a five-year term with a maximum principal of $124 million. Interest is $6 million a year. Exelixis opened a line of credit with Deerfield in 2008 that, at the time, officials said they hoped never to draw down from. But with a 40% cut in staff in March the firm is shifting resources to late-stage development, which is still expensive even with big-pharma partners footing much of the bill. -- A.L.

Constellation Pharmaceuticals: Epigenetics pioneer Constellation added a corporate venture backer, GlaxoSmithKline's venture arm SR One, in a $22 million Series B financing announced June 2. In addition to SR One, previous investors Third Rock Ventures, The Column Group, Venrock Associates, and Altitude Life Science Ventures, which led the company’s $32 million Series A in 2008, all participated in the round. SR One’s cash should help Constellation keep pace with its main competitor, Epizyme, which obtained backing from Amgen Ventures and Astellas Venture Management in its own $40 million Series B last fall. Neither company has reached the clinic. Both are focused primarily on cancer, but Constellation of Cambridge, Mass. hopes to move eventually into diabetes, autoimmune, inflammatory and neurological diseases. Epigenetics focuses on chemical modification to chromatin, the proteins that package DNA, to create therapeutics that influence gene expression. Two classes of such drugs already are on the market: Celgene’s Vidaza and Eisai’s Dacogen, both DNA-methylation molecules approved for myelodysplastic syndromes, and Merck’s Vorinostat, a histone deacetylase (HDAC) inhibitor for T-cell cutaneous lymphoma. At least two other HDAC inhibitors are in late-stage development for oncology indications. -- Joseph Haas

Extra thanks to Mark Ratner for help with this week's post. Photo courtesy of flickr user avmaier.

Notes From BIO: Pim's Cup Runneth Over

Greetings from Chicago! Fantastic weather for early May, an economy on the upswing, not to mention a certain conference that's in town, make the City of Big Shoulders particularly lively this week. One way to take the temperature of a conference -- and last year's BIO in Atlanta barely broke a sweat -- is to check in with the folks scrambling for deals and having hushed conversations in discreet corners.

Before BIO got fully underway Monday morning, it was already hard to find a quiet place to sit. One of our first chats was with Willem "Pim" Stemmer, the inventor of the DNA shuffling technology that underpinned Maxygen, which last year transfered most of its assets into a joint venture with Astellas Pharma, and the recently-IPO'ed biofuel firm Codexis. (Maxygen also birthed the next generation protein play Avidia, which Amgen bought in 2006 for $290 million plus earnouts.)

Stemmer's latest endeavor also aims to squeeze several companies from one. The parent, Amunix Inc., is working on two things. The first is an ion-channel research program, with Pfizer as the first customer. The second, which started as a side project, is a half-life extension technology called XTEN that adds a recombinant polypeptide chain to known molecules, without the manufacturing and safety concerns of pegylation. That's the claim, anyway, and it was enough to convince European VC Index Ventures to solely fund a spin-out, Versartis, charged with developing Amunix's lead compounds, the first of which is an XTEN-enhanced version of the diabetes drug exenatide.

Now comes a second spin-out called Ios, so newly dubbed that it doesn't have a Web site. Ios will hold Amunix's ion-channel program, which Stemmer told IVB he wants to become a "research hub" with several pharma partners and a goal of being acquired in the next two to four years. For drug leads, it is testing venom toxins against ion channel targets, using XTEN for half-life extension. Stemmer was in Chicago this week unfurling the Ios banner and scouting for discovery deals to replace or supplement the existing three-year deal with Pfizer that expires at the end of the year.

Unlike Versartis, which is strictly a product development company, Ios will include Amunix's microprotein platform technology, Stemmer said.

Photo courtesy of flickr user paraflyer.

Fate Seals $30 M Series B, Gets Corporate Venture On Board

Fate Therapeutics has lined up $30 million in a Series B venture round as it pushes development of its lone clinical candidate, works toward making mass supplies of induced pluripotent stem (IPS) cells, and lines up licensees for its IPS platform.

Its Series A venture backers all re-upped, said CFO Scott Wolchko, and three corporate funds jumped in: Genzyme, Astellas Pharma, and an undisclosed party.

Fate will use part of the cash to push its candidate FT1050 through Phase 1. Fate hopes to have data next spring, and one alternative is to advance it into a Phase 2/3 pivotal trial by the end of 2010, said Wolchko. The small molecule is aimed at adult hematopoetic stem cells to help cord-blood transplant patients recover from their transplants faster. Genzyme and Astellas have commercial experience in the transplant area and could provide significant guidance, Wolchko said. Genzyme outbid Millennium Pharmaceuticals in 2006 for a Canadian firm whose product, Mozobil, helped prepare hematopoetic stem cells for collection and autologous transplant. Astellas has built the immunosuppressive Prograf into a $2 billion a year franchise and is trying to fend off generic attack from Novartis.

With FT1050 a key data point to watch for is time to engraftment, or how long a patient's immune system takes to bounce back from the transplant. Shaving several days off the time to engraftment could be a signficant clinical benefit.

FT1050 is Fate's first test of its larger proposition of using drugs to redirect or enhance the healing properties of a patient's own stem cell populations.

Fate is also working on the flip side of the problem: how to use small molecules and proteins to rewind cells back up to pluripotency. Fate cofounder and Scripps Institute professor Sheng Ding said in October his team had found a combination of drugs to speed up the reprogramming process and boost the yield of induced pluripotent stem (IPS) cells, though much work remains before Fate's process can produce industrial-scale amounts of cells that it or other drug companies can use for conventional drug research or, farther down the road, for cell therapy applications.

Wolchko, who directs the firm's business development efforts, said he expects to cut license deals for the platform technology within the next 12 months even if the production methods haven't reached industrial scale. "There are lots of parties we're talking to with different areas of expertise," Wolchko said. "Some might create cardiomyocytes for toxicity screening, or some might see it as a solid foundation for cell therapies; some of the applications might take five to ten years to materialize."

Even without licensing fees, Fate now has two years of capital in its pocket.

Photo courtesy of Flickr user anarchosyn.