Deals of the Week Takes Stock in M&A

Here at Deals of the Week, we don’t often take note explicitly of buyouts outside the biopharma sphere. But one well-publicized tech deal last month piqued our interest – and it parallels another recent pharma deal in a way we found curious.

As you may have heard, social networking giant Facebook wowed the tech field with its February takeout of smartphone communications app developer WhatsApp for a jaw-dropping $16 billion plus an additional $3 billion in employee-retention bonuses, reportedly the largest-ever acquisition price for a private, venture-backed company. (We’ll note in passing that one of the deal’s biggest winners, venture firm Sequoia Capital, is also a life sciences investor.)

Now, $19 billion is a lot of scratch – it’s a bigger pile of cash than the gross domestic product of Jamaica, and it’s in the ballpark of the price Sanofi paid for Genzyme in 2011. But a closer look at the WhatsApp deal’s terms reveals that Facebook paid just $4 billion in cash – a quarter of the deal’s baseline value – and the balance, including the retention bonuses, in its somewhat volatile stock. It’s a common formula in tech, a sector in which speculative value far outpaces revenue in many cases.

In the biopharma world, such arrangements traditionally are unheard of – but that might be changing. While many pharma mega-deals include both cash and stock components, most feature bigger cash portions than paper value. Just over a third of the $68 billion Pfizer spent to acquire Wyeth in 2009 was in stock, with the rest coming in cash; Johnson & Johnson’s $21.7 billion deal for Synthes in 2011 was in the same league, weighted roughly 65%-35% in favor of cash.

That’s why Actavis’ pending $25 billion deal to acquire Forest Laboratories last month was so unusual. Actavis paid just $26.04 per share, or 29% of the total $89.48-per-share purchase price, in cash, and swapped its stock for the rest. So there’s financial risk involved: If Actavis shares fluctuate, the deal’s total value could go up or down rapidly, perhaps before it even closes. (We note that the Facebook/WhatsApp deal technically gained more than $600 million in value before it was even announced, since its stock component was based on an already-outdated five-day average of Facebook’s share price.)

It’s not the first mega-buyout to favor equity over the hard stuff; Merck’s $42 billion buyout of Schering-Plough was tilted slightly in favor of stock over cash, with 56% of the price paid in equity. But rarely are large pharma deals ever consummated with paper value vastly outweighing cash money; it’s even less likely with smaller deals. A search of our Strategic Transactions database of reveals that only about one in 10 biopharma deals since 2008 falling into the “bolt-on” range – those ranging from a few hundred million dollars to a few billion – had a stock component.

Some life sciences companies, particularly those living off their sunny growth prospects rather than established, dividend-paying, cash-rich ones, soon could find that their stock is becoming a valuable deal-making currency. And with biotechs soaring in the public markets, some of them look like good candidates for stock-heavy deals. Like Actavis’ stock price, the Nasdaq Biotechnology Index has doubled since November 2012. Emilio Ragosa, a partner with Morgan Lewis & Bockius’ mergers-and-acquisitions practice, said mid-cap biotechs – those valued around $1 billion – are in the sweet-spot. “They tend to have less cash, but their stock is appreciating more rapidly,” he said.

Big biotechs and specialty pharmas, responsible for most of the M&A deal-making action in 2013, are enjoying exceptionally high valuations, but don’t always have big pharma-like cash flow. They’re good candidates to use their strong stock prices to beef up their businesses without denting their cash piles severely.

It’s unlikely that big pharmas will change this aspect of their deal-making strategies much; as Ragosa notes, “They have enough cash on their balance sheets.” Ever sensitive to their quarterly earnings, most large pharmas will continue to avoid using stock to take out biotechs. Seven of the top 50 cash holdings among U.S. companies belonged to pharmas, according to a 2013 Moody’s report; six were sitting on double-digit billions, led by Pfizer. - Paul Bonanos

Transactional activity has been as slow as a snowy Interstate lately, but we’re still taking stock of the latest alliances in...

Biogen/Eisai: Biogen Idec teamed up with Japanese pharma Eisai on March 5 to potentially co-develop and co-commercialize four compounds for the treatment of Alzheimer’s disease. While specific financial details weren’t released, Biogen will pay Eisai an upfront payment of undisclosed size, as well as a fixed number of milestones based on development, regulatory and commercial events. The team also will split worldwide profits on the drugs should they reach the market. Eisai will take the lead on the first two compounds, which it will provide. The first is a beta-site amyloid precursor protein cleaving enzyme (BACE) inhibitor dubbed E2609; Eisai discovered the compound in-house, and is about to begin its Phase II trials. The second monoclonal antibody, BAN-2401, is already in Phase II trials; it’s an immunotherapy designed to break down beta amyloid plaques after they develop. Eisai also has the option to jointly develop and commercialize Biogen’s two in-house Alzheimer’s candidates, the anti-amyloid beta antibody BIIB037 and an anti-tau monoclonal antibody, both of which are in very early stages. The BACE inhibitor space has been heating up as Merck pushes its candidate into Phase III and AstraZeneca follows closely on its heels. Both Roche and Lilly have ended programs in the space after safety signals cropped up in clinical trials. There hasn’t been any proof so far that the safety issues are class-wide, but the industry is keeping a close watch for any signs. - Lisa LaMotta

Genocea/Harvard/Dana-Farber: Fresh from its initial public offering last month, vaccine specialist Genocea Biosciences struck a research deal with Dana-Farber Cancer Institute and Harvard Medical School to study cancer immunology. Under the March 5 alliance, researchers will use Genocea’s proprietary T cell antigen discovery platform to find antigens that correlate with an anti-tumor immune response in melanoma patients. Charitable scientific network Ludwig Trust will sponsor the research; terms weren’t released. The research will play off existing work by Dana-Farber’s Stephen Hodi and Glenn Dranoff in anti-CTLA-4 therapies such as Bristol-Myers Squibb’s Yervoy (ipilimumab). Harvard microbiology and immunobiology professor Darren Higgins will lead the development of a cancer antigen protein library, which will be screened against patient-derived cells using Genocea’s platform in order to seek a correlative immune response. After an initial lukewarm reception, Cambridge, Mass.-based Genocea shares have rebounded, rising more than 50% since the company’s February 5 debut. The company is best known for its clinical pipeline of anti-infective vaccines, including therapies and preventive treatments for herpes simplex virus-2, pneumococcus, chlamydia and malaria. Its most advanced program is GEN-003, a Phase II therapy for HSV-2. - P.B.

NeoStem/Massachusetts Eye & Ear/Schepens: Cell therapy developer NeoStem also inked a deal with some of Harvard Medical School’s tentacles, entering a research collaboration March 6 with Massachusetts Eye & Ear and the Schepens Eye Research Institute. The publicly traded, New York-based stem cell company will sponsor research by Michael Young, director of Mass. Eye & Ear’s ocular regenerative medicine institute, into various eye disorders; financial terms were not revealed. The deal will fund Young’s research using NeoStem’s proprietary very small embryonic-like stem cells, or VSELs. The scientist will perform preclinical work to find uses of NeoStem’s VSEL products to combat degenerative disorders such as retinitis pigmentosa and macular degeneration. Both Mass. Eye & Ear and Schepens are Harvard Medical School affiliates. NeoStem previously has used its VSELs clinically as wound-healing therapy and to treat periodontitis; the company also has targeted cardiovascular diseases and autoimmune disorders. The eye also has been a popular target for gene therapies, thanks to its closed system and immune-privileged status. That has led to several recent fundings of companies with preclinical and clinical-stage programs. - P.B.

Thanks to Flickr user ProAeroPhoto for his photo of a different way to trade cash for stock, reproduced here under Creative Commons license.

2013 Deals Review Finds Spec Pharma, Bolt Ons Dominated M&A

 

As the door shuts on 2013 and we reflect on the year’s biopharma M&A activity, what’s most noteworthy is the activity of specialty pharmaceutical and big biotech companies, which supplanted Big Pharma as the year’s most aggressive buyers. An optimist might argue that industry’s largest players are savvy avoiders of overvalued assets; another possibility is that they’re simply losing the battle to acquire tomorrow’s growth-drivers.

Amgen Inc.’s $9.7 billion (net of cash) purchase of Onyx Pharmaceuticals in October was the industry’s largest of the year. It reflected the value Onyx built up over years as it grew a successful R&D and commercial operation, and, most notably, the potential of its key asset, Kyprolis (carfilzomib), which gained U.S. approval for treatment of multiple myeloma in July 2012.  After receiving the offer in June 2013, the biotech tried for several weeks to push up Amgen’s original proposed price of $120 per share ($8.7 billion) and finally agreed to a price of $125 a share. Analysts had predicted that Onyx would get $10 to $30 more per share than the original offer, but uncertainty surrounding Kyprolis’ peak potential kept buyers’ enthusiasm in check.

Of 92 biopharma-related M&A deals that closed in 2013, nearly 15% – including half of the top ten deals by upfront price – involved specialty pharma buyers. Of these buyers, Valeant International Inc., Endo Health Solutions Inc., Opko Health Inc., and the much-reconfigured Elan Corp. PLC were particularly active, with each pursuing two or more acquisitions. 

Valeant, Perrigo Co. and Actavis PLC were the top three spenders, while Valeant’s acquisition of privately held Bausch & Lomb for $8.7 billion came in as the industry’s second largest acquisition of the year. B&L will continue to operate as a separate subsidiary within Valeant, which has led the way within the industry in favoring financial efficiency over R&D innovation as a driver of M&A. Valeant in April also acquired the mid-sized dermatology-focused pharma Obagi Medical Products Inc. for $418.4 million.

Deals Of The Year

Our editors have selected what they view as the most significant and intriguing deals of 2013 in three categories – in addition to M&;A, we’ve included alliances and financings – and invite readers to vote on their favorites. Please view profiles of our nominees at http://pages.elsevierbi.net/DOTY/2013.  Polls are open until noon ET on Jan. 7.

Perrigo and other less traditionally visible buyers also reflected the strength of specialty pharma companies. Gastroenterology-focused Salix Pharmaceuticals Ltd. is in the process of buying specialty pharma Santarus Inc. for $2.1 billion, while the latter, in a surprise move, bought Elan for $8.3 billion. 

Also notable was the complete absence from M&A of some of the industry’s biggest companies; Merck & Co. Inc., Forest Laboratories Inc., Novartis AG, and Pfizer Inc., among others, were nowhere to be found among buyers. Those that did surface didn’t make huge waves. Bayer AG’s $2.4 billion proposed acquisition of its Xofigo (radium-223 dichloride) partner Algeta ASA in December consolidates ownership of a potential blockbuster;  AstraZeneca PLC’s smaller acquisitions of fish-oil specialist Omthera and respiratory company Pearl Therapeutics were so-called ‘bolt-ons’ that added near-market but me-too products to its portfolio.

About 10% of acquisitions, or nine, involved rare disease companies. In one of the year’s biggest deals, Shire PLC announced in November that it is buying rare disease company ViroPharma Inc. for $3.3 billion on ambitions of becoming a leading rare disease player. In January, Shire also acquired LotusTissue Repair, which focuses on wound care and dermatology, for $49.3 million upfront and another $275 million in potential earnouts.--Wendy Diller

Credit to the PAXsims blog by Rex Brynen for the image

And the Nominees for IVB's 2013 M&A of the Year Are ...

We've nominated five 2013 Deals for M&A of the Year. It's time for you, esteemed readers of The In Vivo Blog, to decide the winner. It's an eclectic bunch this year -- we can't wait to see what you'll choose. Our polls will stay open through the New Year, until Noon ET on Tuesday, January 7. Good luck to the nominees! VOTE BELOW! IF YOU ARE VIEWING VIA EMAIL AND CAN'T SEE THE POLL, CLICK HERE.

Valeant/B&L: The May 2013 deal was a big win for private equity owners Warburg Pincus. It put some extra shine on the reputation of then-B&L CEO Brent Saunders, who has moved on to Forest to work his Hassanian brand of turnaround-magic in the world of primary care. And it again highlighted ophthalmology -- and B&L's diversified pharma/device/consumer approach to the field -- as an industry hotspot. But the main reason we've nominated Valeant/B&L for the M&A Roger this year is that it underscores the increased activity on the big deal front of specialty pharma over its supposedly deeper pocketed Big Pharma rivals. Read the full nomination here.

McKesson/Celesio: McKesson’s purchase of German drug wholesaler Celesio for $8.3 billion is one of the largest deals of 2013, but that is not what puts it on the In Vivo Blog Deal of the Year map. More to the point, and the reason it should be on the radar of everyone in the biopharma industry, is its likely impact on pharma and the drivers that led it to consolidate in the first place. Although the deal focuses on distribution and supply chain management, some of the duller aspects of an industry prone to flaunt its contribution to saving lives, it is every bit just as important to pharma’s health as the next big deal in cancer immunotherapy. Read the full nomination here.

Biogen/Elan's Half of Tysabri: Elan’s move to sell its share of Tysabri (natalizumab) to long-time partner Biogen Idec was the ball that set the Rube Goldberg device in motion, precipitating its endgame and eventual sale to Perrigo, and landing it on the 2013 shortlist for M&A deal of the year. Ultimately, this sale gave Elan the thing it needed to become appealing to virtually any acquirer – lots of cash. Tysabri fits right into Biogen’s sweet spot; alongside Avonex (interferon beta-1a) and Tecfidera (dimethyl fumerate) Biogen's locked down about 40% of the total MS market. Read the full nomination here.

Amgen/Onyx: Onyx serves as a leg up for Amgen as it looks to establish itself as a major oncology innovator and bring forward a pipeline of oncology drugs it has cobbled together partly through acquisitions. Despite the possibility of drama, the deal wound up as a straightforward acquisition that hedges risk for the buyer and still rewards the seller, one where the purchase price, at $125 per share, meets a middle ground. Read the full nomination here.

The Ibrutinib Royalty: Royalty deals have long been the provenance of more conservative private-equity vehicles. And so it was odd not just to see two venture firms join the royalty deal but also to hear how much each was putting up. Aisling Capital and Clarus Ventures said in August they had paid $48.5 million to acquire a tiny slice of sales royalties from ibrutinib, a cancer drug that hadn't been approved yet. Read the full nomination here.

Financings Of the Fortnight Sees Drug Companies Making It Rain

When the Nasdaq’s biotech index topped 1,600 late last week, many people noted it was an all-time high, even higher than the 2000 bubble. (Not adjusting for inflation, however.)

It has stayed above 1,600 all week, and no surprise, the money-chasers have followed. As of this writing, two biotechs have gone public the past few days, and the waiting room is starting to fill up. Companies recently joining the queue include Omthera Pharmaceuticals, Chimerix, and GW Pharmaceuticals. 

Meanwhile, a new study shows that seven of the top 50 cash-rich US corporations are drug companies: Pfizer, Amgen, Johnson & Johnson, Merck, Abbott Laboratories, Eli Lilly and Bristol-Myers Squibb. (Abbott has since split into device and drug companies, but the drug spin-out AbbVie has enough cash to qualify for the list.)

Much of that cash is held overseas, and it’ll likely stay there. Cash earned abroad and brought back to the US carries a 35% tax rate. Drug firms and other corporate lobbyists convinced the US government to grant a tax holiday – a temporary 5% rate -- in the mid-2000s in large part on the grounds that all that cash coming home would create jobs. The Congress said – nudge, nudge, wink, wink – well, sure, who doesn’t love jobs? Instead, we saw massive cuts in the drug business. The legislation was called the “American Jobs Creation Act,” a title so patently false it still serves as a convenient reminder to arch an eyebrow or three whenever the drug industry launches cries of duress. With apologies to Mark Twain, the demise of Big Pharma is always greatly exaggerated, often by the industry itself.

Even if much of the cash underscored in the Moody’s report is “locked” overseas, cash is plentiful at home, too, for certain sectors of the life sciences world. Debt is dirt cheap, and the stock market is booming. When a Big Pharma decides to divest a non-core asset, rewards await. Bristol-Myers Squibb did just fine spinning out its Mead Johnson nutritionals group in early 2009 and divesting its 83% stake before the end of that year. Earlier this year Pfizer floated its animal health division as the public company Zoetis but retained an iron grip on ownership and board control; its stake has gone up 29% in less than two months.

Farther down the food chain, public investors were choosy about which biotechs got through the IPO looking glass in 2012, but those that squeezed through have fared extremely well. At the closing bell March 20, the class of 2012 (biopharma and diagnostics companies, IPOs on US exchanges only) is up 57% as a portfolio, 13 companies in all. Only three are in the red; one, coincidentally, is Verastem, a cancer stem-cell company brought to you by some the same people who cofounded OvaScience, which just raised $35 million in a private placement after going public last year via a different route than Verastem (see more below). 

Below the IPO threshold, amongst the private biotechs, it’s hard to argue that there’s plenty of cash from the traditional source of early-stage venture capital. But then something like Savara Pharmaceuticals comes along; as we note below in our roundup, the Austin, Texas company working on powdered drug delivery has now raised $19 million, mainly from angels, through its Series B round. We did a double-take, too, when we saw that number. When angel networks can pony up those kinds of sums, are reports that bemoan the funding struggles of early-stage biotech greatly exaggerated?

And while you’re mulling that over, answer this, too: Was the coldest winter you ever spent really a summer in San Francisco? Mark Twain was always good for an aphorism, but when it came to the biotech money scene, he could never match…

Savara Pharmaceuticals: The Austin, Texas developer said March 20 it has landed a $7.4 million second tranche of its Series B round, bringing the total to $16 million. New investors include Tech Coast Angels and North Texas Angel Network, and Central Texas Angel Network is a returning investor. The B round began with angels, too: The Keiretsu Forum, the largest angel “community” in the world, led the first tranche of $3.2 million in the round with participation from 117 investors. To add to the juiced-up B round, the firm also has brought in non-dilutive funding – a three-year, $4 million grant from NIH’s National Heart, Lung and Blood Institute. Initially founded in 2007 on a plan to build an out-licensing business centered on the NanoCluster dry powder aerosol delivery platform in-licensed from the University of Kansas, Savara changed directions along the way to focus on developing its own drug-delivery solutions for pulmonary conditions. It raised a $1.4 million Series A mainly from angels in 2009. The new cash will help fund a Phase II trial for AeroVanc, Savara’s dry-powder inhalation formulation of vancomycin intended to treat MRSA (methicillin-resistant Staphylococcus aureus)  infections in cystic fibrosis patients. AeroVanc, which includes a capsule inhalation device in-licensed by Savara, has been granted orphan drug designation by FDA, meaning it will have seven years of market exclusivity if approved. – Joseph Haas 

OvaScience: The infertility treatment company announced March 13 a private placement of its over-the-counter shares that raised $35 million. The firm, which went public in 2012 without an initial public offering, sold 3.9 million shares at $9 each to Adage Capital Management, Deerfield Management Company, EcoR1 Capital Fund, Jennison Associates and other institutional investors. Leerink Swann served as placement agent. We highlighted OvaScience in a column last year
for a few reasons: It has high-profile founders, it went public via an odd route that has gained some attention recently, and among its dozens and dozens of individual investors were several standout names. Also, it gave us the chance to crack a few egg puns. OvaScience is one of several companies recently to attract to their private fundraising crossover investors who normally stay in the public realm. (OvaScience had hedge fund RA Capital in its Series B round in early 2012.) The firm's lead product AUGMENT is a process to revitalize a woman’s mitochondria in her eggs, improve their viability, and boost the chances of success during in-vitro fertilization. -- Alex Lash

Tetraphase Pharmaceuticals: The antibiotic maker became the fifth health care company and the third biopharma (for humans, that is) to go public in 2013. It raised $75 million on March 20 by selling 10.7 million shares at $7 each, which missed the revised target range of $8 - $10. Tetraphase first filed in February and is the first biotech to jump to the public markets since the national biotech indices hit record highs in March. If it hadn’t gone public, Tetraphase likely would have raised another round of venture funding, a choice another antibiotic developer Rib-X Pharmaceuticals made in 2012. With $80 million raised in three previous rounds, Tetraphase needs cash to begin Phase III studies of its lead candidate eravacycline – a synthetic next-generation tetracycline – for multi-drug resistant Gram negative infections including intra-abdominal infections. It should benefit from a more favorable regulatory climate, including new draft guidance from FDA that allows sponsors to run two Phase III studies in different patient populations, one in patients with intra-abdominal infections and the other in patients with complicated urinary tract infections. Previously sponsors would have been required to conduct two Phase III studies, enrolling 500 to 600 patients each, in intra-abdominal infections. The new guidance gives sponsors an opportunity to go after two indications at the same time, and the different patient populations could make the trials faster to enroll. – Jessica Merrill and Alex Lash

Pharmacyclics: The small-molecule oncology company said March 8 it raised $207 million in a secondary share offering. Like Tetraphase, the Sunnyvale, Calif.-based Pharmacyclics is striking quickly in the wake of good regulatory news. In February, the FDA granted its ibrutinib, partnered with Johnson & Johnson, breakthrough status in two blood cancers. Pharmacyclics sold 2.2 million shares, about 3% of outstanding shares, at $94.20 each, capping for now a remarkable run that saw the firm’s share price nearly quadruple in 12 months. It closed March 8, 2012 at $25.40. Most of that rise came before the FDA’s breakthrough designation for ibrutinib, the first for an oncology drug. FDA’s Office of New Drugs Director John Jenkins has described as reserved for drugs with early results that are “so impressive, so unexpected and ha[ve] such a dramatic impact on the treatment of patients with that disease” that the sponsors and drug regulators should do all they can to move it forward. One of the few clear criteria for breakthrough status is that there is early clinical evidence of substantial improvement over existing therapy. FDA granted breakthrough designation to ibrutinib for two B-cell malignancies: relapsed/refractory mantle cell lymphoma (MCL), for which there are an estimated 5,000 new cases in the U.S. per year, and Waldenstrom’s macroglobulinemia (WM), an even rarer disease with about 1,500 cases in the U.S. per year. Ibrutinib is a Bruton’s tyrosine kinase inhibitor. J&J’s Janssen Biotech licensed rights to the drug in December 2011 in a deal that included a $150 million upfront payment, the largest paid for a single asset that year. Vertex Pharmaceuticals' Kalydeco (ivacaftor) was the first drug to receive breakthrough designation. - Alex Lash and Emily Hayes

All The Rest: With participation from Celgene and Novo AS, PTC Therapeutics (small-molecule therapies) snagged $60 million in its Series G round, the largest venture financing of the fortnight… Research-focused Nabsys brought in $20mm through a Series D financing… UK regenerative medicine company Progenitor Labs received $5.8 million in seed funding from SR One’s UK Fund… KannaLife Sciences, a start-up developing phyto-medical pharmacological products derived from botanical sources rolled up $1.5 million in a Series A investment from Medical Marijuana and CannaVest…To commercialize its biopharmaceutical affinity purification technology, Avitide completed a $1.4 million Series A round led by Borealis Ventures, and joined by SV Life Sciences, Polaris Venture Partners, OrbiMed Advisors, and Angeli Parvi… In a private placement by public Australian stem cell developer Mesoblast, the company issued new shares priced at AU$6.30, for $174.6mm in proceeds to fund a clinical trial program… Public Evolva Holding SA (small molecules), through a rights offering and subsequent private placement, took in $33 million... In a PIPE of 113mm common shares @ $0.145 to lead investors Opko Health and Frost Gamma Investments Trust, RXi Pharmaceuticals (RNAi therapies) grossed $16.4 million… Renal-focused Rockwell Medical plans to sell 4.3 million shares at $3 in a registered direct offering for net proceeds of about $12 million… Public Canadian spec pharma Cynapsus (CNS drug delivery) completed a 13. 1 million unit placement, taking in $5.6 million…The $3.1 million in proceeds from Stem Cell Therapeutics’ PIPE will allow the company to conclude its acquisition of Trillium Therapeutics (announced in February) and also triggers a condition of a December 2012 deal that enables SCT to exercise its option for an exclusive license to University Health Network/MaRS Innovation's tigecycline, an FDA-approved antibiotic capable of selectively targeting leukemia cells… Hyperion Therapeutics (urea cycle disorders) netted $65.4 million in a FOPO of 3.3 million shares @ $20.75 – including the overallotment…Women’s health care-focused TherapeuticsMD reaped $50 million through a public offering of 29 million common shares at $1.70… Inovio Pharma (cancer and infectious disease therapeutics) netted $14.2 million through the follow-on public offering of 27.4 million units, priced at $0.55 each…Oculus Innovative Sciences (dermatology and wound care) netted $3.2 million in a public offering of 8.6 million shares, including the overallotment, priced at $0.40…Infectious disease-focused Enanta Pharmaceuticals priced its IPO of 4 million shares at $14, the low end of its $14-16 range… Israeli biotech Alocobra set terms for its Nasdaq IPO at $10-12 for 1.4mm shares… Animal health company Aranata Therapeutics also announced plans to go public…Chinese drug distributor Sinopharm Group plans to issue $640mm worth of five-year corporate bonds on the Shanghai Stock Exchange. -- Maureen Riordan

Big thanks to Stacy Lawrence for help with this fortnight's column. 

Deals Of The Week: 'Tis The Season To Be Jolly

'Tis the Season to be Jolly, so deals of the week has finalized its last offering of the year, confident that dire warnings of apocalypse coinciding with the ending of a Mayan calendar are hokum.

Business development executives are also ignoring such suspect perils, and are continuing to close on deals, collaborations and tie-ups, producing their own version of Christmas Cheer.

Europe is one region where holly bedecked halls will hopefully take the mind off austerity and its continuing toll on individuals' livelihoods and the funding of health care. At least no European country has succumbed to defaulting on their debts, yet.

So when office parties clog up your favourite eateries, and shopping in the malls and down the boulevards becomes too much of an assault course, return to your armchair to read who wound up under the mistletoe this week, in ...

Celgene/Sutro: Sutro Biopharma Inc. announced a collaboration Dec. 18 with Celgene Corp. to design and develop optimized antibody drug conjugates (ADCs) and bispecific antibodies (BSAs) for two undisclosed Celgene targets. The San-Francisco antibody specialist will also manufacture a naked antibody owned by Celgene using its high-yield, low-cost cell-free protein synthesis technology. The Celgene deal harnesses the Sutro platform’s strengths in combinatorial candidate design, post-lead optimization, and R&D scale up. Sutro CEO Bill Newell said the platform, using one basic cell-free extract, allowed them to make ADCs, BSAs, naked antibodies, and peptides. Sutro is responsible for the design and production of preclinical materials. Celgene will pay a "substantial" upfront consisting of cash and equity, as well as research, development, and regulatory milestones totaling over $500 million if all programs are successful. Sutro is also eligible for royalties on product sales. Although the deal conforms in some respects with Celgene’s earlier R&D collaborations – the equity investment has become a signature – the New Jersey biopharma will not take a seat on Sutro’s board. Coming on the heels of Celgene’s April collaboration with AnaptysBio Inc. and June tie-up with Inhibrx LLC, the deal represents a deepening of the biopharma’s involvement with next-generation antibody technologies. Beyond the cash and biobucks, Sutro and its investors get the validation of a high profile partner and the gratification of seeing a relentless and disciplined focus on its lab-to-commercial scale protein platform finally pay off – Michael Goodman

Biogen Idec/Duke University and Others: Adding to a commitment undertaken since George Scangos took over as CEO in 2010, Biogen Idec will provide more than $10 million in research funding to a consortium of academic research centers that will seek to identify new approaches to treating amyotrophic lateral sclerosis (ALS). The three-year initiative will encapsulate an earlier initiative with Duke University and the Hudson Alpha Institute to sequence the genomes of 1,000 living ALS patients. The efforts will involve researchers based at Harvard, Yale, Columbia and Rockefeller University, with Biogen Chief Scientific Officer Spyros Artavanis-Tsakonas spearheading the effort through his own lab at Harvard. Biogen’s hope is that by coordinating research and sharing results across a number of different disciplines, understanding of the mechanism of ALS can be accelerated and new targets and approaches to treatments discovered. The Cambridge, Mass., biotech also is involved in trying to develop a therapy for the disease, having licensed worldwide rights in 2010 to Knopp Neurosciences’ dexpramipexole, now in Phase III. – Joseph Haas

MorphoSys/Bio-Rad Laboratories: Germany’s MorphoSys has decided to trade its revenue-generating antibody reagent business for a “laser-like” focus on its therapeutic pipeline. The company announced Dec. 16 that Hercules, CA-based Bio-Rad Laboratories Inc. has agreed to pay €53 million ($69.7 million) to acquire its antibody reagent business, AbD Serotec. The price will include MorphoSys subsidiaries in Raleigh, North Carolina; Oxford, England; and Dusseldorf, Germany. The deal is expected to close in January 2013. The price also includes a non-exclusive license to MorphoSys's HuCAL (Human Combinatorial Antibody Library), a collection of several billion distinct fully human antibodies, for diagnostic applications. The German biotech's revenues have been largely dependent on AbD Serotec and incoming payments from antibody discovery partnerships based on HuCAL; during 2012, AbD Serotec generated 28%, or €13.7 million, of MorphoSys revenues. The deal will add AbD Serotec’s more than 15,000 antibodies, kits, and accessories to Bio-Rad’s portfolio of research and clinical diagnostic products. Bio-Rad will also receive milestone payments or royalties related to the AbD Serotec business, which was working with more than 20 diagnostic companies to develop antibodies for diagnostic use. MorphoSys will continue to rely on revenues from its HuCAL therapeutic partnerships. It has more than 60 of these with partners such as Pfizer Inc., Novartis AG, and Daiichi Sankyo Co. Ltd., which generated revenues of €32.1 million in the first nine months of 2012. – Lisa LaMotta

Amgen/ImmunoGen: With ImmunoGen’s T-DM1 (trastuzumab emtansine) on the verge of approval with collaborator Genentech/Roche, the company is continuing to attract partners for its targeted antibody payload (TAP) technology, which delivers a targeted cancer-killing agent to tumor cells. On Dec. 19, Amgen licensed the rights to use Immunogen's maytansinoid TAP technology to develop an anticancer therapeutic to a third target, having licensed rights to use the technology for two other targets in 2009. The original licensing option agreement was struck between the two companies in 2000. With each license Amgen chooses to option, ImmunoGen receives an upfront payment of $1 million and is entitled to $34 million in milestones, plus sales royalties. While ImmunoGen has brought in over $300 million in cash from partnerships over the last decade, the company has been trying to shift its focus to its own internal pipeline. It has three compounds in the clinic, with its lead compound, IMGN901, in Phase II in small cell lung cancer. - Lisa LaMotta

Intercell/Vivalis: A new European vaccine and antibody specialist, Valneva, will be formed by the proposed merger of two publicly quoted biotechs, Austria's Intercell AG and France's Vivalis, announced Dec. 17. Valneva will combine the product development and commercialization skills of Intercell with the vaccine cell line technology of Vivalis, and will become one of the few remaining independent European vaccine companies, after a string of takeovers and mergers in the sector over the past five years or so. Intercell develops and markets the Japanese encephalitis vaccine Ixiaro/Jespect, whose sales growth has not been as smooth as the company expected. In 2012, vaccine sales are likely to be 10% to 20% lower than expected, around €26.5 million to €28.5 million. Vivalis, whose EB66 embryonic duck cell line is used by numerous pharmaceutical companies to produce antibodies and vaccines, has also seen revenues decline in the first nine months of 2012 because of the ending of some manufacturing licenses. Through a stock merger, Vivalis shareholders will end up with 55% of Valneva. Intercell shareholders will also receive an earnout relating to the successful development of a Pseudomonas aeruginosa vaccine that the Austrian company's collaborator Novartis is currently evaluating in a Phase II/III clinical study. And a €40 million ($53 million) rights issue supported by France's strategic industry investor, Fonds Strategique d'Investissement (FSI), will follow the closing of the merger in May 2013. – John Davis

Janssen/Evotec: Janssen Pharmaceuticals Inc. has acquired an exclusive worldwide license to Evotec AG's NR2B subtype NMDA-antagonist portfolio of drug candidates, which have potential in the treatment of depression. Evotec will receive an upfront of $2 million from Janssen, with a further $6 million paid upon confirmation of certain preclinical properties of the candidates. The Hamburg, Germany-based company could also receive additional milestones totaling up to $67 million upon successful completion of certain clinical, regulatory and launch events for a first product. Additional, reduced milestones would be paid for the development of additional indications and/or compounds. Furthermore, Evotec could also receive an additional $100 million in commercial milestones depending on certain sales thresholds, and royalties that could be as high as double-digit on sales. However, a portion of the payments will be shared with Roche, which originally discovered the compounds. Evotec developed the compounds from discovery through to clinical studies, and Roche entered into an agreement in 2009 with Evotec on Phase II studies of portfolio compounds in treatment-resistant depression, although that collaboration ended in 2011 because of difficulties the study protocol caused in recruiting patients. - John Davis

MedImmune/Progenics: AstraZeneca's biologics arm is in-licensing Progenics Pharmaceuticals’ Clostridium difficile late-stage preclinical program as part of MedImmune’s search for monoclonal antibody candidates to prevent and treat bacterial infections. Under the deal, MedImmune will assess the potential efficacy and safety of antibodies targeting C. difficile toxins. Preliminary research suggests the antibodies are highly potent against most of C. difficile strains found in the U.S. and Asia, and are potent against hypervirulent strains. For Progenics, the move reflects its decision in 2011 to focus on its oncology programs. The biotech’s pipeline candidates include PSMA ADC, a human monoclonal antibody-drug conjugate in Phase II for prostate cancer, and preclinical stage novel phosphoinositide 3-kinase (PI3K) inhibitors for cancer. Clostridium difficile infections are the leading cause of hospital-acquired bacterial infections in the U.S. and are associated with more than 20,000 deaths and more than $1 billion in healthcare costs annually. The infection most often occurs in people who have been hospitalized, although up to 28% of cases are community-acquired through contaminated soil, water, pets, cattle, and food. – Sten Stovall

Merck/GE Healthcare: Merck & Co. Inc. is pitted in a tight race with Eli Lilly and Co. to bring the first BACE inhibitor to market for Alzheimer’s disease. The company announced Dec. 18 it has partnered GE Healthcare to use that company's imaging agent flutemetamol as a potential companion diagnostic to its BACE inhibitor, MK-8931. The announcement comes on the heels of Merck’s Dec. 3 announcement that it had started a Phase II/III study of the drug. Under the GE deal, Merck will use flutemetamol – a positron emission tomography (PET) imaging agent – to select patients for clinical trials of MK-8931, particularly a future trial in prodromal Alzheimer’s disease patients. That’s the phase in which patients have only mild cognitive impairments and have not yet been diagnosed with Alzheimer’s disease. Flutemetamol is being developed by GE to detect beta amyloid deposits in the brain, the buildup of which is believed to be a hallmark of Alzheimer’s disease. In Phase III testing, flutemetamol images showed a strong concordance with Alzheimer’s disease-associated beta amyloid brain pathology demonstrated in brain autopsy and in vivo-cortical biopsies, according to GE. Lilly already markets the PET tracer Amyvid (florbetapir), which shows the amount of beta-amyloid plaque in the brain, for use in diagnosing Alzheimer’s disease, following U.S. FDA approval in April this year. Merck said it opted to partner with GE on flutemetamol because the company had a long history in imaging, and access to infrastructure including PET scanners and cyclotrons that produce the radioactive isotopes used in the procedure. GE continues to own rights to the agent, is studying it independently, and plans to file the product with regulators in the near term - Jessica Merrill

Pfizer/Halozyme: The world’s biggest pharma is paying San Diego biotech Halozyme $8 million upfront for a worldwide license to Halozyme’s Enhanze technology to produce a pair of proprietary biologic drugs that can be administered subcutaneously. It is an earn-out-heavy deal, with Halozyme able to receive future licensing fees for up to four more targets, as well development, regulatory and sales-based milestones that could reach $507 million and royalties on net sales of any products reaching market. The targets and indications for the first two drugs to employ Halozyme’s recombinant human hyaluronidase enzyme (rHuPH20) technology were not disclosed, although a release said one product would be for primary care and the other for a specialty care indication. Future target selections by Pfizer can be made on an exclusive or non-exclusive basis. By addressing volume limitations, the Enhanze platform enables biologics which otherwise might need to be administered intravenously to instead be subcutaneous injections. Halozyme says the delivery technology also could reduce the need for multiple injections, improve patient convenience and reduce health care system costs. The deal is positive news in a year that saw the company's fortunes dragged down by a delay and subsequent FDA complete response letter around Baxter's HyQ immunoglobulin product, which uses the Halozyme technology. – Joseph Haas

Merck/Hanwha Chemical: Is Merck stepping back from biosimilars? That’s a question some industry stakeholders are asking after Korea’s Hanwha Chemical disclosed Dec. 18 that Merck had terminated a deal for Hanwha’s biosimilar of Amgen/Pfizer’s blockbuster Enbrel (etanercept). Merck had acquired developmental and commercial rights to Hanwha’s late-stage biosimilar in 2011 (in all markets except Korea and Turkey), surprising many in the West who had not thought of the Korean conglomerate as a biopharma player. Hanwha received an undisclosed upfront payment and was eligible for technology transfer and regulatory milestones, and tiered royalties on sales. Total upside for the deal was $720 million, Hanwha said at the time. Since then Hanwha has moved forward in its home market, submitting its Enbrel biosimilar for KFDA approval several months ago after completion of local Phase I and Phase III trials. So what happened? A “routine pipeline review,” Merck told our sister publication PharmAsia News, emphasizing that its decision did not reflect a change in biosimilars strategy or commitment. Yet some may wonder. As reported first in the IN VIVO Blog, Merck cut bait on Merck Bioventures earlier this year, deciding to merge the biosimilars unit back into its biologics and vaccines division. And perhaps more to the point, Amgen threw a wrench in development plans for Enbrel biosimilars late last year when it announced a stealth patent that could keep competitors off the U.S. market until 2028. So what’s next? Merck says it will continue to pursue a portfolio of biosimilars and novel biologics that meet unmet needs, including a previously disclosed biosimilar of Roche’s rituximab. But the emphasis, at least to our ears, seems to be leaning more to the novel these days then the similar. As for Hanwha, it says it will look for other multinational partners, not only for etanercept, but also for the next biosimilar in its pipeline, Roche’s Herceptin (trastuzumab). In other words, you better stay tuned. -- Josh Berlin

mistletoe by lovelorn poets, via flickr/creative commons

Financing Deal of the Year Nominee: Rusnano/Domain and CoDa Therapeutics

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

How about voting for a deal that turns conventional wisdom on its head.

The biopharma industry has looked to emerging markets for near-term revenues and cost efficiencies, but not for scientific or commercial innovation. An umbrella deal between Rusnano, a five-year-old $10 billion Russian sovereign fund, and the US venture capital firm Domain Associates, announced in March, and a subsequent tie up with Domain portfolio company CoDa Therapeutics, goes some way toward erasing those misperceptions. At the same time, the partners’ tie up reflects sovereign funds’ increasingly important role in shaping the life sciences industry.

And it does so in such a creative, enticing way that Russia, not typically known as a life sciences innovator, is generating excitement among US VCs and biopharma companies. Rusnano is linked to Russia’s Pharma 2020 program, which is already impacting Big Pharma’s development decisions, as indicated by their deal-making activities in the country. At the same time, Domain’s commitment to the joint effort has also been intense, but the relationship is worth the effort because it’s potentially so lucrative, according to Domain partner Brian Dovey.

The size and structure of the partners’ deals are noteworthy: Rusnano, which has a mandate to broadly invest in nanotechnology around the globe, and Domain, the quintessential US VC, are investing up to $330 million each in Domain’s portfolio life sciences companies and up to $190 million to build a manufacturing facility in Russia for the products that would be sold in Eastern Europe out of the Domain companies.

The aim is to “spur modernization of the Russian healthcare market” by providing that country, along with Eastern Europe and the former Soviet Commonwealth of Independent States, with next-generation pharmaceuticals, medical devices and diagnostic products, Rusnano executives said at the time of the announcement. Under the agreement, roughly 20 existing and potentially new US-based Domain portfolio companies will benefit from the collaboration, and the partners can also co-invest in third-party technology.

In July, after months of review, the partners announced their first beneficiary: Domain’s wound-healing biotech CoDa Therapeutics. The San Diego-based company is licensing rights to its technology in Russia and the CIS to the new Domain/Rusnano-backed Russian pharma company. In exchange, Domain, along with current CoDa investors GBS Ventures and BioPacificVentures, and new investor Rusnano, committed nearly $40 million to CoDa, closing a Series B financing that began in 2011.  The VC syndicate and Rusnano are each contributing equal amounts. CoDa, as with all Rusnano life sciences investments, has to establish R&D operations in Russia as well.

Domain isn’t the only US investor Rusnano is working with, nor is Rusnano the only tool the Russian government is working with to entice US venture capitalists and biotech entrepreneurs. It’s also established a business school and life sciences incubator, Skolkovo, in a collaboration with Massachusetts Institute of Technology, and has other stimulus programs aimed at building a biotech industry. But by bringing in US innovators and offering them the carrots they need most: attractive financing, potential market opportunities, and acknowledgement of American’s entrepreneurial savvy, Russia may be demonstrating a new model for building a much needed ecosystem.

--Wendy Diller

image via

Financings of the Fortnight Has Its Eyes On the A's

Our sister publication START-UP starts up every new year with The A-List, a review of the previous year’s Series A life-science financings, which we feel are an excellent proxy for gauging investor enthusiasm for new biomedical ventures and measuring the shifts in what’s getting funded, and who’s doing the funding. 

But we can’t wait for the end of the year to peek, so we’ve tallied year-to-date Series A financings using Elsevier’s Strategic Transactions. (Two weeks ago, we did the same with follow-on public financing.) The top-line result: In dollar terms, we’re on pace to equal 2010, a particularly glum year with $876 million total raised in Series A money. To match last year’s modest rebound of $1.1 billion raised, Series A funding must pick up with alacrity, a trend that’s hard to imagine as the Euro crisis continues to bubble and the U.S. loses its economic momentum from the spring. 

Here are the numbers: In the first half of 2012, 33 Series As across the biopharma, device, and diagnostic industries totaled $423 million. The majority of the first half’s total comes from the biopharma sector, mainly US and European companies. (24 financings, $345 million.) That’s just $30 million fewer raised than in the first six months of 2011 from the exact same number of transactions. So it’s fair to say biopharma isn’t lagging as much as the device sector. Still, biopharma numbers to date are not on track to reach the full-year 2011 biopharma figure of $887 million from 63 deals.

The average fundraise in the first half is $15.1 million, slightly higher than 2011’s full year tally of $14.1 million. But wait: the higher total is, ahem, warped by Warp Drive Bio’s $125 million investment from Third Rock Ventures, Sanofi, and Greylock Partners in January. Warp Drive is researching the medicinal properties of naturally occurring microbes with R&D support from Sanofi through a separate collaboration. It’s one of the most intriguing deals of the year so far, not just for the cash considerations, but for the unusual structure that gives Sanofi a nonexclusive option to acquire Warp Drive if certain milestones are achieved. At the same time, Warp Drive has the right to force a sale of the company if other milestones are met. It’s a brave new world when Series A-funded companies and their investors are locking in future acquirers. 

We’re also seeing a lot of solo Series As, a sign that the VC shakeout has left fewer viable syndicate partners for early-stage deals. Ten Series As were solo-backed, and the largest was Third Rock’s $41 million infusion into Global Blood Therapeutics, a firm developing candidates that alter key blood proteins, with an initial target in sickle cell disease. Third Rock is no stranger to solo A-rounds, notching SAGE Therapeutics, Blueprint Medicines, and Lotus Tissue Repair in 2011.

But the Boston and San Francisco firm also knows that good syndicates are hard to find: it joined Bessemer Venture Partners and Frazier Healthcare in a $10 million financing for Alcresta, which is working on a nutritional supplement that contains more digestible and absorbable forms of long-chain polyunsaturated fatty acids. Alcresta was the syndicate’s third go-round together, all with the same management team. The same phenomenon cropped up this year with the investment trio of Astellas Venture Management, InterWest Partners and Sutter Hill Ventures, who are now on their fourth venture together. It’s not rocket science for people who’ve made money together to revisit the formula, but the reduced pool of investors makes it all the more likely.

While oncology and peripheral vascular disease start-ups dominated the 2011 biopharma Series As, Series As the past six months were focused mainly on neurology, gastrointestinal, musculoskeletal, and metabolic disorder companies, which together made up 40% of the financing. Neurology led with seven financings bringing in $64 million, or 17% of the first-half dollar total and nearly a third of the deals. Four GI-related financings followed, while metabolic and musculoskeletal players had three deals apiece.

Biopharma Series A's By Therapeutic Category, January-June 2012

 

Note: The total number of deals is greater than 24 as several financings involve companies in multiple therapeutic areas.

SOURCE: Elsevier’s Strategic Transactions

Even though CNS start-up Cerecor’s $22.5 million round was shy of the $30 million raise the company had forecasted a year ago, the transaction topped the list as highest raise in CNS and third-largest Series A in the first half of 2012. Counting the second half of 2011, we’ve now seen 16 A-round neurology deals the past year, which perhaps holds counterbalance to Big Pharma’s well-documented exit from the CNS space.

On the device side, six Series A rounds raised $49 million. The dollars and number of deals lag the full-year 2011 total of $151 million raised in 24 transactions. In vitro diagnostics have tallied $27 million in three deals, slightly better than the 2011 pace, which finished with $48 million from 10 transactions. It’s worth noting that corporate venture played a role in three of the  biggest device and diagnostic Series As. Merck Serono Ventures along with KPCB and TPG took part in the first tranche of the Series A raise for Auxogyn, a company focused on infertility assessment using noninvasive devices that determine embryo viability. Novartis Ventures Fund led a $12.5 million first round for ImaginAb, with participation from Merieux Developpement (bioMerieux’s venture arm) and other investors. ImaginAb is developing engineered antibody fragments for diagnostic imaging, initially in cardiovascular diseases. And the molecular diagnostics company Xagenic pulled in $10 million in a  January round that included Dutch diagnostic giant Qiagen.

Now if you'll excuse us, we're shifting our attention away from data dives and toward springboard and platform dives. But first, many thanks to the Olympian effort of Amanda Micklus and Maureen Riordan for this week's column. It's time to raise the torch for another edition of...

  
California Institute for Regenerative Medicine: California's state agency that funds stem-cell and other regenerative medicine R&D announced July 26 $150 million in grants for translational projects that are expected to file an IND or complete an early-stage clinical trial within four years. Only one of the awards goes to a for-profit entity, the San Francisco Bay Area firm StemCells Inc., which wants to use stem cells to treat spinal cord injuries in the neck both in patients with new injuries and in patients who have been paralyzed for months or years. The other six awards are going to academic or institutional researchers and range from $14 million to $20 million per project. The lack of private sector recipients underscores the challenges of turning stem-cell-related research into product candidates. Three years ago, CIRM handed out $225 million in grants to move 14 preclinical projects toward the clinic; only one of the 14 was based at a for-profit company. -- Alex Lash


Bluebird Bio: Once an area that drew great skepticism, gene therapy is now drawing big money. Cambridge, Mass.-based start-up Bluebird Bio raised its third big round of funding since the beginning of 2010, tapping a diverse syndicate of investors for $60 million in Series D money that will support ongoing trials of gene therapies for rare diseases. It comes just as European regulators have approved the first gene therapy product in Europe, another strong sign of the advances the field has made the past decade. The Bluebird deal includes contributions from public and private growth investors Deerfield Partners and RA Capital, hedge fund operator Ramius Capital Group, and two unnamed public investment funds, as well as strategic backer Shire. They join returning venture firms ARCH Venture Partners, Third Rock Ventures, TVM Capital, and Forbion Capital Partners. Bluebird Bio raised $35 million in a Series B round in early 2010, then was slated to take $30 million in two tranches of Series C capital in an April 2011 agreement. The startup, however, held a call option which it never exercised on the second tranche; its VCs instead put that $15 million into the Series D round at a higher price, according to Bluebird CEO Nick Leschly. The firm plans to conduct a Phase II/III study of a treatment for childhood cerebral adrenoleukodystrophy and a Phase I/II study of a beta-thalassemia and sickle-cell disease therapy. Both are built on Bluebird’s lentiviral technology, in which a patient’s own bone marrow stem cells are genetically modified and returned to the patient, potentially obviating the need for a transplant. – Paul Bonanos

Alimera Sciences: The publicly-traded ophthalmic company said July 18 it has grossed $40 million in a sale of preferred shares to Palo Alto Investors, Sofinnova Ventures, and New Enterprise Associates. The trio gets 1 million preferred shares and warrants to buy 300,000 more, with each preferred share convertible into 13.75 common shares. Investors can trigger a conversion at will, outside of a lockup period and other constraints. The preferred shares entitle their holders to dividends and other distributions pro rata with the common stock, as well as unspecified downside protection. The shares can also convert to common if Alimera’s lead product gains regulatory approval or if Alimera raises additional equity at predefined share prices, Sofinnova partner Garheng Kong told the IN VIVO Blog. Kong was among Alimera’s original investors at Intersouth Partners and is now one of the partners investing Sofinnova’s new $440 million life-sciences-only fund, up to 25% of which could go toward positions in public biotech companies, Kong said. (Alimera is the fourth investment from the fund.) Alimera’s lead product is Iluvien, an eye implant that delivers drug up to 36 months to treat vision loss associated with diabetic retinopathy. It is approved in France, Austria, Portugal, the U.K., and of this week, Germany. The US FDA asked for more clinical data last November, the second time it has issued a complete response letter for Iluvien. No new PDUFA date has been disclosed. The private stock sale must be approved by a majority of common stockholders; as of July 17, holders with 56% of the common stock had agreed to vote in favor, according to Alimera. – A.L.

Durata Therapeutics: With a handful of biotechs knocking on the IPO window this fortnight, only one as of this writing has gotten through. Antibiotic developer Durata on July 18 raised $68 million by selling 7.5 million shares at $9 each. The firm missed its original goal of $75 million by pricing below the intended $11 to $13 per share range, but it sold more shares to bridge part of the gap. Existing investors Domain Associates, New Leaf Ventures, Aisling Capital, Sofinnova Ventures and Canaan Partners agreed to buy 3.8 million shares, more than 50% of the offering, to get the deal done. That’s par for the course these days. It’s rare for a biotech to go public without insider participation, as we detailed in February. Nothing’s changed since then. If biotech backers want to reach liquidity, they’ll more than likely need to help get the glass half-full. Investors are adding not subtracting Durata shares, but their holding times to date have been relatively short. Durata was founded less than three years ago from the ashes of Pfizer’s nearly $2 billion acquisition of Vicuron Pharmaceuticals. In Pfizer’s hands, one of Vicuron’s main products, the antibiotic dalbavancin for skin and soft-tissue infections, received three rejections from the FDA. But with the agency rolling out new regulatory guidelines for certain antibiotics, Durata feels it can do it right this time and recoup the rewards of bringing a once-weekly intravenous gram-positive antibiotic to market. It is currently conducting two Phase III trials. BofA Merrill Lynch and Credit Suisse led the underwriting team, which has the option to buy 1.1 million additional shares for 30 days following the IPO. – A.L.

CoDa Therapeutics: The San Diego wound-healing firm is the first to benefit from venture firm Domain Associates’ new strategic alliance with the Russian sovereign fund Rusnano. On July 24, Domain said CoDa has completed a $40 million Series B financing, with contributions split equally between Rusnano and a Domain-led syndicate of CoDa’s current investors. These include the Australian VC firm GBS Ventures and the New Zealand firm BioPacific Ventures. Domain and Rusnano said in March they were each committing up to $330 million over the next three to five years to fund Domain portfolio companies. CoDa came first because it needed financing, according to Domain partner Brian Dovey. It is in Phase IIb trials for a wound-healing compound aimed at venous leg ulcers and in Phase II trials for the same compound for treatment of diabetic foot ulcers. Domain companies that receive Rusnano funds are obligated to license exclusive rights to sell their products in Russia and the CIS regions to NovaMedica, a new Russian company that Rusnano and Domain are spending up to $190 million to create. The partners claim it will be Russia’s first fully integrated, innovative domestic drug firm, and will be structured as a joint venture between Rusnano and Domain. As a condition of its Series B financing, CoDa has licensed exclusive rights to its lead product and related technologies in Russia and the CIS to the new company, in exchange for undisclosed royalties on sales. Domain is one of several U.S. life sciences venture capital firms that are working with Rusnano, a five-year-old $10 billion sovereign fund charged with helping Russia jumpstart domestic high-tech industries, and as profiled this spring in START-UP's Capital Matters column, it has been aggressive making investments in Western biotech, both directly and through other funds such as Domain and Burrill & Co.  – Wendy Diller

Photo courtesy of the International Olympic Committee.