Thursday, April 22, 2010

Financings of the Fortnight Can't Get Excited About The IPO Party

Sure, Alimera Sciences just debuted, the sixth biopharma to do so in 2010 and the 10th to go public since the window re-opened last year. But like so many other biopharma IPOs of late, the issue was replete with caveats (see below). Optimists will say, hey, public is public. Just get us liquid to access more capital, and give our investors an exit. But public demand is so weak, some stocks are about as liquid as toothpaste. (Would that make an IPO a colloidal event?)

And if optimism abounds, why aren't more biotechs filing S-1s? Strike that. Why aren't any biotechs filing S-1s? This isn't the first time we've noted the curious lack of fresh meat in the IPO pipeline. But now that AVEO, Tengion, Alimera, not to mention French firm Neovacs, have all flown out the door in the past fortnight or two -- and all with rather alarming haircuts that range from 30% to 50% -- the registration nest is practically empty.

Plenty of companies could file papers and make it official, and you can bet your sweet patoot the bankers are pushing hard. But a lot of investors are pushing back. Take Alta Partners' Alison Kiley, who said at the BayBio conference two weeks ago that her firm was in no rush to get its late-stage biotechs to the public prom. Or the opinion of another prominent VC, who told The IN VIVO Blog this week that the current IPO scene is "a sham."

Cooley Godward Kronish's life-science chair Barbara Kosacz would agree. In a recent interview she told IVB, "I don't think of there being any window open. It strikes me as a horrible time. Some companies are going out, so I guess you could, but most boards are adamant about not going near it."

Until we see the S-1s, that giant sucking sound you hear is the biotech IPO pipeline washing out to the vast public sea. Here we're tempted to extend the metaphor -- "only to be eaten by sharks," or "fated to drift into a dead zone of investment detritus" -- but we allow a few are bobbing along nicely in the aftermarket (AVEO is up 7%, Ironwood Pharmaceuticals 27%).

We'd be remiss not to mention the Q1 venture numbers that came out last weekend. DowJones VentureOne reported $619 million in U.S. biopharma funding, the lowest quarterly figure in at least five years and down 20% from the first quarter of 2009. Chalk it up to the health reform fight, which dragged on through March, or perhaps to the traditional lag in dealmaking coming back from the holidays, or to VCs hanging on to what they've got so they can see their current portfolio through.

Then the calendar turned to April, and it suddenly felt like 1999 or 2000 again with a bloom of generous rounds for early-stage biotechs. This week we profile two big B rounds, Biocartis and AiCuris, but there were plenty to choose from: $40 million for Catabasis Technologies' A round, Sagent Pharmaceuticals' $40 million B round, and Foundation Medicine's $25 million Series A. Foundation's lead investor is early-stage firm Third Rock, which recently filed its Form D -- as in "daring"? "Daunting"? -- to kick off its second fund with a target of $400 million.

How about "doable"? The money is out there. One year ago early-stage investor 5AM Ventures reported a goal of $120 million for its third fund. It closed in December with $200 million. And in February Orbimed closed a $550 million fund, Caduceus IV, with 80% of the backing coming from repeat investors.

We have a feeling the Q2 numbers will not be nearly as grim. Until then, turn up the volume and party on with...

Alimera Sciences: Like we said up top, haircuts for biotech IPOs are so in style. Regenerative medicine player Tengion priced an ugly 44% below its target on April 8, and now the latest fashion victim is Alimera. The ophthalmology company grossed $72.1 million, but it was forced to slash its per-share price to $11, 31% below the $15 to $17 range it touted in early April. Alimera also bumped the number of shares from 6 million to 6.6 million, but 1.8 million of them were bought by existing venture backers, including Domain Associates, Intersouth Partners, and Polaris Venture Partners, which have put about $94 million into Alimera since it was founded in 2003. Most of Alimera’s IPO proceeds will go towards lead candidate Iluvien (formerly Medidur), an intravitreal implant containing the corticosteroid fluocinolone acetonide in Phase III for diabetic macular edema. An NDA is expected this quarter and if approved, it would be the first drug/device combo ever available for DME. pSivida developed the implant and licensed it to Alimera in 2005. In fact, pSivida will make out better than Alimera -- or its backers -- in terms of the IPO proceeds. Alimera must pay back $15 million of debt pSivida is holding, plus an additional $175k in accrued interest. And if Iluvien is approved, pSivida collects a $25 million milestone payment. -- Amanda Micklus

Biocartis: The Swiss diagnostics firm announced April 8 a €30 million ($41.3 million) Series B round, with two corporate investors, Swiss neighbor Debiopharm Group and Johnson & Johnson Development Corp., taking stakes. Debiopharm isn't just an investor; it will also partner with Biocartis to make companion diagnostics for its cancer and infectious disease treatments, with the Debio-025 Hepatitis C drug first in line. Biocartis plucked the diagnostic platform from Dutch conglomerate Royal Philips earlier this year for an undisclosed amount. Existing investors from a pan-European syndicate including Aescap Venture, Biovest CVA, Advent Venture Partners, and the Benaruca investment vehicle of Biocartis founder Dr. Rudi Pauwels' family underwrote the new round as well. Pauwels has worked with J&J before. The health-care giant bought two of his startups, Tibotec and Virco, in 2002. The financing is one of the largest for a molecular diagnostics startup since the downturn began. Nodality of Redwood City, Calif. announced a $15.5 million round in March that was led by yet another corporate funder, Pfizer Ventures. Hmm. Starting to see a trend? -- Paul Bonanos

AiCuris: ...and if you thought Biocartis's Series B was big, make way for Germany’s AiCuris, which raised €55 million ($75 million) in its Series B on April 14. The lead investor was Santo Holding, an investment company run by the Strüngmann family (also former owners of Hexal, now a Novartis division). Founded in 2006 as a spin-off of Bayer HealthCare’s anti-infectives cast-offs, AiCuris is led by Helga Rübsamen-Schaeff, PhD, former SVP of anti-infectives research at Bayer, and is developing treatments for viral and bacterial infections. Late last year, its lead candidate, AIC246 for human cytomegalovirus (HCMV), was shown to be well tolerated in transplant recipients and had comparable efficacy with valganciclovir. AiCuris has expressed interest in licensing the HCMV inhibitor -- as well as others candidate HCMV molecules -- to Big Pharma. So far, the company has forged one collaboration, an early-stage drug discovery deal signed in 2008 with fellow German/medicinal chemistry specialist 4SC AG. AiCuris is the fourth German biotech to raise venture capital this year, bringing the venture total for German biotechs just north of $100 million, according to Elsevier’s Strategic Transactions database. -- A.M.

NPS Pharmaceuticals: We highlight this Bedminster, NJ specialty pharma for its double duty: It has raised more than $90 million in a pair of transactions over the past two months. The most recent is a follow-on public offering of 10.35 million shares that closed April 21. The FOPO, which sold at $5.50 a share and included a fully subscribed overallotment of 1.35 million shares to the underwriters, netted NPS $53 million. Focused on rare gastrointestinal and endocrine disorders, NPS will use the money to continue registrational clinical trial programs for a pair of lead candidates: Gattex (teduglutide) to treat intestinal failure related to short bowel syndrome and NPSP558, a hormone replacement therapy for hypoparathyroidism. In its earnings statement last month, the company said top-line data from its Phase III STEPS trial for teduglutide are expected in late 2010 or early 2011. Also last month, NPS sold royalty rights to the hyperparathryroidism drug cinacalcet to DRI Capital for $38.4 million. Under the deal, DRI’s proceeds from the deal are capped at $96 million, or 2.5 times the upfront purchase price. -- Joseph Haas

Photo courtesy of flickr user Katie@!.

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