Friday, January 21, 2011

Financings of the Fortnight Will Sell No Wine Before Its Time

Among many other things, last week's J.P. Morgan conference was a movable feast, what with all the sandwiches and fruit we ate while running from one meeting to the next, not to mention the fancy canapes (or as we say in California, "tapas") and glasses of merlot we quaffed while circulating after hours.

We're still digesting, and what at first blush seemed like a Beaujolais nouveau glow of optimism is now more subtle, more complex: we're getting a not-unmanly bouquet of strawberry and pine tar layered with the churlish piquancy of an overripe kumquat.

In all seriousness, what we're really feeling as we sift through our notes, replay our interviews, and follow up with old and new sources, is that there are more worrisome threads to tug on as we dive into 2011. For example, no one's quite sure where funding for innovation is going to come from in the next few years.

VCs? Sure, from the handful of early-stage stalwarts and quasi-rock stars. By and large, though, VCs are leaving a void, and so are their backers. Fundraising in 2010 across all venture sectors fell for the fourth straight year, to $12.3 billion, according to the National Venture Capital Association.

Meanwhile, liquidity is returning, what with the IPO market cracking open. As we noted in our post-JPM musings, several hopeful execs and investors mentioned the IPO as an exit option in 2011. But that's money out. What about money in? Big Pharma's continued willingness to plow big bucks directly into academia, as evidenced by three recent University of California, San Francisco deals and one with the Sanford-Burnham Medical Research Institute, speaks volumes. As the Burnham Institute's new chief business officer Paul Laikind told us last week, the guiding principle of the past decade for such collaborations has been to avoid the mistakes of the past. There's no proven model for pharma to turn academic investment into pipeline productivity, but they're still plugging away.

So is that the answer? Big Pharma's once-vaunted labs are disappearing, but its cash flows will let a thousand external innovations bloom via academic collaborations, corporate venture, licensing and M&A? Not so fast. There's a little something called the patent cliff, and it's no longer a distant notion. A new Datamonitor report calls for growth among the top branded pharma companies to slow to 1.5% by 2015. Of the 43 firms in the study, only six will exceed the 7.1% growth the industry averaged from 2003 to 2009. Only four Big Pharma -- Bayer, Novartis, Roche, and GlaxoSmithKline -- will generate growth above the 1.5% average in the next four years.

We're not throwing our weight completely behind one data set, nor do we believe that Pharma's cash reserves will dry up. After all, every layoff in the lab frees up dollars to spend outside Pharma's walls. But those dollars will be heavily scrutinized. Shareholders will want some of them back in their own pockets. And there are plenty inside Big Pharma's walls still fighting to keep those dollars in-house. We're not convinced Pharma can adequately address the widening Valley of Death, and we can't find anyone who thinks traditional VC will cycle back to its old "adventure capital" roots. And that makes us scratch our heads and continue to wonder who's going to pay to make the medicines that come to market 15 years from now.

We're just glad doctors now say it's good to have a glass of wine or two a day. We recommend pairing an earthy, sun-baked Rioja with a spicy plate of...

Dendreon: The Seattle immunotherapy pioneer said Jan. 14 it sold $540 million in convertible debt, due in 2016 and with an annual interest of 2.875%. The cash comes as Dendreon is rolling out its autologous treatment for prostate cancer, Provenge (sipuleucel-T), which was approved in the US last April. It isn't expected to gain heavy adoption until the fourth quarter of 2011, when the company has said it expects to gain half its revenue of $350 million to $400 million for the year. (Total 2010 sales were $47 million.) Meanwhile, Dendreon needs cash. Provenge requires complex logistics and multiple production facilities, as well as persistent education of medical staff. To create the product, a patient's immune cells are extracted at a blood bank or Red Cross center, shipped to a production center where the cells are exposed to a protein that acts as a prostate-cancer antigen, then shipped back and infused into the patient at a clinic. Dendreon is building out three manufacturing facilities in the US in New Jersey, Atlanta, and Southern California, and building another in Germany. The new cash will also go to fund ongoing commercial and regulatory efforts, particularly its European sales strategy, where Dendreon aims to sell Provenge on its own at the same price -- $93,000 a dose -- as in the US. The debt conversion rate starts at about 19.5 shares of stock per $1,000 of debt, or about $51.24 per share of stock -- a 40% premium over $36.60, which was the closing share price on January 13. Dendreon noted that the conversion rate could change "upon the occurrence of certain events." -- Alex Lash

Amarin: The Irish company completed an offering of $104.9 million in American depository shares this week, selling 13.8 million ADS at $7.60 a piece, a 2% discount to the price announced on Jan. 13. Amarin plans to use the funds to pay for commercialization of AMR-101, an omega-3 fatty acid meant to treat high triglyceride levels. Amarin has been chasing GlaxoSmithKline’s Lovaza, a medicinal-grade fish oil already on the market. Positive top-line results from a Phase III study conducted under a special protocol assessment from FDA showed in November that AMR-101 raised HDL-cholesterol, while lowering LDL, or bad cholesterol. The positive results will allow Amarin to file for approval of AMR-101 in 2011, a year ahead of schedule. Lovaza has annual sales of $1 billion but has a restricted indication due to its propensity to raise LDL-cholesterol. The momentum around AMR-101 has ratcheted up speculation that Amarin is a likely take-out target, fueled in part by the company itself. At the J.P. Morgan conference, new CEO Joe Zakrzewski told IN VIVO Blog Amarin is "definitely" looking for a commercialization partner but is weighing whether to partner before the final data from the Phase III ANCHOR trial reads out. Plenty of big firms with global reach could use a cardiovascular offering for their depleted late-stage pipelines. (Merck comes to mind, for starters.) Jeffries & Co. and Leerink Swann acted as joint book-running managers for the offering. -- Lisa LaMotta and Ellen Licking

Rib-X Pharmaceuticals: Antibiotic developer Rib-X said Jan. 11 it has raised a $20 million round led by longtime investor Warburg Pincus, mainly to fund a 240-patient Phase 2b trial of its lead product delafloxacin against standards of care linezolid and vancomycin. The firm hoped to be in Phase III by now, but an overhaul of FDA guidelines for clinical endpoints in complicated skin and soft tissue infections from drug-resistant bacteria, which delafloxacin is aimed to combat, pushed Rib-X into a Phase IIb. The biotech will now measure its medicine's ability versus comparators to stop the spread of lesions as well as fever abatement, the new primary endpoints in FDA's rewritten guidelines. Success in the trial would "substantially de-risk" simultaneous Phase III trials, as CEO Mark Leuchtenberger told IN VIVO Blog last week. Last year antibiotic rival Trius Therapeutics delayed for several months the start of a Phase III trial in skin and soft tissue infection to discuss design with FDA. It eventually proceeded without adding an intermediate trial to its program. Trius also put a planned IPO on hold for a few months but went public last August. Rib-X will have to raise more money or find a partner for a Phase III, said Leuchtenberger. The company also hopes to announce a partnership by the end of the first quarter for its preclinical RX-04 program against Gram-negative bacteria. -- A.L.

Civitas Therapeutics: Talk about breathing new life. Civitas is the spin-out of Alkermes' pulmonary business, which was left gasping for air in March 2008 when larger partner Eli Lilly dropped its inhaled insulin program, the third major program of its kind to get the kibosh in a five-month span. (The fourth and final, Afrezza from Mannkind, was just ordered back to the drawing board by an FDA complete response letter.) With its target Parkinson's disease, not diabetes, Civitas is resuscitating the AIR system -- an inhaler about the size of a fountain pen and a dry powder technology -- and taking over Alkermes' manufacturing plant in the Boston suburb of Chelsea. Civitas is armed with a $20 million Series A from Longitude Capital and Canaan Partners and ready to push aggressively forward with an inhaled version of an undisclosed Parkinson's treatment that CEO Glenn Batchelder told IN VIVO Blog he hopes to bring to clinical proof of concept by the end of 2012. The former CEO of BIND Biosciences, Batchelder said AIR can deliver a consistent, immediate dose to patients in the midst of an acute "off period" -- characterized by halting or frozen movement -- even when it might be difficult to draw a sustained breath. Bachelder said the company hasn't decided whether to target maintenance therapy, "rescue" therapy for acute attacks, or both. Alkermes remains a shareholder in Civitas with an undisclosed stake. -- A.L.

Image courtesy of flickr user nyoin via a Creative Commons license.

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