Friday, April 06, 2012

Financings of the Fortnight Hops Around

We’ve got a short attention span this week, what with magazine deadlines, an overnight trip to Seattle to help interview participants at this lively Xconomy event on biotech business models, and preparations for a week of solo parenting.

So we’ll keep our intro brief while doing a bit of globe-hopping: New sources of biotech funding were unveiled this past fortnight on three different continents. In Europe, Cancer Research UK and the European Investment Fund joined forces for the $80 million CRT Pioneer Fund aimed at helping projects -- not companies -- bridge the valley of you-know-what between preclinical work and mid-stage clinical studies. Read more about its unusual asset-centricity here. (Our suggestion: If you must pass through the Valley of Death, do it in the spring after a wet rainy season.) In Asia, the Malaysian government revved up its second biotech fund, this time for $100 million, as our PharmAsia colleagues describe here.

In North America, Merck is getting granular, contributing $35 million to the Merck Lumira Biosciences Fund for early stage companies in Quebec, part of its Canadian division's promise to contribute $100 million to Quebec-based life science R&D after it closed its Montreal lab in 2010. The fund is targeting a $50 million final close and will be managed by Lumira Capital of Montreal.

Then there’s Russia, which spans two continents. Its sovereign nanotech fund Rusnano is looking for cash from sources other than the Russian government to plow into more investments – many of which so far have been US-based biotech companies, as our START-UP colleagues explained in this profile. Investing in Rusnano is akin to investing in Russia, to an extent, because companies that receive direct investments from Rusnano must pledge to establish a footprint in Russia. Rusnano’s top executive in the US, Dmitry Akhanov, told VentureWire this week that Rusnano expects its first exits this year, “which is very important for valuation” as it goes out to fundraise. Rusnano wants to sell 10% of its $10 billion fund by the end of the year, says Akhanov: "The (Russian) government has decided that Rusnano is mature enough to become private and grow without direct government support."

Notice anything in common with all these funds? Exciting vacation destinations, perhaps – Montreal is certainly near the top of FOTF’s list in the summer months – but we were thinking more of who’s putting the money forth. With the exception of the Merck Lumira fund and the small slice of contributions from les VC, these funds are VC-free. They might, like Rusnano, partner with VCs, but the wellspring is located elsewhere. Could just be the way this fortnight rolled forth, but as serial entrepreneur John Mendlein put it at the Xconomy confab this week, it’s all about the cost of capital these days. For many corporations, foundations and sovereign states, cash is easy to come by, and a lot of those eggs are going into the baskets VCs are either unwilling or unable to fill. And with that, it's time to crack open another edition of...

Merrimack Pharmaceuticals: The cancer therapeutics firm raised $100 million in its initial public offering, selling 14.3 million shares at $7 a piece on Wednesday, March 28. The 20-year-old firm which began under the name Immtek was queued up to go public in January with loftier ambitions – 16.7 million shares in the $8 to $10 range – but postponed due to the ever-present “market conditions.” (Never mind that in the same fortnight, three other biotechs went public.) One big difference between Merrimack and its more successful peers at the time was insider participation; the other three, Cempra Pharmaceuticals, Chemocentryx and Verastem, had it, and Merrimack did not. (At least, it didn’t report it in its SEC filings.) Having previous investors cross over and take shares in the IPO is one of the inducements IPO buyers look for, as we reported in this START-UP story. (For those without a subscription, a shorter version is here.) Lo and behold, Merrimack’s filings this time around show that at least one existing investor (and its largest), Fidelity Investments, lined up to buy nearly $29 million of the offering. Fidelity was the largest purchaser of Merrimack’s most recent private fundraising, the $77 million Series G round (yes, G) it sold in April 2011. The round brought the company’s total private financing to $270 million. Its lead compound MM-398, a reformulated version of the chemotherapy irinotecan, is in Phase III to treat patients with metastatic pancreatic cancer who have failed gemcitabine. It has orphan drug designation in the US and EU. JPMorgan led the underwriting team with help from BofA Merrill Lynch, Cowen and Co. and Oppenheimer & Co. Underwriters have 30 days from the IPO date to buy up to 2.1 million additional shares. Merrimack shares closed at $6.01, down 14% from their IPO price, on April 4. -- Alex Lash

Promethera Biosciences: Belgian cell therapy company Promethera is the latest to join the crowd developing medicines for rare diseases. Promethera has raised $31.4 million in a Series B round, the largest venture financing this year in Europe, to support the start of clinical trials of its progenitor hepatocyte product, Promethera HepaStem, for orphan liver diseases like Crigler-Najjar syndrome, urea cycle disorder and phenylketonuria. Industry interest in its technology is evident from the presence among the new investors of two corporate VC funds, Shire and Boehringer Ingelheim. Japanese firm Mitsui Global Investment and US culture systems company ATMI Life Sciences also have re-upped for the B round. Shire has had a focus on regenerative medicines ever since it bought Advanced BioHealing in May 2011, and Boehringer Ingelheim is already a leading contract manufacturer of biopharmaceuticals using cell culture systems. Promethera's progenitor cells are isolated and cultured from one liver using its proprietary methods, and are expected to treat more than 100 patients without inducing rejection. Although cell therapy companies have disappointed in the past, the sector is starting to show greater promise, with better understanding and controls over cell culture and manufacture. Belgian and UK regulators already have cleared Promethera to begin Phase I/II studies of its hepatocyte product. -- John Davis

ADC Therapeutics: The new Swiss company is less an independent entity and more an extension of Spirogen, a UK developer of cytotoxic small molecules called pyrrolobenzodiazepines (PBDs) to be used in antibody-drug conjugate cancer drugs. Both are portfolio companies of Celtic Therapeutics Holdings, a private equity firm with a complicated past. Celtic has pledged up to $50 million to ADC Therapeutics, which will take the cytotoxins and linker chemistry from Spirogen and try to marry them with antibodies licensed from third parties to create ADCs that could treat several types of cancers. ADC hopes to have its first two candidates in the clinic within 18 months. It will develop the drugs only to Phase II proof of concept, then look for larger partners to help with expensive late-stage development and commercialization. Celtic general partners Peter Corr and Stephen Evans-Freke will sit on ADC Therapeutics’ board, along with the new company’s CEO Michael Forer, Spirogen CEO Christopher Martin, former National Cancer Institute Director Samuel Broder and Barrie Ward, the former CEO of KuDOS Pharmaceuticals. Forer also is a partner in Spirogen. Celtic currently is looking for a director of R&D for ADC Therapeutics, to be based at the London headquarters of Spirogen and travel between the two companies. The $50 million investment will be given to the company as needed for drug development over the next three to five years. -- Lisa LaMotta

Enterome Bioscience: The French firm said March 22 it has raised a 5 million Series A round led by Lundbeckfond Ventures and Seventure Partners. It is one of several companies exploring the human microbiome – the gene pool of the bacteria living within our bodies, particularly in our intestines. Enterome is developing biomarkers to measure abnormalities in the bacterial mix of the intestine, with the goal of eventually developing therapeutics to treat bowel and metabolic diseases mediated by the gut microbiota, such as non-alcoholic fatty liver disease, non-alcoholic steatohepatitis, obesity and type-2 diabetes. Enterome says changes in the bacterial composition that could signal disease include alterations in gut permeability that lead to insulin resistance, low-grade inflammation and metabolic endotoxemia (an increase in the level of bacterial lipopolysaccharides in the blood, often from a sustained high-fat diet). Founders include former executives at Fovea Pharmaceuticals, which was acquired by Sanofi in 2009. Enterome isn’t the only start-up betting that technological advances will release insights into the microbial universe and lead to drugs. Northern California firm Second Genome raised $5 million in 2011 to develop its discovery platform based on the PhyloChip, which analyzes the entire 16S ribosomal RNA gene sequence present in every bacterial genome to measure the relative abundance of the thousands of forms of bacteria in nature.  -- A.L.

RIP Haley. Photo courtesy of flickrer Valeehill through a Creative Commons license. 

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