Thursday, August 18, 2011

Financings of the Fortnight Cuts Its Budget

You can't talk about financings of the past fortnight without talking about the wild gyrations of the stock market, which again is doing its crazy thing as we write this. And you can't talk about the stock market without wondering what lies ahead after Labor Day, when summer vacationers (those who haven't cancelled vacations, that is) return to their trading desks, VCs return to their term sheets, and the Congress (ugh) returns to Washington, D.C.

Maybe it's that tightening belt cutting into our waistline, but we're already feeling nauseated thinking about the Stupor, er, Super Committee of 12 that's charged with sorting out the long-term U.S. budget deficit by Nov. 23. Much of the posturing, table-pounding, ultimatum-making and hand-wringing will take place in our little patch of forest. Just yesterday a Democratic member of the committee took a shot across the ever-rustier bow of Big Pharma. Some of our colleagues will be crawling all over the story from the reimbursement and regulatory angles, while some of us will be eager to see how inevitable budget cuts affect the other end of the pipeline. For example, what will happen to the fledgling programs at the National Institutes of Health to do more translational work for which the private sector -- whether Big Pharma or venture-backed biotech startups -- is losing its appetite? And what if, despite successful lobbying efforts in the past, venture investors can't fend off a change in their tax rates (as some VCs advocate)? Will biotech innovation get Buffeted?

It should be an interesting three months as we all lurch toward the next mini-Armageddon. Meanwhile, we're living day to day, endpoint to endpoint. We don't have any spiritual advice, but if you don't want to be left behind -- the curve of the latest biotech financing news, that is -- we recommend checking out the latest rapturous edition of...

Enobia Pharma: Having raised more than $100 million from venture backers since 2005, Enobia turned to a different breed of investors for its latest funds and let its existing investors conserve their cash. On Aug. 8, the Montreal biotech announced it had raised $40 million in a private placement to a syndicate comprised of undisclosed pharmaceutical companies and crossover public equity buyers. The cash will help move its lead candidate, an enzyme replacement therapy for hypophosphatasia (HPP), through the late-stage clinic and regulatory process. The new funds also replace the remaining tranches of a $47 million Series D round, $25 million of which Enobia has already drawn down. The final $20 million or so will not be necessary, said Enobia chairman Jonathan Silverstein, also a general partner at OrbiMed Advisors. The cash from new pharma and financial investors comes "at a significant premium price to the D," Silverstein said. He also noted that the pharma companies that invested did so directly rather than through their venture arms. The biotech’s lead candidate, ENB-0040, currently in Phase II in HPP, is not partnered and Silverstein indicated that the new investors included firms that might be interested in a collaboration. “I think their hope is to someday be more actively involved in the company,” he said, stressing that their investment does not give them rights to Enobia's products. Besides Orbimed, other existing investors in Enobia include CTI Life Sciences Fund, Fonds de Solidarite FTQ, Desjardins Venture Capital and Lothian Partners. Together, those five backers contributed $50 million toward Enobia's 2009 Series C round. -- Joseph Haas

T2 Biosystems: With the close this month of a $23 million Series D round, investors in T2 are sending the message: We can do candida. The company is concluding initial studies of its mobile diagnostic device, which can identify five species of the hard-to-detect fungus, a leading cause of hospital-acquired infections that affects more than 10% of sepsis patients. T2 expects to begin a trial in hospitals in the first half of 2012 geared towards an FDA submission later in the year. Currently, candida can only be detected through blood culture, which takes several days. T2 says its device can identify its presence directly in whole blood in a matter of hours using a magnetic biosensor. Other molecular methods for pathogen identification rely on optical detection, meaning the infectious agent must first be extracted from the blood sample to then be “seen.” That’s especially difficult with organisms like candida that only exist in very low copy numbers -- less than 10 per ml of sample. T2 has data on 400 patients showing over 99% concordance with culture methods, which was enough to convince Aisling Capital to lead the new round. Nine existing investors, including Flagship Ventures, Polaris Venture Partners, and Flybridge Capital Partners, also participated. With the new funding in hand, the company now aims to broaden its test panel, and earlier this year brought in Kirt Poss, formerly of VisEn Medical, to lead business development. According to CEO John McDonough, field trials of its device continue with the US intelligence community, a program started in 2008 in conjunction with an investment by In-Q-Tel as part of T2’s Series B financing. -- Mark Ratner

Pulmatrix: Insider investors have supplied $14 million in new funding to respiratory therapy developer Pulmatrix, intended primarily to support ongoing development of a dry-powder inhaler product for COPD and cystic fibrosis. Nominally a Series B-1 round, the new cash could be either converted to Series B shares at the same terms as its last funding in fall 2009, or rolled into a Series C round if a new investor takes a stake in the startup. Polaris Venture Partners, 5AM Ventures, Novartis Venture Fund and ARCH Venture Partners all participated, bringing Pulmatrix’s total funding to $60 million. Founded in 2003 to investigate therapies useful in countering bioterrorism, Lexington, Mass.-based Pulmatrix had previously aimed to commercialize a broad-spectrum antibiotic delivered via a nebulizer, but that project has been set aside in favor of PUR118, a Phase I dry-powder product with the same active ingredient. Both use Pulmatrix’s iCALM platform, which lines the airway to provoke the body’s natural defenses against pathogens. CEO Bob Connelly said the new money will support Phase Ib and Phase IIa trials in both COPD and cystic fibrosis over the next 18 to 24 months. The company will also seek a partnership in COPD, but is mulling commercialization in cystic fibrosis on its own. -- Paul Bonanos

Second Genome: First-time backers Advanced Technology Ventures and Morgenthaler Ventures have led a $5 million Series A round for Second Genome of San Francisco, a developer of diagnostic tools for gastrointestinal disorders based on the microbiome, the set of bacteria in a patient’s gut. The two-year-old startup, formerly known as PhyloTech, had previously collected $1.2 million in seed-stage funding from Wavepoint Ventures, Seraph Group, and individuals including neuroscience professor and serial entrepreneur Corey Goodman and Asuragen CEO Matt Winkler, both of whom are board members. Spun out of Lawrence Berkeley Laboratories and based on research in microbial ecology of water and soil, Second Genome is designing tools that identify microbiome “signatures,” the relative balance of various types of bacteria in the gut that can be aligned with new and existing therapies for patient subtypes. The company performs profiling services based on its PhyloChip technology, developed at LBL, which analyzes the 16S ribosomal gene sequence to deliver a “fingerprint” of a patient’s microbiome. CEO Peter DiLaura said that will eventually lead to its own discovery programs in GI disorders such as inflammatory bowel disease, irritable bowel syndrome, Crohn’s Disease and antibiotic-associated diarrhea. The new round is expected to last into 2013, when a Series B is expected. – P.B.

Photo courtesy of flickr user Matt Dinnery.

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