Financings of the Fortnight Is A Poet and Doesn't Know It

It's not quite thirteen ways of looking at a blackbird, but the two main venture surveys have delivered two different ways of looking at the latest VC fundraising numbers in the US. You be the judge if anyone is exercising a little poetic license.

Here's the headline of the quarterly report from the National Venture Capital Association and Thomson Reuters: "VENTURE CAPITAL FUNDRAISING ACTIVITY REMAINS SLOW: Dollars Raised Declines to Lowest Quarterly Level in 7 Years." (Their capital letters, not ours.)

Now, DowJones VentureSource: "Venture Fund-Raising Rallies After 6-Year Low in 2009: Venture Fund-Raising Up 13% in First Half of 2010; Substantial Closes By Established Firms Buoy Totals."

Caw! Ain't that something? Talk about glasses half full or empty.

(Meanwhile Wallace Stevens, who as an insurance company executive knew a little something about finance, "was of three minds / Like a tree / In which there are three blackbirds.")

Beyond the headlines, the researchers' numbers don't match up, either. (Keep in mind these are for all venture firms; the surveys don't separate life science from high tech or clean tech since most firms invest in more than one sector.) DowJones says 72 funds raised $7.5 billion in the first half of 2010. NVCA/Reuters says 69 funds raised $5.6 billion, or a full 25% less.

Half that $2 billion gap was immediately explainable: DowJones included Sequoia Capital's $1 billion Sequoia China Foreign Currency Fund III. NVCA/Rueters did not, because the fund is managed from Beijing, a spokeswoman said. So there's a difference in how each shop accounts for "US" venture. Another difference the two sides acknowledged to us could explain the gap is when they count dollars. When an active fundraiser brings in $100 million in Q4 '09 and $100 million in Q1 '10, DowJones is more likely to count the raises separately, while NVCA/Reuters only counts "closed cash," a spokeswoman said.

Enough sausage-making for now. The methodology behind the madness might not make for the sexiest blog copy, but we still have those divergent headlines to explain. DowJones chose to highlight the bump from 1H '09 to 1H '10, though their release includes a slide that shows 1H '10 still far below the first-half totals from '07 and '08. The bigger picture is that the NVCA -- the trade group for the venture community -- has been forthright for several quarters about the coming shakeout. Fewer VCs mean fewer members -- down about 7% from an all-time high of 460 -- but NVCA execs haven't sugar-coated their forecasts or descriptions, including this week's all-caps headline.

NVCA's data is more extensive and show the years 2005 to 2008 saw annual venture fundraising that totaled between $28 billion and $36 billion. Last year, the total was under $16 billion. This year, Q2 numbers are up from Q1, but it's fair to say VCs will be hard-pressed even to match 2009's dismal total.

So where's the money going if not into US venture funds? One clue can be found in the Sequoia China fund that accounts for half the $2 billion gap we just mentioned. In a VC survey released this week by NVCA and Deloitte, a majority of VCs in China, India and Brazil expect venture to expand in their countries in the next five years. Wishful thinking or not (and that Sequoia fund makes us think not), it's stark contrast to the US response. More than 90% of US VCs expect a stateside contraction through 2015. Large majorities in France, Israel and the UK said the same for their countries. In other words,

It was evening all afternoon.
It was snowing
And it was going to snow.
The blackbird sat
In the cedar-limbs.

Some call it poetry in motion. Some call it purple prose. We call it...



Trevena: The blue-chip investor group backing small-molecule drug developer Trevena has re-upped with a $35 million Series B round, two years after supporting it in a $25 million Series A. New Enterprise Associates, Polaris Venture Partners, Alta Partners and HealthCare Ventures contributed equally to both rounds, Trevena CEO Maxine Gowen told "The Pink Sheet" DAILY. Yasuda Economic Development Corp. of Japan made a small contribution to each round as well. King of Prussia, Pa.-based Trevena is exploring drugs based on biased ligands, which bind with G-protein coupled receptors but only activate pathways with beneficial effects, potentially resulting in more specific and better-targeted therapies. The startup will use the funds to support Phase II trials on its primary candidate, a compound to treat acute heart failure, as well as preclinical and early clinical development of drugs that treat pain and inflammation. Last fall, Trevena received a $7.6 million grant from the National Institutes of Health to identify and improve biased ligands that act on six GPCRs. According to Polaris’ Terry McGuire, Trevena’s research could also yield broader insights into biased ligands, potentially making its platform useful in improving a wide variety of therapies. -- Paul Bonanos

Sunesis Pharmaceuticals: Despite a stock price near 50 cents a share, Sunesis finally closed an epic three-tranche $43.5 million financing on June 30, cash it sorely needs to push its lead candidate voreloxin into Phase III pivotal trials for acute myeloid leukemia later this year. It's been a rollercoaster ride for Sunesis, which public in 2005 then suffered a big setback in 2007 in its Phase II lung cancer program and discontinued two trials. The next year it cut all discovery research and went all-in on late-stage development of voreloxin in ovarian cancer and leukemia. To kickstart the three-part financing, a group of investors including Bay City Capital, Venrock Associates and Alta Partners purchased 2.9 million preferred shares last April at $3.45 a share and redeemable for 10 common shares. The second tranche in October placed 1.45 million preferred shares at the same price. With the closing tranche, Sunesis sold 103.6 million common shares at 27 cents a share and returned to a single class of stock, as all preferred stock issued through the first two tranches converted into common stock. While the financing was highly dilutive -- the company now has 221.2 million common shares outstanding -- it netted the company $41.7 million at a time when Sunesis was cash-poor despite promising Phase II results for voreloxin in AML. -- Joseph Haas

Calithera Biosciences: It's a Jim Wells double-dip this week. The former Genentech protein engineer who founded Sunesis is also a co-founder of Calithera, which announced July 7 a hefty $40 million Series A to further its work on small-molecule oncology compounds that activate capsases. Now the head of his own lab at the University of California, San Francisco, Wells published a paper in Science last fall that detailed a method of directly activating caspases in order to induce apoptosis. Calithera took a license from the school, and it has also tapped into Mission Bay Capital, a venture fund affiliated with QB3, a research and entrepreneurial outreach institute headquartered at UCSF that shares a roof with the Wells Lab (Wells is also on QB3's executive committee). Morgenthaler Ventures led the round, which also included U.S. Venture Partners, Advanced Technology Ventures, Delphi Ventures, and Mission Bay. Calithera hopes to enter a candidate into Phase I trials within four years. Calithera’s Series A is the second-largest for a biotech in 2010, following only Incline Therapeutics’ $43 million round, which we'll dissect in the upcoming issue of Start-Up. -- P.B.

iPierian: The stem-cell startup said June 30 it lost its CEO John Walker but gained an unusual new investor in Google Ventures, the venture arm of the Web search giant that led iPierian's $22 million Series B round. Google famously backed genetic testing firm 23andMe, run by Google co-founder Sergey Brin's wife Anne Wojcicki, but the venture arm -- launched in March 2009 with a $100 million commitment from sole LP Google -- now handles all Google venture activity. At a time when the stem-cell field is starting to explore ways to generate revenue, iPierian is one of a few firms developing induced pluripotent stem cells for drug discovery purposes. The product of a merger of two tiny start-ups last year, it's jostling with rivals, particularly Fate Therapeutics, to build a patent portfolio. The B-round syndicate includes existing backers Kleiner Perkins Caufield & Byers, Highland Capital Partners, MPM Capital, and FinTech Global Capital, plus first-time investors Mitsubishi UFJ Capital and ATEL Ventures. iPierian also said that CEO Walker, who's been deeply involved in starting a regenerative-medicine lobbying group, was stepping down for personal reasons. President and chief scientific officer Michael Venuti will replace him and take his board seat. Venuti is a veteran medicinal chemist with stints at Celera, Axys, Genentech and Syntex. iPierian is Google Ventures' second biotech investment; its first was a September 2009 Series D round supporting Adimab. The venture firm has made a total of 12 investments across several industry categories including software, Internet and cleantech. -- P.B.

Photo courtesy of flickr user DigitalSextant through a Creative Commons license.

Venture Round: Weekly Wrap Up

Welcome to Venture Rounds, IN VIVO Blog-style.

Each week we'll be providing some high level wrap up of the venture scene along with never-before-seen news when we can dig it out. The format may be kind of fluid, but we'll try to break things down as they relate to venture funds, portfolio companies and other bits of miscellanea.

Check in here on Fridays, and if you've got any comments please pass them along. We love reading comments. We do. We really do.

VentureWire reported earlier this week that Morgenthaler is preparing to raise a new $400 million venture-only fund.

Wisely, Morgenthaler is looking to separate its venture and buyout units, which traditionally have invested from the same fund. It's hard to imagine how this arrangement worked in this age of strategic specificity given the very differnet demands--and return potential--of venture and buyouts. But Morgenthaler found a way, until now.

No surprise, the firm isn't talking about or confirming any fund-raising. The article attributes everything to LPs. But in an interview with IN VIVO Blog, Partner Gary Shaffer is revealing that he won't be a partner in any new fund.

Shaffer, who invested in both life sciences and technology companies, says he's leaving VC behind to focus on two things, his family and non-profit ventures. Right now he's heavily involved in Habitat for Humanity and Project Hope, a home-building effort centered around New Orleans. But he has designs on increasing the charitable portfolio to include international efforts as well.

Shaffer produced a pretty good track record during his 15 years as partner. He was involved in the firm's investments in AneuRx, Cardiovascular Imaging Systems, Coalescent Surgical, Menlo Care, and Perclose, all of which were acquired.

Meanwhile, he also played a part in SONIC innovations and Thermage, both of which have gone public, and Emphasys, which has filed to go public. He intends to slowly slip off his current board seats which include CardioMind, Emphasys, OptiScan, Peregrine Semiconductor and Vertiflex.

Morgenthaler's life sciences bench remains pretty deep. According to the VentureWire piece, its senior member, Robin Bellas, will take over management of the venture firm.

***

Meanwhile, VentureBeat is reporting that CMEA Ventures has closed on its own $400 milllion fund. The report draws on some details from VentureWire, but neither report identifies the firm's life sciences team, which can be found here.

***

We've done numerous articles about companies pursuing opportunities in pulmonary space. But Breathe Technologies Inc., which announced its Series B financing this week, seems to have a new take.

Breathe Technologies is developing a unique family of compact,ultra-lightweight, ambulatory respiratory ventilator systems for the hospital,homecare and pandemic markets. Annual worldwide sales of conventional respiratory systems that the company's products could enhance or replace are estimated at more than US$2 billion.

A respirator would appear to be the kind of capital equipment investment venture firms might avoid. But Breathe took the modest $15 million round from Kleiner Perkins Caufield & Byers, as well as its first round investors Synergy Partners International, Delphi Ventures and Life Science Angels.

***

Finally, it's time for our SEC Documents of the Week. Kohlberg, Kravis & Roberts--which made a melting ice shelf-sized splash into biopharmaceuticals by leading the historic $250 million Series B in Jazz Pharmaceuticals Inc.--sold off a tiny piece of its holdings in the newly public company.

According to three Form 4s filed on March 12 (go here, here and here), KKR Financial Holdings III, LLC reaped $17.8 million through the sale of common stock warrants and "15% Senior Secured Notes due June 24, 2001.

However, KKR isn't cashing out. First, Jazz shares aren't doing so hot, with prices bouncing around $10. Second, KKR holds a H-U-G-E stake in Jazz, roughly 35%. According to the 424B4 filed after Jazz's Spring 2007 IPO, KKR had to decide whether or not to exercise warrants to acquire 245,540 shares "within 60 days of March 31." It appears KKR sold 175,384 of the newly public shares and kept the rest, 70,156.

To see who else is beginning to cash out on deals, check the Venture Round in this month's Start-Up magazine.

Any private suggestions, tips, Red Sox banter or recipes? Email me here.

Financings of the Fortnight Gets an Earful in the Hall of Byers

For a guy with the good fortune to speak in front of hundreds of people under the roof of a building that carries his own name, Brook Byers was sure in a cranky mood this week.

The venture veteran of Kleiner Perkins Caufield & Byers was part of a panel discussing academia-industry ties at the University of California, San Francisco's Mission Bay campus. It was the capper of an open house to showcase the school's research departments and its desire, which rivals the Massachusetts Institute of Technology, to encourage entrepreneurial ties to venture and industry.

The event took place in the side-by-side Genentech and, ahem, Byers Halls (see picture). And if Byers' participation didn't emphasize enough the deep connections everyone was celebrating, another panelist was UCSF's new chancellor Susan Desmond-Hellman. We've heard she once had something to do with Genentech.

As the panel, rounded out by Pfizer chief scientific officer Uwe Schoenbeck, BayBio chief Gail Medaris, and QB3 director Regis Kelly, cooed over innovation as if it were a gently swaddled newborn, Byers was the cranky uncle banging his coffee cup on the table for a refill.

Of course, he's all for innovation, which in our world is as sacred and gauzy a concept as "freedom" is at a gun show. You just don't mess with it, pal. But while everyone else kept the conversation sunny, Byers cast a rather Nixonian shadow, sowing blame on various parties for the economic gloom.

First came the media: He took the New York Times to task for a feature on MIT's Deshpande Center and other entrepreneurial engines on academic campuses that failed to mention all the similar activity happening at UCSF. Later, after Kelly asked about the dearth of venture money for start-up companies these days, Byers seemed to hold himself in check. "I was going to say something not very nice," he said, then proceeded to suggest negative media coverage is helping keep investors on the sidelines.

He also wished out loud for policy changes. Many VCs these days are fending off attacks to tax carried interest as regular income -- although some think it is a fine idea (be sure to read the comments, too) -- and in grumbling about the issue Byers said he was "very frustrated right now" with President Obama even though "I helped elect him."

Byers had a few words for the innovation-stifling FDA, too, especially for the confusion that forced one of Kleiner's anti-infective companies developing a MRSA treatment to re-do re-design a Phase III trial. That sounds a lot like Trius Therapeutics, which had to postpone its IPO because of the trial do-over re-design. (Don't mess with innovation can also mean Don't mess with my money.) [Correction: Trius has not yet begun its Phase III trial; it reached agreement with FDA on a special protocol assessment last month.]

Byers isn't alone: DowJones VentureSource reports that venture-backed companies that went public this past quarter took a median 9.4 years to exit, the longest the service has ever recorded. In a different data set, the NVCA/Thomson Reuters quarterly exit poll showed that biotech and health care accounted for 4 of 17 venture-backed IPOs and 8 of 92 venture-backed acquisitions in the second quarter. Overall IPO volumes are up, but -- sorry if this is accentuating the negative, Brook -- post-IPO performance isn't encouraging. That's not our opinion: even NVCA chief Mark Heesen says so. Nothing in the data so far points to anything but a "washout" of health-care venture firms. Again, that's not our opinion: Ask Jim Garvey of SV Life Sciences.

As the panel wrapped up, Byers tried to make amends by ending on a more positive note. When we caught him outside, we apologized with a smile on behalf of our journalistic brethren for prolonging everyone's financial bummer. He smiled, too, and said a lot of his comments on the panel were deliberately provocative, a favor to Kelly to spice things up. But seriously, we asked: Are we missing something from the big picture? We lay out the data, we slice and dice it, we talk to investors and entrepreneurs all the time. Byers amicably eased away; dinner with his fellow panelists beckoned. That, he said, would have to be part of a longer conversation.

Until then, we will always have...

Incline Therapeutics: Investors in Incline's new $43 million Series A round have already lined up a buyer. Along with Incline’s June 21 announcement, Cadence Pharmaceuticals of San Diego said it had acquired options to buy Incline for up to $285 million sometime in the next 42 months, based on performance milestones. The two companies share more connections: Incline management includes former Cadence executive David Socks and Alan Levy, also a partner with Cadence investor Frazier Healthcare Ventures. Cadence CEO Ted Schroeder sits on Incline’s board. Founded in 2009, Incline has acquired rights from Johnson & Johnson's Alza division to the IONSYS transdermal patch, used to deliver the painkiller fentanyl to hospital patients after surgeries. Approved in both the U.S. and Europe but marketed only briefly overseas, the system was recalled in 2008 because corrosion in circuit boards could have led to accidental overdoses. Incline and its investors apparently see an easy fix, and J&J was ready to wash its hands of the product. With cash from Frazier, 5AM Ventures, Adams Street Partners, Technology Partners, Saints Capital Partners and Emergent Medical Partners, Incline aims to regain regulatory approval and bring IONSYS back to market. (For more deal details and a look at why Cadence didn't simply buy IONSYS outright, stay tuned for the upcoming issue of START-UP.) -- Paul Bonanos

SV Life Sciences: As we noted above, SV chairman Jim Garvey predicted a washout among venture firms. What we didn't note was that SV will stay high and dry. The health-care-only firm said June 29 it has closed one of this year's largest funds, right behind Orbimed's $550 million close this spring. At $523 million, the firm's fifth fund since inception comes during a time of contraction in the venture world, with other firms scaling back or folding up shop. If you squint you could call this scaling back, too: SV's fourth fund was $572 million, and instead of investing in 32 to 37 portfolio companies, it plans a slightly smaller range of 30 to 32 companies. That's scaling back the same way that ten days in Fiji instead of 12 in Bora Bora is a penny-pinching vacation. SV even plans to hold steady with its investment mix: about 50% biopharma and the rest spread between diagnostics, devices, services and IT. -- Alex Lash

Bind Biosciences: This Cambridge, Mass. nano-play reeled in a $12.4 million venture round that caught our eye for a couple reasons. First, the company makes nanoparticle drug encapsulation that it says will pair with existing or new drugs. It hasn't reached the clinic yet with its lead '014, a formulation of docetaxel; that should come later this year. Once in the clinic, good results might be lucrative, as rival nanoparticle designer and chemo-reformulator Abraxis found out with Celgene's $2.9 billion cash-and-stock acquisition offer June 30. Abraxis' lead is paclitaxel encapsulated in nanometer-sized shells of albumin, a common protein in the blood. We also took note of Bind's odd nomenclature for the round, what it called a Series "C-1." It's not unheard of, so we asked why not call it the second tranche. Because, replied a spokeswoman, it wasn't. The $11 million C round came only six months ago. This was a brand-new up round with at least one new investor, Endeavour Vision, a Swiss group that's a bit heavier into high-tech than biotech. Hmm, we replied, so why not call it a "D round"? "Nuance and technicality" was the answer. Unfortunately, we couldn't dig any deeper by press time. Besides, nuance and technicality make our heads hurt. -- Jessica Merrill and A.L.

Calistoga Pharmaceuticals: Among oncology targets, PI3K (phosphoinositide-3 kinase) has piqued a lot of investor and partnership interest of late. Calistoga's lead candidate CAL-101, an oral delta-selective PI3K inhibitor in several Phase I trials for certain types of hematologic cancers such as non-Hodgkins lymphoma, is unpartnered, but investors have anted up again with a $40 million C round announced June 30. It comes a year after a $30 million B round, and the new cash should help push CAL-101 into a registration trial later this year, the company said in a release. The round was led by Quogue Capital with existing investors Alta Partners, Amgen Ventures, Frazier Healthcare and Three Arch Partners and new investor Latterell Venture Partners also on board. Frazier's Jamie Topper was a busy man this fortnight; he was also in the middle of the Incline financing, described above. -- A.L.

Venture Round: VCs (and others) Win With Sirtris

Tired of Sirtris-GSK talk yet? Too bad. As we now bring you, the venture angle.

As you no doubt know by now, GlaxoSmithKline will pay $725 million for Sirtris Pharmaceuticals Inc., paying $22.50 per share, an 84% premium over Sirtris' closing price.

We've already gone over the particulars of the deal, including some of our concerns. But one irrefutable fact is Sirtris' venture investors made more than a few bucks.

As should be the case, the earlier investors did the best. Polaris Venture Partners, TVM Partners, Cardinal Partners, Skyline Ventures and a few of the company's co-founders will do very well. But by our measure even investors in the company's last private round early last year will see nearly their capital nearly triple, including the cigar-smoking guy directly above.

Now let's go over a round-by-round account:

* Back in the fall of 2004, Series A investors Polaris, TVM, Cardinal and Skyline as well as a few individual—co-founder Richard Aldrich, Paul Schimmel and David Sinclair—paid 50 cents a piece for 10 million shares of convertible preferred stock. At last year's IPO, those shares converted into 1.9 million shares of common stock, so by our measure those investors ultimately paid roughly $2.63 per common share.

* Later that year, Sirtris raised another $12.6 million by selling 21 million shares of Series A-1 convertible preferred stock for 60 cents a piece. The four venture investors bought in along with Wellcome Trust Limited. At the IPO, the shares converted into 4.1 million shares of common stock, meaning investors ultimately paid roughly $3.07 for each common.

* Series B investors, who came along in the spring of 2005, bought 33.7 million shares for $27 million, paying 80 cents per share. All the earlier VCs were joined by Three Arch Partners and Novartis BioVentures. Those 33.7 million shares converted into 6.4 million of common at the IPO, making the per common share price $4.20.

* Sirtris went to the well again in spring of 2006 raising $22.1 million in a sale of Series C stock, priced at $1.12 per redeemable share. Investors this time included all of the Series B investors as well as a trust managed by Schimmel, Paul Schimmel Prototype PSP. After the IPO, the 19.7 million preferred shares converted into 3.7 million common shares so these investors paid $5.88 per share.

* Finally, Sirtris capped off its private fund raising with a $35.9 million round at the start of 2007. Earlier investors TVM, Skyline, TVM, Three Arch as well as Sinclair were joined by CEO Christoph Westphal, co-founder Sinclair and Peter Elliott, senior vice president and head of development. Investors paid $1.68 each for 21.3 million shares of Series C-1 redeemable convertible preferred stock. At the IPO, those converted into 4.07 million shares of common. Per share price: $8.81.

Who were two other big winners? A trust managed by John Henry, the principal owner of the Boston Red Sox (pictured), was the single largest investor in Sitris' C-1 Round. Not sure how he came to be involved in Sirtris, perhaps he met up with fellow Brookline, Mass. resident Westphal at their neighborhood Dunkin’ Donuts. Meanwhile,Venture lender Hercules Technology Growth Capital will crow about its big returns in an upcoming conference call. (Tip of the cap to PE Week Wire for pointing this out.) Hercules provided Sirtris $15 million in venture debt in 2006.

Insider Sales

Sirtris wasn't public long enough to file a proxy. You can find out who owned what just after the IPO right here. But some investors and executives already unloaded some stock, so the final numbers will be different.

Early investor Polaris, for example, distributed close to one million shares to its limited partners on Nov. 30, just after the lock up expired. Shares closed at $16.09 on that day.

Co-founders Westphal and Sinclair, meanwhile, sold off 55,000 and 30,000 shares, respectively, over the past few months, with the shares selling anywhere between $11.23 and $14.95. The sales were part of a Rule 10b5-1 trading plan, a prearranged and gradual sell-off of shares by insiders. Separately, Schimmel also sold off just over 11,000 shares at $17 a piece.

Westphal's Future

In our earlier post, we wondered whether Westphal would remain with GSK to run the unit or return to his venture capital roots as he was a proficient company starter while at Polaris. Westphal has kept his fingers in the venture game serving as senior advisor to Flybridge Capital, formerly IDG Ventures.

No doubt, venture capital will continue to call to Westphal, but he will have strong incentive to stay at GSK. According to the 424B4 form filed after the IPO, the stock vesting scheduls for Westphal contain a "double trigger" requirement that "prevents an unintended windfall to management in the event of a friendly (non-hostile) change of control."

Under this structure, unvested equity awards under our 2004 Stock Plan would continue to incentivize our executives to remain with the company after a friendly change of control. If, by contrast, our 2004 Stock Plan had only a "single trigger," and if a friendly change of control occurred, management's equity awards would all vest immediately, creating a windfall and the new owner would then likely find it necessary to replace the compensation with new unvested equity awards in order to retain management. This rationale is why we believe a "double-trigger" equity vesting acceleration mechanism is more stockholder-friendly, and thus more appropriate for us, than a "single trigger" acceleration mechanism.

Westphal found Sirtris' story compelling enough to leave a general partner position at Polaris. That attraction--coupled with the "double trigger"--means he may stick around for a while.

As always, if you have any private suggestions, tips, and comments on my math email me here.

Venture Round: Looking for the Bright Side

What if this is the best thing that could have happened for venture capitalists and their companies?

By “this” we mean the complete and utter destruction of Wall Street, and by “best thing” we’re obviously thinking long, long-term impact here. Clearly, things will be rough for a long time coming.
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But venture capitalists have been squealing about how Sarbanes-Oxley has regulated them right out of the IPO business, saying the costs and oversight were too much for their little start-up companies to bear.

Then, the bulge bracket banks—the big guys with the bankers, analysts and cash—began turning their eyes to bigger, exciting and, yes, revenue-generating deals, leaving their little biopharma and device companies that could under-covered and forgotten in the eyes of many VCs.

Well, those days are clearly done. The question now remains, what will rise from the ashes? Will the banking and analyst staff that once populated the highest offices in Manhattan find their way to some of the boutique banks that have made themselves a nice little business putting together smaller deals, bringing the experience and resources to grow those institutions?

Furthermore, as one institutional investor tells us, venture capitalists could help themselves and this nascent boutique banking industry by steering some of the choice work toward smaller investment banks, eschewing the cache and hoopla associated with one of Wall Street’s blue chip names.

Uh, former blue chip names.

PE Hub had a similar conversation about small tech companies with Paul Deninger, vice chairman of the investment bank Jefferies & Co. We're not buying all that he's selling, but read it here, including the blistering comments. (BTW, we'd hardly consider IPC The Hospitalist Company, a tech company. It's a health care company thanks very much.)

So, is this the end of the world as we know it? Or has the past few weeks been a necessary—and admittedly painful—cutting of the larger trees that will allow some sunshine and rain wash over the growth underneath?

***

As we said the short-term is pretty bleak. Witness this week's announcement that the spin-out of Angiotech Pharmaceutical is in danger, which likely means no investment by Ares Capital or New Leaf investment.

Also, VentureWire Lifescience and others reported on the recent fund-raising by Kalobios, which didn't include previous investor Lehman Brothers.

"We were all set to close on Friday of last week, until Lehman filed for bankruptcy," said KaloBios Chief Executive David Pritchard. "They had several million committed to the round, and while we only lost one business day...we had to rush to make that up."

Lehman had led KaloBios' $20 million Series C round in July 2007 through its health-care venture capital group. That group invests directly off the firm's balance sheet, unlike Lehman's IT-oriented venture partners group, which closed a $365 million fifth fund in September 2007. Randy Whitestone, a Lehman spokesman, said the venture partners group is part of the firm currently being auctioned off, and he said the firm is not certain of the health-care group's fate.

Pritchard described embattled Lehman as "a great investor and very supportive of the company." Jeffrey Farrell, a senior vice president at the investment firm, was an observer on KaloBios' board.

Pritchard said many of the round's other investors stepped in over the weekend to fill the hole left by Lehman, contributing above-pro rata shares. New investors Genzyme Ventures and Mitsubishi UFJ Capital led the round, joined by existing investors Alloy Ventures, 5AM Ventures, GBS Ventures, Lotus Bioscience Ventures, MPM Capital, Singapore Bioinnovations and Sofinnova Ventures.

***

Fred Wilson, general partner at Union Square Ventures, has an interesting little post on his A VC blog about how the New York Times came to profile his firm. The serendipitous origin of the article must broil PR pros who would kill to get their clients such a profile, but more often than not this is how such profiles come together.

Anyway, the article relays how Union Square Ventures is willing to take small stakes in tiny start-ups, exclusively in tech. That's easier to do with a $165 million fund, but it got us thinking. We wrote extensively about how larger venture capital firms are maintaining their early-stage medical device flow by committing small bits of capital in ventures started by proven entrepreneurs who are affiliated with the fund. But are there any life sciences VCs who exclusively make similarly sized bets in untested start ups?

Financings of the Fortnight: Less Talk, More Rock

Third Rock Ventures has topped itself. One of biotech’s few ready sources of early-stage capital, the firm has announced its backing of three firms in the past week, and all of them one way or another fly in the face of the caution so many life-science VCs move with these days. One of those investments, announced Thursday, June 14, is Third Rock’s largest solo Series A funding to date, which is saying something. This is a firm that has previously flown solo in launching companies such as SAGE Therapeutics ($35 million), Blueprint Medicines ($40 million), Ember Therapeutics ($34 million), and Lotus Tissue Repair ($26 million).

Now it's making a big bet -- no, a huge bet -- of $40.7 million on Global Blood Therapeutics, and our colleagues at "The Pink Sheet" have all the details. The company will seek to develop orally available small-molecule drugs that affect blood disorders; its first target is sickle-cell disease. GBT believes it can use allosteric modulation to overcome the single mutation in hemoglobin that causes the misshapen, sticky clusters of red blood cells, and help patients produce healthy, round ones.

No syndication? No problem. GBT CEO and Third Rock’s newest partner, Mark Goldsmith, says “there are significant advantages [in acting] as a single investor.” A few other VCs will sometimes launch a firm solo with seed or early-A money – check out this profile to read how Avalon Ventures does it – but not with the firepower Third Rock brings to bear. Formed by former Millennium Pharmaceuticals executives, the firm is now investing from its second fund, which closed at $426 million in 2010.

The Third Rock proposition of big bets on ambitious biomedical science hasn't proven itself out with knockout exits. Then again, they've only been at it for five years. And knowing many of their investments will require the patience of life-science saints, they've also built in clearer, perhaps faster, paths to exits in a few cases, such as Sanofi's equity stake and two-way options in Warp Drive Bio; or the LLC structure for antibody platform firm Ablexis that makes license fees and milestone payments more easily distributable to investors.

As we saw this week, Third Rock doesn’t always work alone. The firm re-upped in a $25 million Series B round for Rhythm Pharmaceuticals, which is built around ghrelin and melanocortin agonists for GI and metabolic diseases in-licensed from Ipsen. TRV was part of the $21 million Series A syndicate, but in the B round, Ipsen is taking the lead and building upon the 17% equity stake it acquired as part of the original in-licensing deal. Rhythm is more specialty play than science experiment, but the risk lies in the indication: metabolic disease has proven a thorny field, despite the screaming unmet need, for product development. Recent FDA decisions for two weight-loss drugs have given the field a lift, but overall the climate still seems to favor more regulation, not less.

Our Third Rock edition of FOTF ends with Igenica, a low-profile antibody firm that pulled in a $33 million C round with Third Rock in the lead. It was Third Rock’s first involvement in Igenica, which hasn’t said much until now about its twin oncology discovery platforms: one analyzes the surface proteins of tumor cells and provides data on the relative abundance of antigens; a second uses mouse models not just to screen antibodies against those antigens for affinity, but to measure anti-tumor effect.

More on Igenica below in our roundup, but we’ll end with a FOTF challenge: If Third Rock really wants to be on the cutting edge of biomedical innovation, how about funding some microbiome start-ups? With the wealth of data coming out of this week’s microbiomapalooza, surely there’s a way to put those Third Rock millions to use. We can see the headlines now: “Venture Firm Follows Gut For Latest Launch.”

You’ve got an appetite for bad puns and tasty fundings? Belly up to the latest edition of…

Igenica: Preclinical antibody firm Igenica said June 12 it has raised a $33 million Series C round led by new investor Third Rock Ventures, one of the rare instances of Third Rock waiting a few years and stepping in for a later round. But Igenica is no late-stage investment. The new cash brings total venture fundraising to $55 million, and the goal is to have clinical data in hand from a lead program and an IND filed for another before raising more money, says chief business officer John Celebi. The firm says it is going after drug targets that have not previously been investigated for cancer, using both an antibody discovery platform and a target discovery platform.  The firm has been lying low, rumored to be involved in antibody-drug conjugate development, but to date it has said very little about its programs. Third Rock moved with “such alacrity,” says Celebi, that the final tranche of the firm’s $24 million Series B round was rolled into the C round, which also included previous investors The Column Group, 5AM Ventures, and OrbiMed Advisors , The firm’s executive chairman is David Goeddel, a founding scientist at Genentech and Tularik, and now a partner at The Column Group, and both Celebi and the firm’s VP of research Guoqing Chen are Tularik alumni. – Alex Lash

PhaseBio Pharmaceuticals: PhaseBio announced a $25 million Series B financing in December 2010 to advance its diabetes and cardiovascular drug candidates, but on June 5 the privately held biotech said it had raised an additional $23 million from existing investors. It called this funding a third tranche of its Series B, which brings the round’s total to $48.4 million. “It’s really not our objective to consider another [venture] round,” said CEO Christopher Prior. The money will be used to fund, among other things, a Phase IIb head-to-head trial of lead candidate Glymera, using Novo Nordisk’s Victoza (liraglutide) as a comparator. Glymera is a recombinant GLP-1 analogue for type 2 diabetes. Using an elastin-like biopolymer (ELP) delivery technology acquired from Duke University, PhaseBio seeks to create drug candidates that offer steady-state absorption and longer half-lives than potential competitors. Backers include Johnson & Johnson Development Corp., Astellas Venture Management, New Enterprise Associates, Hatteras Venture Partners and Fletcher Spaght Ventures. The new money also will be put toward a Phase I study of Vasomera for acute and chronic heart failure and pulmonary hypertension, and a Phase I/IIa study of Insumera, a fully mature native insulin formulated to be long-acting with the ELP technology. -- Joseph Haas

Seldar Pharmaceuticals: We wouldn’t be surprised if “Drais” were Japanese for “outsource.” That’s because Drais Pharmaceuticals is quickly becoming the virtual developer of a mini-pipeline of products spun out of Astellas Pharma. Seldar is the name given to the latest outsourcing vehicle under Drais’ auspices, and it works like this: Astellas’s venture arm, along with a familiar syndicate of Sutter Hill Ventures and InterWest Partners, have put $13 million into Seldar to develop a single asset, ASP7147, a bombesin BB2 receptor antagonist to treat irritable bowel syndrome. ASP7147 comes from Astellas, and Drais’ management team will oversee it, with a Phase I trial ready to start soon. It’s another example of a growing comfort with single-asset entities that have short, defined development timelines, all the better to sell or partner without the complicated infrastructure of a full-fledged biotech. It’s also an example of VCs and management sticking to familiar faces who’ve done right by each other in the past: Drais is run by two executives who once ran a US outpost of one of Astellas’ corporate predecessors. Seldar owns all rights to the compound, but Astellas can receive a milestone payment and royalties on future sales. Astellas also has first shot at negotiating partnerships for ASP7147, the right of first refusal for Japan, and the non-exclusive right to negotiate in other regions. The deal follows hard on the heels of a similar arrangement, dubbed Telsar, in which Astellas transferred ownership of an ulcerative colitis treatment to the Drais team and took part in a $14 million Series A round. The Seldar syndicate also invested in Telsar – as well as in Drais, and before that, in AkaRx, which brought its backers a lucrative return in 2009. -- A.L.

BioMarin Pharmaceutical: In its first public offering in five years, orphan disease drug developer BioMarin raised nearly $236 million in a May 31 sale of 6.5 million shares at $36.28, giving the company a post-market cap of $4.4 billion. If underwriters exercise the 650,000-share overallotment, proceeds will be $259 million. The healthy stock valuation appears to be a result of growing investor optimism for BioMarin’s Phase III enzyme replacement therapy GALNS (N-acetylgalactosamine-6 sulfatase) to treat the rare autosomal disorder Morquio A syndrome (MPS IV). GALNS recently topped Leerink Swann’s predictions of the ten most successful near-future product launches. Joe Schwartz, Leerink’s managing director of biotech, believes enzyme replacement therapies are a big opportunity, and he calls GALNS a potential “miniblockbuster." It would be the only therapy for MPS. BioMarin’s financing is the most raised in a follow-on public offering in the past five years among biotechs with $400-500 million in revenues, a crowd that includes Regeneron Pharmaceuticals, Onyx Pharmaceuticals, Myriad Genetics, and The Medicines Co. It was also the second triple-digit offering of the month in the rare disease space, following Alexion Pharmaceuticals and its $462 million sale of 5 million shares that priced at $93.02 each. (Alexion had sales of $783 million in 2011.) Rumors have also circulated this week that GlaxoSmithKline has eyes on BioMarin as a possible acquisition target. – Maureen Riordan

Kick-ass photo courtesy of Lidal-K.

Financings of the Fortnight Sees More Conflicting Indicators for Biotech VC

By Joseph Haas

Reading the sometimes conflicting data from the venture capital sector can be just a bit confusing. Last time out, for example, this feature tried to divine whether VC fundraising was on a slow pace or was rallying, with a pair of sources differing on the sector’s second-quarter take by nearly $2 billion.

As Congress would say, now we’re talking about real money.

One possible factor that could dampen the hopes of life sciences companies looking for VC investment is the difficulty some venture firms are having raising new funds themselves. See our Valuation Watch piece in the July/August 2010 issue of START-UP for details on how big life sciences backers like Polaris Venture Partners, Atlas Venture and Sofinnova Partners are closing new funds well short of stated goals and an update of our 'gas tank chart' that got, um, a lot of mileage last year. Of course at least a few VC firms recently met or exceeded their fundraising goals, including OrbiMed Advisors and SV Life Sciences. Once again, the indicators in VC financing appear somewhat conflicted.

Still, an attempt to read the quarterly trends suggest that the outlook for biotech companies looking for venture investment may be a sunny one, even as a few venture outfits lower fundraising expectations.

The life sciences sector (both biotechnology and medical device firms) saw venture capital investment increase during the second quarter by 52% in dollars and 36% in deal volume, according to the July 16 Money Tree Survey by PWC and the National Venture Capital Association, based on data from Thomson Reuters. Such investments totaled $2.1 billion as 234 deals were crammed into the April through June period; we covered the survey in-depth in “The Pink Sheet” DAILY.

Of those, biotech deals accounted for $1.3 billion spread across 139 deals. Biotech accounted for the largest share of venture capital financing during the quarter, enjoying a 59% uptick in dollars compared to the first quarter, as well as a 34% increase in the number of deals.

Overall, venture capital investment occurred at levels not seen since 2008, said Tracy Lefteroff, global managing partner for venture capital practice at PWC.

“The rise in companies lining up to go public in the life sciences space in Q2 was also a likely driver of the strong rebound we saw in investing in this sector during the quarter,” he said. “If the markets remain positive, we’ll likely continue to see robust investment levels for the remainder of the year, with VC funding in 2010 poised to surpass 2009 levels.”

Another hopeful trend suggesting an improving environment for start-ups during the second quarter was an increase in seed and early-stage investments. These rose 54% from the first quarter to the second quarter to a total of $2.3 billion, with deal volume rising 32% to 429. Likewise, first-time financings were up 7% during the quarter to $1.1 billion, with biotech leading the way among sectors in terms of first-time dollars raised.

Speaking of leading the way, it's time for another installment of ...

NuPathe: Central nervous system drug developer NuPathe revealed terms for its initial public offering, scheduled for next week. The Conshohocken, Pa.-based company is expected to sell 5 million shares for $14 to $16 apiece, raising about $75 million and giving it a market capitalization of about $212 million after the offering, based on the midpoint of the price range. Lazard Capital Markets and Leerink Swann are co-lead underwriters of the offering. NuPathe has completed Phase III trials on a patch that delivers the migraine drug sumatriptan through the skin via a small electric charge. NuPathe expects to file an NDA for its patch, called Zelrix, during the fourth quarter of 2010. NuPathe has raised $53 million in private funding to date; Quaker BioVentures, which led NuPathe’s $30 million Series B round in May 2008, is the company’s largest outside shareholder, while Safeguard Scientifics, Birchmere Ventures, Battelle Ventures and SR One hold smaller stakes.—Paul Bonanos

Euthymics Biosciences: A new company formed to advance and commercialize a novel anti-depressant, Euthymics raised $24 million in a tranched Series A round from a venture syndicate led by Novartis Venture Funds and Venture Investors LLC, along with Hambrecht & Quist Capital Management, GBS Venture Partners and the State of Wisconsin Investment Board. The Cambridge, Mass.-based start-up paid $2 million to acquire shuttered DOV Pharmaceutical Inc., which ceased operations last year when it ran out of capital. Publicly-traded DOV was in the midst of Phase II trials on a triple reuptake inhibitor that features unbalanced potency against the neurotransmitters serotonin, dopamine and norepinephrine, in an effort to reduce side effects such as weight gain, sexual dysfunction and cognitive impairment. Euthymics expects to use the funding for a Phase II/III trial on the drug, which if approved would be marketed to patients who do not respond to selective serotonin reuptake inhibitors. Among Euthymics’ founders are former Orexigen executive Anthony McKinney and longtime Lilly executive Frank Bymaster, who was on the original development team for Prozac in the 1970s.—PB

Xoma: Through a committed equity financing facility, antibody specialist Xoma has the option to sell up $30 million of its registered common shares at a discount to Azimuth Opportunity Ltd. over a 12-month period. Just for signing on July 23, Azimuth got 1.7 million Xoma shares. Despite diluting shareholder equity and having a potential short-term negative impact on the price, CEFFs help companies avoid the more time-intense and often more expensive FOPO path. Like with most CEFF arrangements – limited only in how much capital is drawn down within a specific time period – Xoma controls the timing, dollar amount and share price of each draw, is not obligated to dip into the fund, and is free to pursue other financing. Azimuth is no stranger to Xoma; the private equity firm provided $26 million last September through two separate CEFF draws and now holds about 42 million of Xoma’s shares (approximately 261 million were outstanding as of May 31). With $28 million cash in its coffers, Xoma’s priorities – according to CEO Steven Engle – include expanding IL-1 beta antibodies IP, pursuing new partnerships, and advancing other autoimmune, cardio-metabolic, inflammatory and oncology candidates. Lead antibody XOMA52 is in Phase II for diabetes and cardiovascular disease. Xoma's isn't the only CEFF signed this fortnight -- just this morning Omeros announced a $40 million/24 month CEFF deal with Azimuth.—Maureen Riordan

Immune Design Corp.: Nearly doubling its June 2008 $18 million venture financing, Seattle start-up Immune Design took in an impressive $32 million in a July 26 Series B round led by new backer ProQuest Investments, which was joined by returning Series A participants Alta Partners, Column Group and Versant Ventures. According to Elsevier’s Strategic Transactions, the only immunotherapy firm raising more in a recent Series B – in 13 such transactions done since January 2007 – was CureVac GMBH (in a $47.7 million round July 2007); in fact, the average take of vaccine players in a Series B raise during that time period was about $20.5 million. So how did IDC manage to secure such a hefty sum? Perhaps its strong management team led by Corixa alum Steve Reed, also founder of the Infectious Disease Research Institute, promoted investor confidence. Recent success of its IDRI-pioneered GLA adjuvant technology in a second Phase I study in flu, couldn’t have hurt either. The financing gives IDC at least two-and-a-half years-worth of cash to advance GLA as well as its second platform, known as DC-NILV, designed to target and stimulate dendritic cells (from David Baltimore’s Caltech research team). IDC’s near-future plans include a Big Pharma partner to further finance development costs.—MR

Corporate VCs Star In Financings Of The Fortnight

Oh, venture capitalists. After Dow Jones released its third quarter investment numbers for venture capital two weeks ago, we decided to mine our database to see if all flavors of vc--traditional and strategic--were equally affected. It wasn't terribly surprising to discover that investment from traditional VCs had plummeted--as we noted in our previous post, it's hard to commit money when your pockets are empty.

But to our surprise, investing by strategic groups also dropped in the same period. (You want to know by how much? You'll have to check out the Valuation Watch column in the November START-UP.)

Hang on a minute. Haven't we been arguing for months that corporate venture groups will play a starring role in new company creation, filling the vacuum left by financially struggling traditional players? We have, and we stand by that assesment for the forseeable future--or at least until we see the fourth quarter numbers.

On the one hand, the improving market conditions could make biotechs less willing to accept money from corporate VCs, especially if the funding comes with strings attached. On the other hand, the public markets are still decidedly chilly, suggesting that for the time being, privately-held biotechs will have to hitch their exit aspirations to dreams of lucrative acquisitions by bigger pharma and biotech companies.

But that means finding better ways to capture potential acquirers attention, other than fat sandwich boards that scream "Buy Me!" (If that works, will you let us know?) Certainly one way to forge those ties with pharma is through their corporate venture groups. Perhaps more importantly, even as some limited partners have signaled they are ready to dive back into the risky venture waters, that money is still on the come. Corporates have capital at the ready now, and at least from October's numbers they seem prepared to use it.

Indeed, since October 1, at least eight private biotechs have raised money from corporate venture groups, including three in the past two weels alone. All of which suggests corporate venture's starring role in early stage biotech funding is not yet waning. Still if you doubt us, read on for a round-up of the past two week's financing news.


Probiodrug AG: On November 2, German biotech Probiodrug announced it pulled in more than €36 million ($54 million) through a Series B financing, a pretty significant venture round in the biotech sector, but by no means the largest this year. (Remember Pharmion spawn Clovis Oncology’s $145 million Series A in May and Hyperion Therapeutics’ $60 million Series C round a month later?) Probiodrug’s financing, which was co-led by first-time investors BB Biotech and Edmond de Rothschild Investment Partners also included other new backers Life Sciences Partners and Biogen Idec’s New Ventures. (Corporate Venture!) The German firm is--or maybe was is the better descriptor--widely regarded as an expert in dipeptidyl peptidase (DPP) IV inhibition, a critical mechanism in treating Type II diabetes. In 2000, its work in this area led to an exclusive global licensing deal with Merck, research from which eventually produced the marketed drug Januvia--although not without some bumps, including the failure of the lead compound around which the Merck deal was centered. Four years later Probiodrug got out of DPP R&D altogether via an asset sale worth $35 million to OSI’s Prosidion division. The retrenching set the stage for further evolution. In 2007, the biotech, which had raised $52 million since its initial founding in 1997, merged with drug discovery firm Ingenium Pharmaceuticals in a deal that also included a €20.6 million Series A recapitalization. Probiodrug’s new focus in on inflammatory and CNS disorders, especially the big kahuna, Alzheimer’s disease.—Amanda Micklus

Aldagen: Regenerative cell therapeutics developer Aldagen has revived its plans to go public, filing an S-1 on October 28. Only a day earlier it disclosed in a Form D filing that it sold $7.3 million through the issue of convertible bridge notes—the first fund raise it’s done since bringing in $18.4 million through a Series D in April 2008. Founded in 2000, Aldagen is developing adult stem cells that have high concentrations of aldehyde dehydrogenase, an enzyme that controls the developmental state of progenitor and stem cells. The biotech firm believes these stem cell populations have a greater ability to differentiate into multiple types of cells and tissues. Its lead candidate, ALD101, is used to improve the engraftment period after umbilical cord transplants for inherited metabolic diseases in children. Completion of the pivotal Phase III trial is expected in the first quarter of 2011. As the biotech looks to an NDA filing, it will likely rely on help from the recently formed Alliance for Regenerative Medicine—an effort in Washington to facilitate the regulatory and reimbursement pathway for stem cell drugs. The company says the net proceeds of its IPO, along with cash and cash equivalents (approximately $8.8 million at September 30, 2009) and interest income will sustain operations for two more years. Aldagen is the latest biotech to test the IPO waters after scupppering a previous attempt last year due to market conditions. Earlier this week ophthalmology player Alimera also announced it would try to go public after canceling its first try this past April.—Amanda Micklus

Pulmatrix: Pulmatrix obtained further validation of its technology for developing broad-spectrum anti-infective drugs Nov. 2, bringing in a $30.2 million Series B led by two new investors, ARCH Venture Partners and Novartis Bioventures Fund. (There it is again. The all important corporate venture backing.) The company also won a $2.2 million grant from the National Institutes of Health to advance work on its lead program, PUR003, currently in Phase Ia/IIb studies as a treatment for influenza. Together the two transactions should give the biotech a financial runway for 18 months or more, says CEO Robert Connelly. Of the $30 million in new funding, $7 million covers bridge funding the privately-held biotech has already burned through. Pulmatrix declined to say whether the financing was a step-up round, other than to note “we were happy with the valuation and financing terms.” (Did you expect a different answer?) In addition to completing the flu study, the VC funds will enable Pulmatrix to launch studies of ‘003 in chronic obstructive pulmonary disease and asthma, while the grant money will support ongoing preclinical studies to extend the spectrum and efficacy of the molecule.—Joe Haas

Virdante: Virdante Pharmaceuticals, a new privately-held biotech focused on antibody-based therapeutics for autoimmune and inflammatory disorders, closed an extended Series A financing on Oct. 29, bringing the total raised since January 2008 to $47.75 million. New investors in the round were led by Thomas McNerney & Partners and also included Osage Partners. They join the initial investors in the Cambridge, Mass.-based newco: Clarus Ventures, Venrock, MedImmune Ventures and Biogen Idec New Ventures. (Ooooh! Two strategic investors. Theoretically that boosts the chances of a higher return upon acquisition.) CEO John Ripple said the company’s business model is to develop and commercialize its own proprietary pipeline and “apply our technology to development candidates from a select group of corporate partners.” We’re guessing MedImmune and Biogen Idec will be among that select group, given their investment in the biotech and its Sialic Switch technology, licensed exclusively from Rockefeller University.—Joe Haas

Image by flickrer Herve Boinay used with permission through a creative commons license.

Financings of the Fortnight Climbs Half Way To The Stars

Yeah yeah. We know. The life science venture shakeout isn’t over yet. It’ll get smaller before it gets bigger. Happy new year, everybody. That was the drumbeat we heard as we made the rounds at J.P. Morgan this week. But the California sun was shining, the street musicians were banging on their plastic buckets, and the doors of the St. Francis (don’t call it the Westin!) just kept on revolving.

Let us throw a few names at you. Sanderling Ventures. Alex Denner. Ascension Health. Hatteras Venture Partners. Shakeout notwithstanding, all have raised or are raising new health care funds, some by notable means. Hatteras is boosting its fund size 50% to $125 million by adding Small Business Administration loans under a new venture-friendly government program. 

Sanderling Ventures, whose last fund was of 2004 vintage – so long ago uncorked it doesn’t even register on START-UP’s latest annual gas-tank chart -- has laid down a marker that it’s looking to raise a seventh fund of $250 million, and GlaxoSmithKline says it will be a limited partner with a $50 million stake.

The venture arm of Ascension Health, one of the largest hospital groups in the US, has raised a third fund of $225 million. And Carl Icahn’s former biotech consigliere Alex Denner is also launching his new hedge fund, friends of FOTF tell us.

But the fund news we found most intriguing was that apparently CMEA Capital of San Francisco is giving an eighth fund a go, and it might be life-sciences only. We’re not sure of the details – and CMEA isn’t talking – but we do know this: two new partners with biotech experience have been dubbed "founding partners" of CMEA 8. It says so on the firm’s Web site. One is Kent Hawryluk, who has been an Indianapolis-based VC with Twilight Venture Partners for years. He helped found Marcadia Biotech in 2006 and sell it to Roche in late 2010 for nearly $300 million upfront. The other is Troy Wilson, who was president, CEO and co-founder of Intellikine until Takeda bought it about a year ago for up to $310 million.

With CMEA maintaining radio silence despite our entreaties, we’re left to speculate about the verbiage on Hawryluk and Wilson’s CMEA pages: 

“Our success at Marcadia is a reproducible formula for the portfolio companies of CMEA 8. We focused on transforming breakthrough science into a product needed by patients and Pharma. It was through capital efficiency, proper incentives, and hard work we were able to create value in such a short amount of time.”

And…

Wilson’s most recent success illustrates the strength of the CMEA 8 model. He was President and CEO of Intellikine, a company he co-founded. In just over four years, Intellikine discovered three drugs to treat cancer and advanced them into clinical testing… Along with several of his Intellikine colleagues, he recently co-founded Wellspring Biosciences. “It’s exactly the sort of company we want in CMEA 8,” he says.

Wellspring, by the way, is developing small molecules for cancer treatment, according to its bare-bones Web site.

Last we heard news from CMEA, it was launching the Velocity Development Corp. in 2011, a virtual development team for asset financing, as a carve-out of its seventh fund. In an earlier permutation, Velocity was supposed to be backed by Eli Lilly & Co. as part of Lilly’s “mirror fund” scheme, but instead it launched in mid-2011 as part of CMEA’s portfolio. Around the same time, Atlas Venture created its own asset-financing group, the Atlas Venture Development Corp. AVDC since has announced two projects, Arteaus Therapeutics and Annovation Biopharma, and in the following months, other asset-based venture schemes have debuted.

All the while, Velocity has been quiet. In discussing Velocity at the time of its launch, CMEA managing general partner Jim Watson, one of the San Francisco firm’s high-tech investors, said there would be no CMEA 8. Plans apparently have changed.  

A lot has certainly changed for Kleiner Perkins Caufield & Byers partner Risa Stack. On January 7, Stack said she was taking a position as a general manager and a primary deal maker for General Electric's healthyimagination, a $6 billion initiative to make health care affordable and accessible. Stack will develop strategy and drive execution of new initiatives with an initial focus on personalized medicine and health care data, her areas of expertise at KPCB.

Stack already was on the healthyimagination advisory board, and the initiative’s CEO Sue Siegel is a long-time friend and colleague, having worked at Mohr Davidow, a frequent co-investor with Kleiner Perkins in diagnostics.  Stack worked closely with co-founder Brook Byers, who also was heavily involved in many of her portfolio companies. (Byers is Kleiner’s board representative at Foundation Medicine, which just extended its Series B round – see item below.)  Several of Kleiner Perkins’ diagnostics portfolio companies, including Foundation, CardioDx and Veracyte, are in the early phases of product launch.  And with technologies abundant – even fungible, some say – it makes sense to look to integrators like GE to drive adoption.

Raise a fund? Ha. We at FOTF HQ can barely raise our fingers to the keyboard to write this column after four days of pounding the San Francisco pavement. Fortunately, there's nothing better to elevate one's chi and center one's chakras (we are in California, after all) than the year's first edition of...

Foundation Medicine: Coincidence? In Vivo Blog readers name Foundation Medicine’s Series B round their top financing deal of the year. Four days later, the company reveals it’s grabbed the attention, and cash, of three renowned investors who have added $13.5 million in new capital to push the Series B total to $56 million. Microsoft chairman Bill Gates, jVen Capital founder and former Digene chief Evan Jones, and Russian billionaire Yuri Milner topped off the round, following a September 2012 first closing that featured crossover investors Deerfield Management, Redmile Group and Casdin Capital; strategic backers Roche Venture Fund and WuXi Corporate Venture Fund; and VCs Third Rock Ventures, Google Ventures and Kleiner Perkins Caufield & Byers. The latest cash infusion arrives as Foundation continues to commercialize its first product, FoundationOne, a genomics test that oncologists use to choose appropriate treatments or clinical trials for cancer patients based on assays of their tumors. Foundation struck at least seven pharma partnerships during 2012, and it is planning to launch a hematologic malignancies test in 2013. Gates invested on his own rather than through his foundation, as he did in a 2011 round for Nimbus Discovery. Milner, known for his late-stage investments in Facebook, Twitter and Zynga, recently took a stake in 23andMe. And Jones, who has backed Veracyte, Fluidigm and CAS Medical Systems, took a board seat at Foundation. – Paul Bonanos

Ultragenyx Pharmaceutical: Last summer, START-UP posed the question “Was Enobia’s Sale A High-Water Mark For Rare Disease Deals?” Rare disease company Ultragenyx is trying to make that question look silly. The Northern California firm with close ties to rare-disease leader BioMarin Pharmaceutical said on December 20 it has raised a $75 million Series B round. It was led by Adage Capital Partners and featured a varied roster of heavyweight crossover public investors, corporate venture groups and its existing venture backers. The cash will go mainly toward the biotech’s lead clinical programs, UX-001, a Phase II replacement therapy for hereditary inclusion body myopathy, and UX-003, an enzyme replacement therapy to treat  mucopolysaccharidosis type 7, due to enter a Phase I/II trial this year. The cash also likely means that Ultragenyx will look to go public in the not-too-distant future, often a requisite to entice public investors to make private biotech investments, as our colleague Stacy Lawrence explained in a November START-UP feature. (For more crossover coverage, check out the new In Vivo magazine, in which Stacy has drawn back the curtain on Deerfield Management, which wants to become unequivocally the top health care hedge fund.) Despite the influx from global funds like T. Rowe Price, Blackrock and Jennison Associates, and the inclusion of rare-disease heavyweights Shire and Sanofi-Genzyme Bioventures, one of Ultragenyx’s original backers has the board chair: Eran Nadav of TPG Biotech. TPG and Fidelity Biosciences led the company’s $45 million Series A round – which landed it on START-UP’s 2011 A-List, by the way. – Alex Lash

Labrys Biologics/Solstice Biologics: By lumping two companies together, we don’t mean to imply they are two versions of one concept or two products spun out of one platform. On the contrary, they’re quite different. But they have the same lead Series A investor, venBio, and therein lies the rub. Labrys – $31 million committed, syndicate also includes InterWest Partners, Canaan Partners and Sofinnova Ventures – is a single-asset bet, an antibody to treat chronic migraine pulled from Pfizer’s shelf that should start Phase II this year; that’s the kind of idea venBio mainly was formed to go after. But Solstice – $18 million, and Aeris Capital joins venBio – is a bold technological idea, a reworking of RNA strands to help deliver their therapeutic promise into all kinds of cells. To date, constraints on delivering nucleic acids as drugs have limited the field to a few clinical applications. If Solstice’s RNA engineering works – a big if, as venBio cofounder Corey Goodman told "The Pink Sheet" Daily – it could crack the field wide open and justify the leeway venBio LPs gave Goodman’s team to seek out one or two early stage deals. Meanwhile, Labrys is to some extent a bet on Goodman’s drug connoisseurship. He ran Pfizer’s San Francisco biotech group for a couple years before the Wyeth merger shut down the group, and he was well acquainted with the migraine antibody. When Pfizer decided to outlicense it in early 2012, Goodman joined the competition quickly. – A.L.

Sarepta Therapeutics: On the heels of 48-week extension data from a Phase IIb trial in Duchenne muscular dystrophy (DMD) patients, Sarepta priced an underwritten public offering Dec. 13 netting the company $118.2 million. The Cambridge, Mass., firm announced it would offer more than 4.95 million new shares of common stock at $25.25 per share, a slight discount from its same-day closing price of $25.44. The raise capped off a turbulent 2012 for Sarepta. The company had an unclear future after 24-week data from eteplirsen’s Phase IIb trial in DMD produced mixed results. The share price sank as low as $3.24 in December 2011, adjusted for a subsequent reverse stock split, and the firm risked being de-listed by NASDAQ. Gains in early 2012 eroded gradually, and shares neared a new low as recently as July. However, a turnaround began that month as Sarepta engineered a six-for-one reverse stock split to bolster its share price. Then, in short order, it released impressive 36-week and 48-week data for eteplirsen. In the aftermath, Sarepta’s share price soared, peaking at $45 in early October. The improved trial results also brought about major interest in the company from institutional investors, Sarepta CEO Chris Garabedian said. They make up a large majority of the offering’s investors, he said, which comes after an at-the-market facility brought in $37.8 million after the 36-week data were released. -- Joseph Haas

The Best of the Rest: HealthCare Royalty Partners provided Nuron Biotech with $80 million in equity and royalty financing… Russian VC RusnanoMedInvest participated in venture rounds for Regado Biosciences ($51 million), Marinus Pharma ($21 million), and Lithera ($20.6 million)… Naurex completed a $38 million Series B round led by Baxter Ventures...Allakos raised $32 million in Series A funds to support work on immuno-inflammatory antibodies... for its FANG cancer vaccine platform, Gradalis pulled in a $24 million Series B… health IT company Within3 raised $20 million… NeRRe Therapeutics closed an $18.4 million Series A and got rights to GSK’s neurokinin antagonists… To further its anti-diabetic agent imeglimin, Poxel raised $17mm in Series B financing… NanoDimension led a $16 million Series B for Blend Therapeutics… GoBalto raised $12 million in a Series B round to support cloud-based software that simplifies clinical trials… TPG Biotech provided Trevi Therapeutics with $10 million in Series A financing… Avaxia Biologics pulled in a $6.4 million Series B to advance gut-targeted therapies… Actinium Pharma raised $5.1 million as part of a $20 million offering  prior to going public via a reverse merger… Tackling hypertrophic cardiomyopathy, Heart Metabolics closed on a $4 million Series A round… Tau Therapeutics collected $3 million to develop T-type calcium channel inhibitors for solid tumors… Transcriptic reportedly crowdfunded its seed round with help from AngelList and SecondMarket… Troika Venture Capital provided undisclosed financing to cancer metabolism firm StemPar Sciences… Rare disease player Synageva closed on a $118 million FOPO… A few weeks after signing on Leica Biosystems to create a companion dx for its NeuVax breast cancer candidate, Galena publicly raised $24 million… The regenerative medicine company Cytori Therapeutics completed a $20 million public offering… Targeting bioactive signaling lipids, Lpath finalized a $12 million follow-on… In a deal with Aspire Capital, Cyclacel raised $20 million… Nymox collected $15 million in a private placement to pay for trials of NX1207 in BPH and prostate cancer… Seaside 88 has provided NanoViricides with $5 million… Tonix Pharmaceuticals closed on a $3.4 million PIPE… Cancer Genetics set IPO terms at 5 million shares for $6-8… Stemline Therapeutics upped its planned IPO offering to 2.3 million shares at $10-12... Audeo Oncology postponed its IPO… To fund Procysbi commercialization, Raptor Pharma got a $50 million loan from HealthCare Royalty Partners… Oxford Finance loaned Agile Therapeutics $15 million… Arno Therapeutics raised an additional $2.15 million in convertible debt on $12.7 million initially collected in November… To help pay for its acquisition of cancer-trating laser equipment, Pinnacle Biologic received an undisclosed amount of debt financing... ADMA Biologics received $6 million in debt financing from Hercules Technology Growth Capital… Abbott officially spun off the biopharma unit AbbVie…and nine months after START-UP wrote about it here, Wellcome Trust launched a £200 million evergreen fund. -- Amanda Micklus

Photo of Powell Street in 1959 courtesy of Roger4336. He took it himself. Please note the previous location of Lefty O'Doul's. It has since moved.