Financings of the Fortnight Is Putin' Rusnano In The Spotlight

Rarely has a sovereign fund been as high-profile in the life sciences as Rusnano, which is investing $10 billion of Russian government money in companies from a variety of industries, including life sciences/biomedicine.

In a country that’s had a painful relationship with capitalism since the Soviet state collapsed, it’s no surprise the idea of a giant state-backed fund making bets on private companies has drawn skepticism – including from then-Russian president Medvedev four years ago.

Now, six years after Russia's Vladimir Putin authorized the group, it’s undergoing a shakeup and a corruption audit, apparently with Putin’s blessing. (A related project, Skolkovo – an attempt to build a Silicon-Valley-like cluster near Moscow – has also been dogged by similar investigations, allegations of corruption, and political pressure.)

Seeing how about 20% of Rusnano’s investments have landed in the life sciences so far, what happens next should be of keen interest to many in our corner of the world. That’s why we’re pointing out our colleague Stacy Lawrence’s one-on-one interview with Rusnano chairman Anatoly Chubais in the current issue of “The Pink Sheet.”

Chubais was a key figure in the post-Soviet privatizations that concentrated wealth in the hands of so-called oligarchs, and he has run Rusnano since 2008. He survived the recent shakeup, during which several directors left the fund.

Despite the turmoil, Chubais says he’s pressing ahead with more privatization plans, transforming Rusnano from a vast sovereign fund to a private management firm that runs several funds. Here’s how he described it in “The Pink Sheet”: 

“We decided to transform Rusnano into a private equity fund, which means that we will be a separate management company from Rusnano and we will transform it into a GP, which will attract investors and create a family of private equity and venture funds. And the GP itself will be privatized stage by stage… it should start next year and maybe finish between 2016 and 2017.”

Anatoly Chubais (right) is listening. (Courtesy Michael Popov.)

That's still rather murky, so we won't be surprised if plans shift in the next couple years according to the political winds within Russia. Rusnano has set off alarms – at least within certain factions of the Russian government – by posting much larger than expected losses within its portfolio. It’s unclear how much of them are associated with its life science deals, which have included big names in the US. Among its direct investments are BIND Therapeutics and Selecta Therapeutics, both built around technology from the lab of Bob Langer, a Massachusetts Institute of Technology professor and the ne plus ultra of the American ideal that combines academic and capitalist freedom. It doesn’t get more apple pie, biotechnologically speaking, than a Langer spin-out.

Going into BIND’s initial public offering in September, Rusnano owned 11.5% of the company and according to documents bought more than 200,000 shares at the IPO price, leaving it with a 9.3% stake in the company currently worth $22.3 million.

Through subsidiary RMI Investments, Rusnano also has moved heavily into Regado Biosciences, first by leading its Series E round in late 2012, then buying more shares at IPO, which took place only because Regado accepted a drastic haircut. At the end of August, RMI owned nearly 26% of Regado. The cardiovascular treatment developer debuted in late August at $4 a share and closed October 16 at $5.71.

On top of its direct investments, Rusnano has committed $200 million to Burrill & Co.’s fourth general venture fund, which began investing in late 2011. Topping that, it has earmarked $330 million to invest side by side with Domain Associates, the US venture fund, in a deal that also aims to build Russian manufacturing capacity for the products that emerged from the firms’ jointly-funded portfolio companies.

It’s a significant source of capital for hungry biotechs, but there are strings attached. Non-Russian firms that take Rusnano money must establish a footprint in Russia, part of the firm’s remit to build a domestic pharmaceutical industry through the Pharma 2020 initiative, which, as our IN VIVO colleagues explain here, is as much a proclamation as it is a specific roadmap.

Here’s how Chubais describes the tightened scrutiny of his operation: 

“We had a very, very deep check from the special state auditors and there was not a single corruption allegation, which is positive. We have about 100 portfolio companies and for some of them, they have some grounds for further investigation for their efficiency of using money from Rusnano. That’s an investigation which is going on now and we don’t know if it’s a ‘yes’ or ‘no.’”

You can scrutinize the entire Chubais interview and pelmeni more stories about the nascent Russian biomedical initiatives in our sister publications. Or, if you just want to keep it on the blog, that's your pirogitive, go ahead and stuff yourself full of…

SAGE Therapeutics: The Cambridge, Mass. CNS startup has raised a $20 million Series B, with ARCH Venture Partners, joining original backer Third Rock Ventures to help move into the clinic the first compound of what the company hopes will be an epilepsy franchise. The new money and the clinical transition comes in the first few months of the tenure of new CEO Jeff Jonas, who previously ran Shire’s regenerative medicine group. SAGE’s platform is dubbed PANAM, for “positive and negative allosteric modulation.” Its compounds are designed to dial up or dial down activity around receptors such as gamma-aminobutyric acid, or GABA, and N-methyl-D-aspartate, or NDMA, without acting directly upon the ligand binding sites of the receptors themselves. The Series B round is nearly half the amount SAGE raised in its $38 million Series A, which was disclosed two years ago and came mainly from Third Rock. (ARCH, it turns out, also topped off the Series A last month with nearly $3 million, but Jonas declined to say why ARCH’s cash was allocated in that fashion.) ARCH Managing Director Robert Nelsen joined SAGE’s board. Jonas said the company will soon file an IND for SGE-547 to treat status epilepticus, a type of seizure that lasts several minutes and can be life-threatening. With an eye toward building a franchise, SAGE will investigate the role of GABA in other epilepsies, and could add indications to ‘547 or develop other seizure drugs that act around the receptor. ARCH and Third Rock know each well. The syndicate partners previously co-invested in a pair of this year’s high-profile IPO companies: cancer metabolism company Agios Pharmaceuticals Inc. and gene therapy developer bluebird bio Inc. With its new fund, SAGE is “comfortable well into next year,” Jonas told “The Pink Sheet” DAILY, and more private funding might not be necessary. – Paul Bonanos

Macrogenics: The antibody developer raised $92 million by selling 5.75 million shares at $16 each in its October 9 IPO. In baseball terms, it hit the triple crown despite a choppy broader market. It upsized its deal; priced at the top of its range; and traded up 56% in the first day. MacroGenics has two candidates in the clinic, with another two expected to advance into clinical testing in 2014. The most advanced is margetuximab, a monoclonal antibody that targets HER2-expressing tumors, which is in Phase IIa testing. It’s intended to be a bio-better of Herceptin (trastuzumab) that not only will be more effective killing tumor cells expressing a lower level of HER2, but also enhance the immune system’s ability to kill cancer cells. Prior to the IPO, Macrogenics raised an astonishing $547 million, including $342 million from partners Gilead Sciences, Pfizer, and Boehringer Ingelheim, among others; $151 million in equity; and $54 million in government grants and contracts. These deals could keep it from leaning too heavily on shareholders; it stands to receive more than $100 million in milestone and other partnership payments by the end of 2015. Venture investors include TPG (11.6% pre-IPO stake), Alta Partners (10.5%), InterWest Partners (10%) and MPM Capital (9.4%). This is MPM’s fifth biotech IPO this year, placing it among the most active in 2013. Only ARCH Ventures, Flagship Ventures and crossover investor Fidelity have been behind as many biotech IPOs this year. – Stacy Lawrence

G1 Therapeutics: North Carolina biotech veteran Christy Shaffer, who left Inspire Pharmaceuticals shortly before Merck purchased it in 2011, has returned with the start-up G1 Therapeutics. The Chapel Hill-based company on October 16 announced a $12.5 million Series A financing that will enable it to bring its lead chemo-protectant candidate into Phase I in 2014. G1’s technology focuses on inhibition of cyclin-dependent kinase (CDK) 4 and 6 to shield cancer patients’ bone marrow from the myelosuppressive effects of chemotherapy. Early on, G1 is planning two development courses for its lead candidate: as an intravenous infusion in small cell lung cancer patients, and as an oral version to protect against radiological-induced myelosuppression, a condition that could result from a nuclear weapon strike. Shaffer joined North Carolina-based Hatteras Venture Partners in 2011 to head up its Hatteras Discovery initiative focused on incubating start-ups derived from academic research. Hatteras Discovery seeded G1 with $600,000 in 2012 and now has invested in the A round, led by MedImmune Ventures, with participation from Mountain Group Capital. With the seed funding and NIH grants, G1 selected a lead candidate, and it hopes to file the IND by summer 2014 and begin Phase I by the end of the year, Shaffer said. With potential to protect all four lineages of blood cells, G1 hopes the candidate will earn first-in-class status. – Joseph Haas

TD1 Innovations: The Juvenile Diabetes Research Foundation said October 15 it has pledged to put up to $5 million into a new company, TD1 Innovations, which will scout new pharmaceutical, device and diagnostic technologies related to type-1 diabetes, the autoimmune version of the disease. If JDRF and its partner in the effort, PureTech Ventures, find compelling technologies, they’ll spin them out into new companies and provide seed funding, with hopes of advancing them far enough to find outside investors or industry partners on the other side of the so-called valley of death. It’s the first project under PureTech’s “Valley of Life” initiative, which aims to give nonprofits a legal structure to make philanthropic investments in for-profit companies without violating the tax code. With venture capitalists and pharma companies reticent to fund early stage biomedical innovation, disease foundations, patient advocacies and other nonprofits have looked to push treatments into clinical trials. To trigger JDRF’s full $5 million investment in TD1 Innovations, PureTech must raise matching funds, but the partners hope the fundraising goes well beyond that, up to $30 million, which they estimate would allow them to spin out roughly 10 new companies. Others have tried so-called “venture philanthropy” – including the Bill and Melinda Gates Foundation) – but this appears to be the first time a nonprofit will have a hand, and a financial stake, in building new companies from scratch. -- Alex Lash


All the Rest: Astellas not only contributed to Mitokyne’s Series A, which brought in $45mm, but also signed a concurrent drug discovery alliance and has an option to acquire the company...a $46mm Series D by immatics biotechnologies GmbH will fund Phase III of IMA901 for renal cancer…Seragon Pharmaceuticals revealed that the value of its Series A, which closed in August, was $30mm..genome and exome sequencing company Personalis completed a $22mm Series B…Aslan Pharma’s $22mm Series B will support Phase IIb trials for gastric cancer candidate ASLAN001…Versartis’ $20mm Series D round will go towards Phase III of VRS317 for pediatric growth hormone deficiency…French vaccines developer Theravectys raised $20mm...Curemark (enzyme replacement candidate for autism) brought in $18.5mm in what looks to be its Series C round…PharmaLink raised $15mm in a Series C round…a Series A round by PharmAkea Therapeutics brought in $10mm concurrent with an alliance with Celgene, which took a stake and has an option to acquire the start-up…Molecular Templates (antibody-drug conjugates for cancer) completed an $8.5mm Series C…AxioMx fetched $2mm in a Series B round…Mid Atlantic Bio Angels invested $400k in Immunomic Therapeutics...Arrowhead Research netted $60mm through the private sale of common and preferred shares…Cytos Biotech hopes to raise CHF17.6mm ($19.5mm) in a rights offering of up to 6.3mm shares...in a private placement to institutional investors, Pharming brought in $16.3mm…Rexahn raised $5.3mm in a registered direct offering…VG Life Sciences concluded a $2.2mm private placement...multiple players completed follow-on public offerings: Portola Pharmaceuticals (hematological and inflammatory disorders) $151mm...$113mm for dermatology-focused Kythera; generic drug maker Lannett netted $71.9mm; Prothena (antibody therapeutics) $71.6mm; Dyax (phage display technology) $56.4mm; cell therapy developer NeoStem $33mm; CytRx (cancer therapeutics) $24.3mm; Cel-Sci (immunotherapeutics)  $16.4mm; Tekmira (RNAi therapeutics) $30mm; and Advaxis (cancer and infectious immunotherapies) $23mm...Aerie Pharmaceuticals set terms for its initial public offering hoping to sell 5.25mm shares between $12-14…Ruthigen set IPO terms too: 1.5mm shares at $12-14...several other biotechs filed for IPOs: GlycoMimetics (lead compound for sickle cell disease); Karyopharm (cancer and inflammation); Trevena (GPCR compounds); Xencor (MAbs);  Celladon (calcium dysregulation); Vital Therapies (liver disease); and Egalet (abuse-deterring pain drugs)…BioMarin priced five-year 0.75% senior subordinated convertible notes ($340mm) and 1.50% seven-year 1.50% senior subordinated convertible notes ($340mm)…European Investment Bank provided Norgine with an $81.2mm loan to help with product acquisitions. -- Maureen Riordan

Putin art photo courtesy of flickr member volna80.

Deals of the Week Sells During Slow Season

Capitalism knows no holiday, but people need a break sometimes. The dog days of summer often slow the pace of pharma deals, and 2013 is no exception. If you traded boardroom time for surfboard time last week, or just hung out at home with a glass of lemonade and the sprinkler, Deals of the Week is here to help you catch up with what you’ve missed.

Speaking of front lawn scenes, word is that TPG Capital put a “For Sale” sign in Aptalis Pharma’s yard earlier this year, according to published accounts. Reuters reports that the private equity firm wants $3 billion but hasn’t yet found a suitor for Aptalis, a global specialty pharma whose diversified holdings include several products for gastrointestinal and digestive disorders. The firm engaged JP Morgan Chase and Evercore Partners to pursue the sale.

TPG acquired predecessor company Axcan Pharma US for $1.2 billion in late 2007, taking it private. Then in December 2010, the firm funded Axcan’s buyout of public Dutch company and former partner Eurand NV for $590 million. The merged entity was renamed Aptalis two years ago.

Aptalis’s top sellers include Carafate (sucralfate) for duodenal ulcer disease and Canasa (mesalamine) for ulcerative proctitis, and it owns three of the five approved drugs for pancreatic enzyme insufficiency: Zenpep, Ultrase, and Viokase (pancrelipase, in three formulations). The company also expanded its cystic fibrosis holdings with the acquisition of another former partner, Mpex Pharmaceuticals in 2011 for $62.5 million in up-front and subsequent non-contingent payments, giving it Phase III candidate Aeroquin (aerosol levofloxacin). A late-stage trial revealed some encouraging data about the drug in January, but Aptalis hasn’t made its next step clear.

Parties interested in buying Aptalis have included Elan Corp. prior to its own acquisition by Perrigo Co.; Forest Laboratories, which is currently dealing with a CEO transition; Sun Pharmaceutical Industries; and Salix Pharmaceuticals, but all have reportedly walked away. Buyers would get a company that posted a loss of $66.4 million on $470 million in revenues during fiscal 2011, the last time it reported full-year earnings.

If no buyer materializes, TPG could pursue an initial public offering for Aptalis. The private equity firm was a top stakeholder in contract research organization Quintiles Transnational’s May offering, which raised $1.1 billion at a valuation of $6 billion. TPG holds stakes in numerous biotech and pharma companies, and bought Par Pharmaceutical for $1.9 billion last year.

It’s also possible that Aptalis could be broken apart, either before or after a sale. It’s a diversified company, but one addressing several disparate niches. The value of its cystic fibrosis program is unclear, and might not fit squarely with a buyer’s goals as well, so TPG might not find anyone willing to pay full value for all of Aptalis’s parts. - Paul Bonanos

September's coming soon, and I'm pining for the moon. But for now, summer's here and the time is right for...

Quintiles/Novella Clinical: Quintiles put some of its IPO war chest to work this week, when it revealed an Aug. 14 deal to acquire Morrisville, N.C.-based CRO Novella Clinical, a specialist in oncology, medical devices and biopharmaceuticals. Fifteen-year-old Novella has about 800 employees in North America and Europe, including locations in Ohio, Colorado, Ontario and the UK. Financial terms of the deal weren’t released, although Quintiles said the deal won’t have a material impact on its 2013 earnings. It expects to operate Novella as a standalone division named “Novella Clinical, a Quintiles company.” Analyst Eric Coldwell of Baird Equity Research estimated that Novella will produce $150 million in revenue this year. Before the IPO, Quintiles said it would use the proceeds in part to pursue acquisitions that would broaden its service lines or deepen its expertise. Since 2011, it purchased Outcome Sciences, VCG&A, Advion Bioservices, and Expression Analysis for a total of about $280 million. The CRO had $585.7 million in cash and cash equivalents on its balance sheet June 30, along with more than $867 million in accounts receivable and unbilled services. - P.B.

Pfizer/Sanford-Burnham: The NYC-based Big Pharma has inked a collaboration with Sanford-Burnham Medical Research Institute in Orlando, where scientists will work to screen and discover new targets that could lead to treatments for diabetes and obesity. The pharma-institute tie-up, announced Aug. 13, will focus on identifying targets and compounds that interfere with the accumulation of fat in muscle cells in hopes of finding new treatments for diabetes and obesity. Research has shown that abnormalities in lipid metabolism in muscle are associated with insulin resistance. As fat accumulates in muscle tissue, it becomes insulin-resistant and glucose is not cleared effectively from the blood. Neither party would disclose the financial arrangements surrounding the deal, but Pfizer will be funding all the research efforts. Work will be conducted in both Pfizer's and Sanford-Burnham’s labs. Decision-making within the collaboration largely will be decentralized, and research decisions will be made separately in each lab with the two organizations meeting regularly for updates and to decide on next steps. All intellectual property will remain with the organization making the discovery, with any jointly-invented IP being shared. The collaboration is set to last three years, but may be extended.- Lisa LaMotta

Boehringer Ingelheim/Brigham & Women’s Hospital: Boehringer Ingelheim Pharmaceuticals Inc. and Brigham & Women’s Hospital are partnering on a long-term comparative effectiveness study to assess the use of oral anticoagulants for reduction of stroke risk in U.S. patients with non-valvular atrial fibrillation. B&W researchers will lead the study, which Boehringer is sponsoring. The objective is to better understand the real-world safety and effectiveness of warfarin and newer oral anticoagulants such as Pradaxa (dabigatran), introduced by Boehringer in the U.S. in late 2010. The analysis will be based on claims data from UnitedHealth Group, which covers more than 80 million individuals. The announcement reflects increasing industry interest in sponsoring long-term real-world evidence studies. It also reflects intense interest in the clinical role and safety of new oral anticoagulants, which, in addition to Pradaxa, include Bayer/Janssen’s Xarelto (rivaroxaban) and Pfizer/Bristol-Myers Squibb’s Eliquis (apixaban). The partners did not specify a timeframe for the study, but Sebastian Schneeweiss, vice chief, division of pharmacoepidemiology and pharmacoeconomics at B&W noted in a press release it would take place over several years.  Some 5 million people with non-valvular atrial fibrillation in the U.S. are at increased risk of stroke, Boehringer says. All of the new agents are being scrutinized by the medical community for safety, notably for increased risk of bleeding. This has been a particular concern regarding Pradaxa due to some early reports of severe bleeding by doctors, but a late 2012 FDA review of Mini-Sentinel real world data found Pradaxa did not cause increased bleeding compared to warfarin. So far, there are no head-to-head comparative prospective clinical trials of the new agents, but B&W’s work should provide some RWE insights. - Wendy Diller

Biomotiv/Torrey Pines: Cleveland-based drug developer/accelerator BioMotiv’s asset-based financing model found another backer Aug. 12, when it signed a $40 million deal with Torrey Pines Investment. Each company will contribute $20 million to a collaborative program that will fund early-stage companies over the next seven years. BioMotiv intends to in-license preclinical assets from academic and private-sector researchers, then advance them to Phase Ib or IIa for out-licensing. Assets will be housed in separate corporate structures designed to be sold individually, with returns passed back to investors. CEO Baiju Shah told START-UP in June that BioMotiv will accept smaller up-front payments than VCs typically do, allowing for earlier exits than many start-ups can expect. Further terms, including what San Diego-based Torrey Pines will receive or contribute beyond cash, weren’t released. BioMotiv raised $25 million earlier this month from investors including first-time backer Nationwide Mutual Insurance and founding investors University Hospitals of Cleveland and the Harrington family, as well as individuals. That built upon $21 million in initial funding from the founding backers. The start-up aims to raise a total of $100 million for its projects, not counting the money in the Torrey Pines deal. BioMotiv currently has seven preclinical candidates, but hopes to have 20 in development at once. - Joseph Haas

Thanks to Flickr user the-tim for the overgrown photo, reproduced via Creative Commons license.

Deals Of The Week Brings It All Back Home

As a great man once said, there’s no success like failure, and failure’s no success at all. For Infinity Pharmaceuticals, the failure of one drug means it will have to seek success with another lead candidate – and it’s planning to do that alone, rather than with a longtime partner.

Infinity announced July 18 that it had taken back global rights to a key cancer drug by restructuring an existing alliance with Purdue Pharma LP and its European affiliate Mundipharma International Ltd., which had previously obtained rights to all of Infinity’s early-stage oncology programs in a 2008 arrangement. The renewed focus on that drug comes a month after Infinity said it would suspend a Phase II trial on saridegib, a cancer drug that was apparently performing no better than placebo, according to interim data. Saridegib was also covered under the same partnership.

Infinity now takes full control of a phosphoinositide-3-kinase (PI3K) inhibitor known as IPI-145, which has been through a Phase I study and is slated to enter an expansion cohort, as well as mid-stage trials for asthma and rheumatoid arthritis. Also transferred were rights to a fatty acid amide hydrolase program and other early discovery projects. Initially, Purdue and Mundipharma had sought greater control over the oncology compounds, according to Infinity CEO Adelene Perkins. But Infinity was unwilling to part with additional rights, and instead took back worldwide rights to the programs.

Perkins said the company will attempt to build value on its own, using cash from the restructured deal, before it considers partnering the programs again. But now that it’s less encumbered by alliances, Infinity could become a takeout target too. (As we’ve noted before, a clean target can be especially ripe for picking. Speculation arose last fall that Amylin would soon be bought, shortly after it recovered full rights to exenatide from Lilly. Within months, Bristol-Myers Squibb and AstraZeneca paid $7 billion to acquire Amylin, valuing it far higher than its trading price before the partnership dissolved.)

Under the newly rearranged agreement, Purdue and Mundipharma will take a larger equity stake in Infinity. Purdue will buy 1.8 million shares of its common stock for $14.50 a share, or $27.5 million. Infinity also will issue another 3.5 million shares at the same per share price to Purdue to pay off the remainder of a $50 million line of credit that Purdue issued in 2009. The investment will give Purdue a 28% stake in the company, up from its previous 22.5% share. The original contract stipulates that Purdue cannot own more than 33.3% of the company. Infinity also will pay Mundipharma a royalty on sales of any future products that were once part of the agreement ranging from 1% to 4%.

Who's in the basement, mixing up the medicine? Why, it's...

Express Scripts/ Walgreens: Walgreens will rejoin Express Script's pharmacy networks beginning Sept. 15 under the terms of a “multi-year” contract announced July 19. Although the companies did not disclose contract specifics, the announcement states that Walgreens’ 7,900 stores will participate in the “broadest” Express Scripts retail pharmacy network available to new and existing clients. With Walgreens, that network includes more than 64,000 pharmacies nationwide. The resolution must be reassuring to drug companies concerned about broad access to their drugs, even though it is unlikely that they lost much in sales because of the dispute, since competitors were ready to fill Walgreen’s shoes.

Walgreens withdrew from Express Scripts’ retail pharmacy network in January. In financial presentations preceding Walgreens’ exit, Express Scripts and rival PBM CVS Caremark both predicted the development would lead to a greater acceptance of narrower pharmacy networks among payers. Payers have typically opted for broad pharmacy networks as a convenience to members even though they are more expensive. It remains to be seen whether payers will actively choose a more restrictive network in the interest of controlling costs once Walgreens has rejoined the Express Scripts mix. Addressing the question in an email, an Express Scripts spokesman said, “we wouldn’t speculate on any future transitions, but we have had strong interest from clients” in narrower networks.

For Walgreens, the financial impact of its dispute with Express Scripts has been significant. Express Scripts processed approximately 88 million prescriptions filled by Walgreens in fiscal 2011, representing approximately $5.3 billion of the drug chain’s net sales. In a financial report filed July 12, Walgreens estimated that since it left the Express Scripts network, it has retained, on an annualized basis, only 15% of the 2011 prescriptions processed by the PBM.Adding even more pressure on Walgreens to reach an agreement was the prospect of losing its network relationship with Medco Health Solutions, which Express Scripts acquired in April. A Walgreens spokesman said in an email “there are no changes in pharmacy access for Medco clients and members” under the new agreement with Express Scripts, and that “Medco retail networks that included Walgreens will continue to do so.” Walgreens pharmacies filled approximately 125 million Medco prescriptions in 2011, representing approximately $7.1 billion of the drug chain’s net sales.--Cathy Kelly

Par Pharmaceuticals/ TPG Capital: Generic drug maker Par Pharmaceuticals agreed to be acquired by private equity firm TPG Capital in a deal that is worth as much as $1.9 billion. Par, which had sales of roughly $900 million, announced July 16 that TPG will pay $50 per share to acquire the company. Based on the July 13 closing price of $36.58, the last trading day before the deal was announced, the offer represents a 37% premium. The generic pharmaceutical company’s stock jumped more than 36% to trade at $50 the day the deal was announced. Par has until Aug. 24 to seek a better offer, the company said, noting it will “actively solicit acquisition proposals.” Should no other offers materialize, the deal is expected to close this year. Consolidation activity in the generics market has been high over the last few years, but much of it involves U.S. companies looking for ex-U.S. properties and/ or differentiated subsectors such as injectables, and hard-to-manufacture formulations, so few suitors may be interested in Par’s largely U.S.-focused business. The deal with TPG comes shortly after Relational Investors LLC, which owns 9.9% of Par, urged the company to put itself up for sale citing the continued low valuation for the stock despite Par’s effort to make operational improvements. Par added Indian generics manufacturer Edict Pharmaceuticals for $20.5 million in cash, as well as repayment of $4.4 million in debt and up to $12 million in cash earn-outs. It also bought Anchen Pharmaceuticals, for $410 million in May 2011 and a portfolio of ANDA filings, from Teva, in the wake of the Israeli company’s acquisition of Cephalon. The purchase price is below what other generic pharmaceutical companies have been bought out for recently. -- Lisa LaMotta

Amicus Therapeutics/GlaxoSmithKline: GSK increased its equity stake in Amicus Therapeutics Inc. when the two companies expanded their collaboration regarding jointly developed migalastat HCl for Fabry disease. The July 19 collaboration gives Amicus all U.S. rights to Fabry programs developed under the agreement and GSK the commercialization rights to the rest of the world. The British pharma is increasing its stake in the Cranbury, N.J.-based company to 19.9%, with a $18.6 million investment of stock priced at $6.30 per share. Migalastat HCl is being developed as a monotherapy and currently is in Phase III; data are expected in the third quarter of 2012. The drug also is in Phase II as a combination with enzyme replacement therapy. Amicus and GSK, in collaboration with Japan-based JCR Pharmaceuticals Co. Ltd., are developing migalastat HCl as a co-formulation with a proprietary recombinant human alpha-Gal A enzyme (JR-051). The formulation is expected to enter the clinic in 2013. Amicus and GSK will continue to share research and development costs for all formulations of migalastat HCl, with Amicus funding 25% and GSK funding 75% of these costs for monotherapy and co-administration during the remainder of 2012. The companies have agreed to split costs 40%/60%, respectively, for the co-formulation and for all formulations in 2013 and beyond. -- L.L.

Accera/ Nestle Health Sciences: Accera has struck a deal with Nestle Health Science SA to gain clinical development and commercialization for its medical food Axona, which is meant to help manage metabolic processes associated with moderate Alzheimer’s disease. Terms of the July 18 deal were not disclosed. People with Alzheimer's and other neurodegenerative conditions typically suffer from a condition called neuronal hypometabolism, meaning neurons are unable to process glucose. Axona, formerly called Ketasyn (AC-1202), is an orally available form of caprilyc triglyceride that is metabolized by the liver into betahydroxybuterate, a ketone body, which then crosses the blood-brain barrier for use by neurons as fuel. Accera has completed clinical trials elderly volunteers and in patients with memory impairment or mild-to-moderate AD. Results showed that Axona helped improve cognition when compared with placebo.

Established in January 2011, Nestle Health Sciences was formed to gain a stronger foothold in diagnosis and treatment of gastrointestinal diseases, an area Nestlé knows well from its medical nutrition business. The new subsidiary has bigger ambitions, however, and is hoping to create a continuum of offerings for metabolic ailments and neurodegenerative diseases like Alzheimer’s; Axona would be a strong addition to that. The medical nutrition industry is small, dominated by three companies – Abbott Laboratories, Mead Johnson Nutrition, and Nestlé. Nestlé launched the Health Science subsidiary in January, building it out of the technology from Nestlé’s existing health care nutrition business, which posted sales of $1.9 billion in 2010. The subsidiary since has purchased three companies – Vitaflo Scandinavia, CM&D Pharma, and Prometheus Laboratories– in an effort to make it more substantive than its previous medical nutrition business. - L.L.

Novavax/PATH: Novavax, a Rockville, MD-based vaccine specialist announced a collaboration on July 18^th with the international non-profit health organization PATH to develop its recombinant RSV fusion protein vaccine to protect infants in developing countries through maternal immunization. There is currently no approved RSV prophylactic vaccine available for the disease. RSV is the most common childhood respiratory infection, and has a global prevalence of 64 million cases, with 160,000 deaths annually. PATH will provide approximately $2 million toward Novavax’s Phase II dose-ranging trial planned for later this year. The partners may then progress the further development of Novavax’s vaccine with the goal of immunizing pregnant women such that high levels of maternal RSV antibodies will be transmitted to their offspring before birth. Thereafter, they can elect to continue the collaboration, with PATH potentially funding 50% of Novavax’s external clinical costs. Novavax would retain global rights to the product in the event it is approved, and has made a commitment to make the product affordable and available in low-resource countries. The RSV virus is also increasingly recognized as a significant pathogen in elderly populations. Novavax has stated that their goal is to collaborate with both private and public-sector partners “in all markets throughout the world,” says CEO Stanley Erck. Novavax puts the global commercial opportunity for a prophylactic RSV vaccine in excess of $5 billion. The biotech has partnerships with Cadila Pharmaceuticals (India), GE Healthcare, and LG Life Sciences (Korea), and was the recipient of a Department of Human Health BARDA grant  in March 2011. -- Michael Goodman

Life Technologies/ Navigenics: In what appears to be a straightforward buy-over-build decision, life sciences tools conglomerate Life Technologies is acquiring personal genomics firm Navigenics.  LifeTech calls the deal its “first step in executing a strategy to build out its molecular diagnostics business.”  It will employ Navigenics’ CLIA-certified lab to design and validate new assays, including both laboratory-developed tests and FDA approved diagnostics.  Navigenics’ CLIA lab will also support LifeTech’s partnering efforts with pharma for companion diagnostics.

Two years ago, LifeTech’s genomics’ efforts – it manufactures gene sequencers through its Applied Biosystems and Ion Torrent Systems divisions – were focused on the research and translational medicine markets, initiating programs like its collaboration with the Translational Genomics Research Institute, to find gene signatures that could better guide treatments and outcomes for triple negative breast cancer.  Since then, cancer genomics research has led to an increasing number of targeted gene tests – many that can be performed on next-generation sequencing platforms.  With diagnostics a much greater potential market opportunity for genomics than life sciences research, LifeTech, along with its major sequencing rival Illumina, has started to move downstream.  And its translational work appears to have sold the firm on the need for its own CLIA lab and on the opportunities that open up in cancer genomics by owning the clinical workflow, including data analysis and bioinformatics (which we wrote about recently here). The companies did not disclose the price of the acquisition, but it’s fair to assume that it was not much more than the bricks-and-mortar value of the lab, plus a dime or two for bioinformatics and the opportunity to hold onto some good people.

Navigenics’ founding model was challenged, as were those of other personal genomics start-ups, after the cautionary letters it and others received in June 2010 on the need for a premarket review of their products.  Nor did it appear to rejigger its model to create much know-how or IP since. That said, in announcing the deal, LifeTech also noted that it will be able to leverage Navigenics’ clinician and patient education and support capabilities as it builds a diagnostics business – particularly with community-based physicians.  One benefit of the personal genomics adventure has been recognition that when to comes to complex tests there’s a greater need for direct involvement with physicians, as opposed to a focus on marketing tests to labs.--Mark Ratner

Human Genome Sciences/GlaxoSmithKline: In a deal that was years in the making, GSK finally acquired its partner Human Genome Sciences for $3.6 billion, in a deal made up of cash and debt announced July 16. Now, GSK gets full ownership of darapladib, an inhibitor of lipoprotein-associated phospholipase A2 (Lp-PLA2) being investigated in acute coronary syndrome, and albiglutide, a once-weekly, injectable GLP-1 agonist for type 2 diabetes, as well as the already-marketed lupus drug Benlysta (belimumab) that the companies have been partnered on for more than a decade. The $14.25 per-share price represents a 99% premium over HGS’ closing price on April 18, the last trading day before GSK’s initial offer was disclosed publicly. That original bid was valued at about $2.6 billion, so HGS’ three months of delaying what many observers viewed as the inevitable brought its investors roughly another $400 million. Both companies’ boards have approved the transaction, in the form of a tender that will expire July 27. -- L.L.

Sanofi/Brigham & Women’s: For the next step on its continuing quest to establish itself as an end-to-end diabetes treatment provider, Sanofi has partnered with Brigham & Women’s Hospital to search for an immunological therapy for type 1 diabetes. Researchers from both organizations will unite to conduct “proof-of-concept, safety and functional studies” with a goal of finding an immunomodulatory drug target for the disorder, according to a July 18 statement. The parties did not release financial details of the arrangement, but said that Sanofi will receive an option to acquire an exclusive license to intellectual property generated by the partnership. Sanofi has marketed Lantus (insulin glargine) for more than a decade, and sells a variety of oral and injectable medications for both type 1 and type 2 diabetes; the company is currently waiting on regulatory approval for Lyxumia (lixisenatide), a glucagon-like peptide-1 antagonist. BWH researcher and Harvard professor Dr. Vijay Kuchroo specializes in immunology, and has studied the genetic basis of type 1 diabetes. – P.B.

Lisa LaMotta reported on the Infinity/Purdue deal. And thanks to flickr user mtarvainen for sharing under Creative Commons.

Deals Of The Week's Tale of Two Drugs

It was the best of times (Vacation!). It was the worst of times (Market turmoil, London's riots, and unemployment; the Middle East.) It was the age of wisdom (Drug reprofiling! Warren Buffett. A new Muppets album); it was the age of foolishness (2012 Presidential election! Phone hacking scandals!).

We had everything before us -- with the waning of summer, the impending season of investor meetings ought to mean renewed opportunities for deal making, after all. Or maybe not. Big Pharma's aversion to take risk could well mean that for biotechs of a certain ilk, we had nothing before us.

Meantime, if regulators weren't exactly channeling a tale of two drugs this week, news of the extension of Eylea's PDUFA and the months-earlier than expected approval of Zelboraf, announced within 18 hours of each other, sure set up an interesting comparison. (The Friday announcement of an early nod for Seattle Genetics and Takeda's Adcetris means we could have written a tale of three drugs. Alas, it messes with my metaphor.)

On the one hand you have Eylea, a VEGF-inhibitor developed by Regeneron to treat the wet form of age-related macular degeneration, whose primary commercial advantage isn't improved efficacy but a more patient-friendly dosing regimen. Its new PDUFA data has been delayed three months from August 20 until mid-November. On the other hand, you have the small molecule BRAF inhibitor Zelboraf, a targeted therapy that is being co-launched with a companion diagnostic and becomes just the second new drug in decades to treat deadly metastatic melanoma. It's original regulatory action date was October 28.

Two different medicines both treating areas of high unmet medical need. But one is first-in-class and one is a essentially a convenience play, albeit an important one given the importance of sight and the potential to avoid onerous monthly eye injections. Still, it's tempting to wonder if stealth comparative effectiveness is at work by U.S. regulators.

That seems unlikely. No new safety or efficacy concerns are behind Eylea's regulatory extension; in a call with investors Wednesday August 17, the biotech's execs emphasized questions tied to the chemistry, manufacturing and controls portion of the drug's biologics license application were responsible for the postponement of the drug's approval. And if the recent advisory committee meeting vote is any guide -- the committee voted 10-0 in favor of the drug's approval -- there's no reason to think the drug won't make it to market later this year.

Still for Regeneron, which is leaning heavily on Eylea to catapult itself into the realm of commercially-focused biotechs, the news undoubtedly came as a psychic blow. The biotech is now in hurry-up-and-wait mode, having lined up a commercial team approximately 70-people strong to launch the product, according to this story in "The Pink Sheet" DAILY. On the August 17 conference call, the biotech revealed it will take a third quarter SG&A charge in part because of the estimated $70 million to $80 million associated with Eylea's launch. Unsurprisingly, investors reacted negatively, sending the company's stock price down about 8% as of the market's close August 18. (Though it could have been worse given the general market turmoil and the massive sell-off late in the week.)

Plexxikon, the biotech which originated Zelboraf, is in a completely different position entirely. Having exercised an option to co-promote the drug in the US, the VC-backed start-up was snatched up by Daiichi, which like so many other pharmas, is looking to double down in oncology. Roche's Genentech is leading the commercial efforts, and as our colleagues at "The Pink Sheet" DAILY report, has identified a crafty plan that puts the targeted therapy's value front-and center. At an estimated $60k for a course of therapy, the drug, which can only be prescribed for patients with a specific mutation, is significantly cheaper than Bristol-Myers Squibb's competitor Yervoy.

The dichotomy between the forces now steering Regeneron and the insulation Plexxikon now enjoys as a division of Daiichi show that for biotechs, the more things change, the more they stay the same. Or in the words of Charles Dickens,

in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.

On one of the last Fridays of summer, perhaps it is a far, far better thing that I bring you another edition of...

General Dynamics/Vangent: Government contractor General Dynamics shored up its health care information technology division this week with the $960 million cash purchase of Vangent. The deal brings an exit to private equity fund operator Veritas Capital, which owned 90% of publicly traded Vangent prior to the sale. Veritas acquired Vangent’s predecessor, Pearson Government Solutions, for $600 million in 2007; Vangent has since expanded by acquiring two other companies, FDA and Medicare contractor Buccaneer Computer Systems and Service ($65 million) and the health care IT unit of Aptiv Technology Partners ($4 million). Vangent derives about 90% of its business from U.S. government agencies, including the Departments of Health & Human Services, Defense, State, Education and Labor. It provides IT services including electronic health records to military personnel and Federal employees, as well as informing Medicare recipients of health care options. Vangent will be integrated with Falls Church, Va.-based General Dynamics’ information technology division, which also recently grew by acquiring cloud computing company Network Connectivity Solutions. Arlington, Va.-based Vangent posted net income of $40 million on revenues of $762 million during 2010, and had $27 million in cash and equivalents at the end of the year. The deal comes as many government agencies seek to cut costs in anticipation of reduced budgets and buy-out firms as well as traditional venture groups see opportunity in the relatively nascent healthcare IT space. – Paul Bonanos

Paladin/Labopharm: Canadian drug formulator Labopharm had sought a suitor pour longtemps, and finally found one in acquisitive specialty pharma Paladin Labs. This week Montreal-based Paladin agreed to buy struggling Labopharm for CN 28.57 cents per share in cash, valuing the company at about CN$20 million ($20.4 million). Paladin, which markets a variety of drugs including pain relievers, contraceptives and injectable emergency treatments for hypoglycemia and allergic reactions, is already attempting to acquire cold remedy developer Afexa Life Sciences of Edmonton in a hostile bid. The offer for Labopharm is friendlier, however, and has already been accepted by its board. Labopharm, which brought in new management in March as part of a restructuring, develops drugs using its controlled-release and nano-delivery systems; in its earnings report earlier this month, Labopharm said its expenses and obligations would likely exceed its revenue and cash reserves in the coming months, and its ability to survive as a going concern was in question. While the deal seems likely to close without incident by the fall, Paladin has cause for concern elsewhere: Hours after the acquisition was announced on Aug. 17, Paladin CEO Jonathan Goodman was in a bicycle accident, and is currently hospitalized with what the company calls “serious injuries.”--PB

Human Genome Sciences/4-Antibody: Even as HGS's investors wonder what additional late-stage clinical assets the biotech will bring in to continue the revenue upsurge the biotech has enjoyed from the recent launch of its lupus biologic Benlysta, the Maryland-based biotech continues to ink early stage deals to ensure its continued access to innovative products. This week comes news that the firm is teaming up with the Switzerland-based 4-Antibody. Financial details of the tie-up weren't disclosed, but the licensing deal seems like a pretty standard early-stage R&D deal, giving HGS rights to use 4-Antibody's proprietary high through-put antibody discovery platform to produce two novel molecules. The technology is rooted in rapid flow cytometry and is designed to produce fully human antibodies that are "better behaved" (according to official 4-Antibody statements) than molecules produced via alternate methods. It's 4-Antibody's second deal; the start-up inked an alliance in 2010 with Boehringer Ingelheim worth more than $240 million in biobucks. (As with this week's HGS deal, the upfront in that collaboration was not disclosed.) HGS, meanwhile, continues to show its interest in large molecule therapeutics. Just one week after winning approval for Benlysta, it announced it would pay $50 million upfront for rights in the US, EU, and Canada to FivePrime Therapeutics' lead asset, a Phase II oncology medicine, FP1039. --EL

Pfizer/Qiagen: Is the biopharma industry finally getting real when it comes to companion diagnostics? It's hard to say given the economics of deals between biopharma and testing companies are rarely announced. But at least such tie-ups are happening with greater regularity, and this week we have another reminder (if Zelboraf's early approval wasn't already reminder enough) of the strategic importance of companion tests. On August 16, Qiagen and Pfizer revealed the two groups were teaming up to develop a molecular test to accompany the Big Pharma's Phase III dacomitinib, which works by blocking three related tyrosine kinases in the human epidermal growth factor receptor (HER) family. Details of the collaboration were undisclosed but it's a no brainer that Pfizer would align with Qiagen. The two have partnered before in the companion diagnostic realm and Qiagen has considerable expertise in developing FDA-approved tests to diagnose patients' KRAS genetic status. (Recall that mutations in the KRAS gene are commonly observed in human cancers and EGFR-inhibitors like dacomitinib are most effective in individuals who do not have these aberrations.) Indeed, Qiagen recently submitted a premarket approval application for KRAS companion tests associated with two separate drugs targeting metastatic colorectal cancer. While the Pfizer companion test is being adapted for specific use in lung cancer tissue, it uses the same core assay components as Qiagen's other KRAS diagnostics. Qiagen is a relative newcomer to the space of companion diagnostics, building its capabilities primarily through its 2009 acquisition of DxS; this additional Pfizer deal illustrates just how valuable that purchase has proved for a company whose historic strength has been as a purveyor of kits and reagents. That Pfizer is preemptively taking the step to pair dacomitinib with a companion test is a smart move; there are plenty of competing EGFR-inhibitors in development. Providing payers and physicians with a diagnostic that can help triage lung cancer patients helps provide an added level of differentiation.--EL

Bayer Healthcare/Pathway Medical: In the midst of the increased chatter about reviving the question of whether drug companies should also be in the medical device business, fueled by Endo Pharma’s recent $2.6 billion acquisition of American Medical Systems, at least one pharma company that is already in the device space appears to be quietly expanding its presence there. As reported by Xconomy, Bayer Healthcare’s Medrad device unit has reportedly reached an agreement to acquire atherectomy company Pathway Medical Technologies for $125 million, although the deal is not yet final.

Earlier this year, Medrad received CE Mark approval of its Cotavance drug-eluting balloon to treat peripheral artery disease and is selling that product in Europe, while also pursuing an IDE on the path to seeking US commercialization. Drug-eluting balloons hold great promise as the next major platform to treat vascular disease, particularly in areas where even drug-eluting stents have proven ineffective, with the peripheral vascular market representing the largest of those opportunities. Pathway’s atherectomy devices are also focused on clearing peripheral vessels. Medrad has long been a secondary player in this market, largely through its Angiojet thrombus removal system, which the company added in 2008 with its acquisition of Possis Medical. By adding atherectomy and drug-eluting balloons to their current product line, Medrad, which is located in the Pittsburgh suburb of Warrendale, PA, appears to be taking its cue from the hometown Pirates baseball team in looking to move up in the standings by assembling an armamentarium of endovascular devices for clinicians in the under-served and growing peripheral vascular market.

For Pathway, the deal appears to be a welcome exit, albeit one of uncertain return for its investors, for a company that has struggled for much of its 13 year history. The company was nearly out of business in 2004 but was able to revive its fortunes by switching its focus from the coronaries to the peripheral market. The reported $125 million acquisition price doesn’t quite match the $130 million that the company raised – and the Xconomy report suggested that only investors in the most recent Series D will see any benefit from the deal -- but $125 million is a strong acquisition price in the device space and in a glass-half-full kind of way represents something of victory for Pathway executives. --Steve Levin

Due to an editing error, the Anjojet device was inapprorpiately refered to as a drug eluting balloon. The post has been updated as of August 22, 9am ET.

Financings Of The Fortnight: Give Me An A

For START-UP's annual A-List (and effort, too).

Yeah, this blogger is well aware it's only July and that loyal readers have grown used to reading our annual analysis of biotech financing trends in January. But retailers big and small have long created a little marketing heat with post-Independence day sales. In that same spirit, surely IN VIVO Blog can take a quick peek at the health of early-stage biotech financings? Think of it as our version of Christmas in July. Or if you prefer, akin to the top-line clinical trial analysis drug companies do before releasing the final presser on a compound's efficacy.

Thus, midway through 2011 we pause to measure Series A commitments year-to-date, using the data as a metric for the health of VC investment in innovative new cos. How are we doing?

Much better than 2010, according to Elsevier Business Intelligence's Magic 8 ball, the Strategic Transactions database. Year to date, early stage biotechs have raised roughly $375 million in 24 Series A deals, with the average financing pulling in $15.6 million. And activity in June has been particularly robust, with announcements tied to rare disease plays UltraGenyx and Lotus Tissue Repair, and the computational drug discovery platform play, Nimbus (see below). Indeed, the Series A dollars announced in June alone total $129.8 million, about a third of the total raised so far in 2011.

It was, of course, hard to get much worse than 2010's stats. Last year, the total biopharma Series A dollars were a dismal $650 million with the number of Series A the lowest we've seen in at least five years. And when VCs were putting money to work, they were making smaller bets: the average biopharma Series A in 2010 was just $10.5 million.

The obvious uptick across three different metrics -- total Series A dollars, average raise, and number of deals (if the trend continues, we should see close to 50 Series As before 2011 closes out, well above the 42 observed in 2010) -- seems to suggest a renewed sense of optimism in the VC community. (Maybe all those dollars following tech start-ups like Zynga and LinkedIn will slosh into health care! Natch.)

In reality, the situation is more nuanced. For VC firms that have successfully raised money in the past couple of years (think Third Rock, OrbiMed, Essex Woodlands, and NEA among others), it's good times indeed. Lots of innovation needs funding and competition for deals has dropped as struggling firms baby existing portfolio companies. Indeed, according to a survey currently being conducted by START-UP (full results will be published in our September issue), 42% of VC respondents have a negative outlook about the future of venture (only 23% were positive). And, 100% of current respondents predict that three years from now the roster of VC firms will be shorter than it is today.

In other words, rising Series A averages and investment dollars don't change the fact that many believe the traditional biotech financing model doesn't work anymore. Time lines are too long and the returns are too poor for limited partners who back VCs. Thus, numerous venture groups are trying to avoid the zombie label by experimenting with new models, which all loosely comply with the single unifying theory for biotech company development know "capital efficiency".

Think Atlas's toe-dipping experiment with project-based financing or CMEA's new Velocity Development Corp. or willingly separating discovery from development ala Adimab/Arsanis & Versartis/Diartis.

The other strategy at play involves finding new ways to forge ties with the primary end buyer, pharma, a major topic at last week's BIO meeting in two separate finance-track panels. But how close is too close? Is syndicating with corporate venture a smart strategy? Do you really need multiple strategic investors in a syndicate to generate optimal returns? What about pharma as an LP? CMEA has clearly reconsidered the wisdom of having a big pharma as an LP, officially pulling out of Lilly's Mirror Fund, in what might be a danger sign for other pharmas considering similar experiments.

So many questions. (And for START-UP/IN VIVO subscribers, answers -- or at least data.) Until then, it's time for your biweekly bolus of biotech finance, brought to you by the letter A and the numbers 24 and 15.6.

Nimbus Discovery: In addition to the letter A, two other letters --L and C-- are critical to the success of Nimbus, a platform play seeded by Atlas Ventures in 2009 that aims to perfect computer-based drug discovery. The start-up has gone from stealth to acclaim in recent months, not just for its high profile investor, Bill Gates, but also for its limited liability company structure, which makes it possible for the biotech to return cash to its investors without taking a tax hit. As executives converged on the Washington Convention Center last week came news that Nimbus had pulled in a sizable $24 million Series A, with new investors SR One and Lilly Ventures helping lead the round. Between its recent financing and its effort to pull in multiple strategic investors, Nimbus has become the new case study for how certain VCs think nascent biotechs should be built. As we told you in this Start-Up piece, Nimbus differs from traditional discovery ventures in that it explictly aims to separate drug discovery and development tasks. The discovery efforts are kept in the platform LLC holding company, which acts as an umbrella over target- or molecule-specific C-corp subsidiaries. Thus, each time a candidate drug is licensed, that transaction is effectively an acquisition of a company, and includes just the IP and the particular data package associated with the relevant compound. Nimbus is currently focusing most of its efforts on two drug discovery programs targeting the proteins ACC, which may play a role in cancer and obesity, and IRAK4, inhibitors of which may be important in treating diffuse B cell lymphomas as well as inflammatory diseases like rheumatoid arthritis and gout. The new money is slated to go toward both programs.--EFL

Redwood Bioscience: The San Francisco Bay Area start-up said June 27 it's received an undisclosed amount of capital from Takeda Ventures (corporate venture!) to develop its chemical engineering platform for drug-conjugate development. The cash builds on Redwood's prior also-undisclosed infusion of cash from Mission Bay Capital, a new seed-stage venture firm that targets University of California spin-outs. Redwood is based on technology from the laboratory of Cal-Berkeley professor Carolyn Bertozzi, who last year was the first woman to win the Lemelson-MIT Prize. Redwood's "aldehyde tagging" allows site-specific modifications of proteins for drug conjugation or other functional enhancements. The funding news comes as antibody-drug conjugates (ADCs) are on the cusp of commercial relevance after three decades of work. Seattle Genetics is expected to win FDA approval for its Hodgkins lymphoma treatment Adcetris (brentuximab vedotin), which would earn bragging rights as the only ADC on the market. Outside the US and Canada, Millennium Pharmaceuticals, the oncology division of Takeda, owns rights to Adcetris. Also in late stage is T-DM1, a conjugated version of breast cancer treatment Herceptin that Roche's Genentech division is developing with technology from ImmunoGen. As we explained in this IN VIVO feature, Takeda's antibody researchers -- headquartered a few miles away from Redwood -- and many other drug developers are looking seriously at ADC technology now that Seattle and Genentech/ImmunoGen have paved the way with clinical validation. -- Alex Lash

Zafgen: This week the letter A has to also share the spotlight with the letter C, which in the case of Cambridge, MA-based Zafgen stands for capital. The start-up announced a $33 million Series C round July 7, led by returning investors Atlas Venture and Third Rock Ventures. The two venture capital firms, which also led a $14 million Series B in 2008, were joined in the round by a handful of unnamed individuals, Zafgen CEO Thomas Hughes said. Zafgen will use the funds to advance its MetAP2 inhibitor, ZGN-433, for severe obesity through Phase II, with new trials slated to begin next year. Last month, the biotech unveiled Phase Ib data showing that ‘433 yielded significant improvement in cardiovascular risk markers, such as LDL cholesterol levels and C-reactive protein levels. Hughes believes his candidate can succeed even though the obesity space is a littered with failures (including Vivus' Qnexa, Arena Pharmaceuticals' lorcaserin, and Orexigen Therapeutics' Contrave), because ‘433 is intended to provide significant benefit to severely obese patients, many of whom have co-morbidities such as diabetes or heart disease. The Phase II program will test ‘433 in patients with a body mass index of at least 35 plus a co-morbid condition or patients with BMI of 40 or above without a co-morbidity, Hughes said. The trial will treat patients for a minimum of 12 weeks, with endpoints of body weight, glycemic control (for participants with diabetes) and cardiovascular risk factors. Thus, since '433 will be studied in a patient population of greater medical need, Hughes argues it will offer a substantially better benefit-to-risk ratio than other previously tested drugs. Given the skyrocketing obesity numbers -- 38% of states now have obesity rates exceeding 25%-- if Zafgen's drug is safe and even mildly effective, it's pretty likely some pharma will pony up a fat check to own rights to the product. —Joseph Haas

Clovis Oncology: Maybe this week's FOTF should have been sponsored by the letters I, P, and O. Investors are waiting to see if Clovis can follow through with an initial public offering despite a lackluster IPO environment. The Boulder, CO.-based biotech filed an S-1 with the Securities and Exchange Commission on June 23 proposing an IPO of up to $149.5 million. The prospectus explains that the financing would go toward advancing its pipeline of oncology drugs through commercialization as well as adding to that pipeline through further in-licensing. (Remember the deal with Pfizer for the PARP inhibitor?) According to its prospectus, Clovis plans to differentiate its products by pairing them with companion diagnostic tests that will help determine the proper patient population, a strategy payers will be more likely to espouse. While Clovis’ intentions are good, and its founder Patrick Mahaffy has delivered in the past (he was CEO at Pharmion when it was bought by Celgene for $2.9 billion), the IPO strategy has been tough to execute over the last few years. There have been only 43 biotech companies that have successfully completed an IPO since the beginning of 2008 according to the Elsevier Strategic Transactions database; that includes 10 biotech IPOs so far in 2011 earning a total of $378.85 million. And many of the biotechs in the 2009 -2011 couldn't even get out without taking massive hair cuts, making it tough for venture backers to get an actual return.--Lisa LaMotta

Image courtesy of flickrer Peter E. Lee used with permission through a creative commons license.

Financings of the Fortnight Pursues The Case of The Confounding Qs and Zeds

If we were playing Scrabble, FOTF would throw down a couple double-word scores (with double-letter scores of course embedded), whup your sorry butt, take a long contented sip of hot cocoa, and call it a night. But it's never that easy, is it?

The news of the past fortnight is more question mark than answer, leaving us to purse our lips and puff distractedly on our Meerschaum calabash. The two Zeds stand for Zealand Pharma and Zogenix, two of the three firms that took advantage of the open IPO window -- such as it is -- to debut their stocks.

With a few economic indicators perking up stateside, we thought investors might start to receive new issues with a warm handshake, especially from firms with Phase III drugs or marketed products (a bar Zealand and Zogenix clear).

Certainly the two companies' debuts weren't as bad as the raspberries the Irish government's getting for punting citizens' benefits in order to bail out bankers. Still there's no denying Copenhagen-based Zealand's CEO David Solomon had to put his best face on getting half of what he hoped for, telling Our UK Correspondent that, hey, at least we got out despite Dublin burning!

Back here in the US, where officials newly elected or otherwise are trying to make grown-up noises about debt reduction, Zogenix and fellow escape artist Anacor Pharmaceuticals also misgauged investor sentiment. Each took about a 70% discount in opening share price based on initially stated goals. They made up the gap somewhat by selling more shares, but that's cold comfort to investors who saw the delta between their buy prices and potential sale prices sink like a broken boat into Mississippi mud.

More mysteries: Stealthy as Quintiles Transnational tried to be -- on the QT, dare we say? -- it couldn’t hide the fact that its former investment unit NovaQuest has become an independent, standalone organization. In a Form D filed with the SEC the day before Thanksgiving, NovaQuest revealed that it had raised the first $117 million of a planned $500 million investment fund. A Quintiles spokesman confirmed that the new NovaQuest Capital Management will function as a separate company, which will operate NovaQuest Healthcare Investment Fund LP. Quintiles will be a minority investor in the fund among six total investors, but the giant CRO will not manage its investments. Rather, several former Quintiles executives, including John Bradley, Fred Cohen and Ronald Wooten, are now listed as directors of the new fund. NovaQuest’s principals couldn’t be reached for comment, but IN VIVO Blog did learn that Wooten played guard for the New England Patriots in the 1980s.

A Quintiles’ spokesperson told us its Capital Solutions division will continue to make investments on the company’s behalf. But the carve-out of NovaQuest suggests that Quintiles’ innovative investment model – offering contract research, clinical trials and other services alongside cash in exchange for equity or other future payments – hasn’t prospered since NovaQuest was launched in 2006. The company lost big on its investment in Eli Lilly & Co.’s Alzheimer’s disease treatment semagacestat, which failed in Phase III in August. Nor has NovaQuest yet produced a notable exit or successful drug, albeit in a relatively short existence. It’s unknown whether future NovaQuest investments will be tied to Quintiles’ services, nor whether the firm will continue to invest in tandem with TPG-Axon Capital, its partner in the semagacestat arrangement and other deals.* Tangential thought: We'd rather be a Q than a Z.

There's one more letter of mystery in today's edition: A. We're gearing up for our annual A-List feature, in which we highlight the year's most significant, creative Series A fundings and sort out the underlying trends. The mystery: Who will make the list? We have some good ideas, but we'd love to hear yours, as well. You can mail a - dot - lash at elsevier - dot com, or you can tweet me @InVivoBlogAlex. One word of warning: fundings in which the amount of cash remain a secret won't be considered. So much for Collegium Pharmaceutical's spin-out of its derm assets with the backing of Essex Woodlands. We've already got enough mysteries on our hands.

Time to set aside idle palaver, Watson! The game's afoot, and it's called...

Zealand Pharma: Zealand's IPO on the Copenhagen stock exchange, announced earlier in November, was going to be the gauge of European investor appetite for biotech. When it priced shares Nov. 23, it seems investors weren't so hungry. Despite Zealand's late-stage GLP-1 asset partnered with Sanofi-Aventis and a pipeline significantly more mature than when the company first tried to float back in 2005, the Danish biotech managed only to raise €50 million, listing at DKK 86 per share, at the very low end of its projected range. Nonetheless, CEO David Solomon told IN VIVO Blog "we're satisfied" given the economic climate at the time, with Ireland on the brink of its bailout and considerable global uncertainty. "Other deals [in the US] re-priced or aborted, but we got out," he said. Yes, but Zealand effectively re-priced, too. The company adjusted expectations downwards November 18 following its investor road-show. "We decided to listen to investors," says Solomon, and the price range was reduced from DKK 86-120 to a more telling DKK 86-90. Zealand's new investors are mostly European (and mostly Nordic) institutionals. Since shares listed they have hovered well below list price, but it's early days, and volumes are low. The IPO coordinators haven't yet taken up their over-allotment option. Solomon promised a "wealth of news flow" which might put some fire into the stock. No Christmas cheer, then, yet for major shareholder Sunstone Capital – nor for other biotech IPO hopefuls. -- Melanie Senior

Anacor Pharmaceuticals/Zogenix: From A to Z, it was a fortnight of diminished expectations -- yet again -- for biotechs going public. In the case of Anacor and Zogenix, the haircuts were so severe, each in the neighborhood of 70%, you'd be forgiven for checking to make sure their scalps were still attached. Haircuts have been the rule not the exception among life-science IPOs this year, but the Anacor and Zogenix reductions were the unkindest cuts yet, and in fact rivaled only in the past few years by a little cell therapy play called Bioheart. Anacor, with a pipeline of four topical dermatology compounds, netted $55.8 million by selling 12 million shares of common stock Nov. 30 at $5 apiece, a far cry from its initial goal in the $16-$18 range. Meanwhile, San Diego-based Zogenix, which this year launched its first product, a needle-free sumatriptan injection for acute migraine and cluster headaches, sold 14 million shares at $4 per share, raising $56 million. It had hoped to sell 6 million shares in the $12-$14 range. At least Anacor could boast of tacking on some non-dilutive funding, as you'll see in the next item. -- Joseph Haas

NanoBio: Part of the small but energetic Michigan biotech cluster, NanoBio landed a $6 million grant from the Bill & Melinda Gates Foundation to push forward with a nasally-administered vaccine for respiratory syncytial virus (RSV). It's one of a just a few vaccine-related grants to for-profit companies the foundation has made among its dozens in recent years. There are currently no vaccines approved for this indication, but the biotech is likely to face competition in the race to bring one to market. Alnylam has a Phase II candidate that targets the nucleocapsid "N" gene responsible for RSV replication, whereas NanoBio touts its NanoStat platform’s ability to generate robust mucosal, systemic, and cellular Th1 immunity. MedImmune, which made its name with an antibody treatment for RSV as well as the nasal flu spray FluMist, and ViroPharma also have clinical-stage intranasal RSV candidates in the pipeline. (NanoBio wasn’t the only for-profit Gates recipient this fortnight; on the same day, newly public Anacor Pharmaceuticals received more than $2 million to fund a new collaboration with UCSF and the New York Blood Center on river blindness.) The Gates money is a sliver of ten-year-old NanoBio's accumulated $115 million in financing, which includes venture capital, grants, and partnerships such as its 2009 alliance with GSK for a Phase II OTC cold sore treatment. -- Amanda Micklus

Lpath: Also no stranger to nondilutive funding, this San Diego firm eked out nearly $5 million in a private placement of 7 million shares at 70 cents each, it announced Nov. 17. Each investor also receives warrants to buy half again as many shares as they bought in the placement. The warrants have a two-year term and can be cashed immediately for $1.00 per share into restricted shares of Class A common stock. It's not the type of funding we normally highlight, but the San Diego firm, which develops monoclonal antibodies formulated to target bioactive lipids such as sphingosine-1-phosphate, caught our attention in the summer of 2009 when it was the first recipient of a new type of government small-business grant. The National Cancer Institute has a small "Bridge" program to extend its SBIR grants to translational projects to help biotechs get across the valley of death and into the clinic. Sometimes called "SBIR Phase III" awards, the Bridge awards are a little extra cash -- up to $3 million -- for SBIR awardees beyond the traditional Phase I and II grants that will hopefully get them to a milestone or data point that attracts private investment. The recent private placement probably wasn't what Lpath had in mind. Since the Bridge award, Lpath's partnership for its lead product, the anti-cancer Asonep, ended when Merck KGaA declined to opt in at the end of Phase I. Officials said the placement proceeds will help move a different candidate into Phase II trials for wet AMD and let the company continue to explore "strategic opportunities." -- Alex Lash
*Paul Bonanos contributed the Quintiles/NovaQuest reporting.

Photo courtesy of flickr user MarkHillary.