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Thursday, September 23, 2010

Financings of the Fortnight Checks Out Big Rounds in the Big Apple


Even in good times it's not easy for a private biotech to take its lead compound to market all by itself. These dreary days, it's rarer than an empty cab in the Midtown rain. That's a New York reference, pal. It's PSA week, whaddya expect?


Despite all the distractions, like the perfect weather and giant slices of pizza everywhere, we couldn't help but notice when this fortnight brought us not one but two venture-backed firms whose investors are doubling down to get their protégés through Phase III.

Bully for them, we say, if they can get through registrational trials without a Big Pharma partner. At that point, Big Pharma partners hungry for near-market pipeline assets won't have a choice but to lavish riches upon them, right? Well....that's what we used to say about getting to a Phase II/proof of concept milestone. Now we're hearing things like this: "How do VCs fund all of these companies to Phase III, which seems to be the stage that Big Pharma is comfortable with?" That's what Quaker BioVentures founding partner Brenda Gavin told START-UP recently.

Let's not make too much fuss about two biotech fundings -- and we'll get to them in a moment -- but it's hard to ignore the larger context: Of the many biotech-focused venture funds running out of gas, not all are likely to re-up. So our first instinct was to wonder who's behind these whopping late-stage rounds that are designed to push a biotech's lead asset through Phase III. Are they the product of VCs rolling the dice one last time on portfolio companies that represent their best chance to get out with a bang?

So far, no. As you'll see below, one recipient of generous funds, Relypsa, tapped returning investors to help push its potassium-binding agent through Phase III. But the round was led by new investor OrbiMed Advisors, a firm flush with newly-raised cash. The second recipient profiled below, the German firm immatics biotechnologies (which we assume can now afford to buy some upper-case letters) turned to existing European investors for about half its new round. But one returning investor -- indeed, the one that remains its largest shareholder -- is dievini Hopp BioTech holding (again with the lower case!), which invests the cash of billionaire Dietmar Hopp, founder of software giant SAP and probably not among the biotech funds running out of gas.

An interesting side note: immatics CEO Paul Higham told our Pink Sheet colleagues that his efforts to raise cash from US investors earlier this year ran into reluctance to commit large sums, especially for a cancer immunotherapy based in Europe focused on renal cell carcinoma. (Those conversations took place before Dendreon's Provenge approval, Higham said.) Another interesting side note: Strategic Transactions tells us the three largest drug-related venture rounds so far this year are all European companies: Archimedes ($100 M), AiCuris ($75 M), and now immatics ($71 M).

Is there anything to the Eurocentric bent of these rounds? It's not as if optimism is brimming across the pond. A survey of VC attitudes released in June revealed just as much gloom in Europe as in the US, with hope for venture expansion pointed more toward emerging markets.
If you're keeping tabs, by the way, another recipient of funds earmarked for a late-stage push is Calistoga Pharmaceuticals, the Seattle firm working on isoform-selective PI3 kinase inhibitors. Its $40 million Series C round in June will fund a registrational program for its unpartnered lead CAL-101 and other clinical work, and the startup recently brought on board Pharmacia and PTC Therapeutics veteran Langdon Miller as executive VP of R&D to oversee the work, but CEO Carol Gallagher told us this week the money won't get them to NDA.

We all need a push every so often to get to our destinations. Which reminds us, the traffic outside our 44th St. hotel is a nightmare, so it's time to shut our laptops, duck into the subway, and get on board another installment of....


Relypsa: Doing its part to get a US biotech on the list of top fundraisers, Relypsa said September 13 investors had committed to a $70 million Series B round to help the firm push its potassium binder RLY-5016 into Phase III. Relypsa president Gerrit Klaerner said the firm can run the trial itself, with plans to reduce recruitment needs by incorporating Phase II data into the trial design. '5016 is a binding polymer that stays in the gastrointestinal tract and absorbs excess potassium, a potentially deadly condition. One application Klaerner would like to address is patients who would otherwise might have to avoid angiotensin-converting enzyme (ACE) inhibitors and angiotensin receptor blockers (ARBs) to lower blood pressure, as these drugs can have the side of effect of releasing potassium into the blood stream. An acute buildup of potassium is called hyperkalemia and can lead to arrythmia or cardiac arrest. OrbiMed Advisors led the round, but it also included investors who backed Relypsa's predecessor, Ilypsa, which Amgen bought in 2007 for $420 million for its lead compound, a phosphate binder for chronic kidney disease patients. To create Relypsa, Amgen spun out the rest of Ilypsa's assets to the same management team. -- A.L.

immatics biotechnologies: Developers of cancer immunotherapies have attracted renewed interest from investors and big pharma since the US approval of Dendreon’s Provenge in April. But German biotech immatics biotechnologies says it had plenty of investor interest from its own countrymen before Dendreon's success, leading to a Series C funding round of $71 million (€54 million). Immatics’ technology is markedly different from Dendreon’s, however, as it's based on administering the same combination of chemically synthesized, tumor-associated peptides to each patient with a particular cancer. The skill is in identifying antigenic peptides that actually induce a strong immune response, said immatics executives. The financing will fund a Phase III clinical trial of immatics’ lead therapeutic vaccine in renal cell carcinoma. Approximately half of immatics new funds came from existing investors including dievini Hopp Biotech holdings and Wellington Partners. New investors were venture capital funds advised by MIG Verwaltungs AG and AT Impf GmbH. The latter is owned by the Strüngmann brothers, who co-founded the German generics company Hexal, before selling it some years ago to the Swiss generics-and-original-research combo, Novartis. -- John Davis

Addex Pharmaceuticals: Addex raised CHF 20 million ($20 million) in a combined registered direct offering and debt transaction with Biotechnology Value Fund. Announced Sept. 15, the deal was structured as 593,567 new registered shares in Addex for CHF 6 million and the issuance of six-month mandatory convertible notes for CHF 14 million. The transaction was priced at $10.18 a share, a 12 percent premium over Addex’s volume weighted average share price during the five trading days prior to Sept. 14. Upon closing, BVF will own 9% of Addex’s outstanding shares, while the convertible notes will become 1,371,069 new shares on March 14, 2011, representing 17% of the firm’s outstanding shares. It comes a week after Addex landed a $900,000 grant from the Michael J. Fox Foundation to help finance a Phase II study of lead compound ADX48621 in Parkinson’s dyskinesia. Addex says the BVF cash infusion will give it runway into 2012 and help it advance several programs, including '621, while leaving it less vulnerable to another stock price decline should one of its programs disappoint. BVF was able to buy into the Swiss company at a bargain price because of last December’s failure of gastroesophageal reflux disorder and migraine candidate ADX11059, which resulted in Addex’s share price tumbling by about 75%. -- Joseph Haas

Anacor Pharmaceuticals: Just as it's pulled in a $15 million milestone from GlaxoSmithKline in connection with a 2007 option deal to develop an antibiotic based on its boron chemistry platform, Anacor has decided to try again for an initial public offering. On Sept. 10, the Palo Alto, Calif. biotech filed its S-1 with $86 million as its placeholder until it determines price range and share volume. In August 2007, Anacor filed to go public with a goal of raising up to $57.7 million then withdrew in December 2008 due to unfavorable market conditions, though it's worth noting it had plenty of time to make its issue before the financial tsunami struck. As part of the 2007 collaboration with GSK, the pharma committed to invest $10 million in a future private placement, which it did in January 2009. Schering-Plough also invested in that private placement as part of a 2007 licensing deal for a topical antifungal, but S-P isn't listed in the S-1 as one of Anacor’s principal stockholders. Anacor says it has raised $88 million in equity capital since its inception in 2002. In addition to advancing its pipeline of five clinical candidates, Anacor presumably will use the proceeds to cash out its equity investors, which include Rho Ventures (25.5%), Venrock Associates (16.1%), Care Capital (12.4%) and Aberdare Ventures (11.5%), along with GSK (14%). Anacor plans to begin a Phase III program for lead program AN2690 in onychomycosis in the fourth quarter of this year. -- J.H.

Photo courtesy flickr user Adrian8_8.

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