Deals Of The Week Ponders Project Financing

GlaxoSmithKline has been out ahead of other big pharmas when it comes to investing in venture funds. Its deal with Avalon Ventures represents another flavor of the relationship – investing as a partner rather than as an LP and creating companies around a single drug. But in the rush to mint single-asset companies, are the stakeholders giving short shrift to innovation?

On April 22, GSK joined with Avalon Ventures to form up to 10 start-ups in one San Diego-area facility. Avalon will contribute up to $30 million from its Fund X, and GSK will provide up to $465 million in seed funding, based on development milestones, while retaining an option to swoop in and acquire a company if and when it produces a clinical candidate. Avalon will pick the early-stage prospects, and both companies jointly will approve the formation of new companies.

We’ve seen these deals before, motivated by the neediness of the two parties: big pharma needs low-risk access to external innovation as its own internal labs sputter; VCs need access to funding as their traditional sources dry up. GSK has been particularly active in teaming up with VCs, and seems to be trying out different flavors of collaboration. It invested last January in Sanderling Venture’s Fund VII; and in March 2012, it joined with Johnson & Johnson to invest in Index Ventures’ Index Life VI fund.

The Avalon deal is a new twist, however. GSK is not an LP in the venerable San Diego firm’s Fund X, which closed last year with $200 million in commitments. Rather, it is an investment partner, with the two sides forming syndicates of two for each company they create. They will not look to bring in more investors, officials from GSK and Avalon said this week.  And although GSK’s relationship to Index is as a limited partner, not a roll-up-the-sleeves, company-creation partner, it’s similar to the Avalon deal in one respect: the focus is on single-asset companies.

That’s also DOTW’s focus this week: project financing. Not from the perspective of the VCs who popularized the model and are investing in it like lemmings, but rather from the perspective of the scientists who do the daily work of inventing drugs. From the scientists’ point of view, the asset-centric model isn’t about lower risk and better returns. (After all, it’s an ongoing experiment whose benefits we won’t know for some time yet.) Scientists are asking a different question: is it the best route to innovation?

A single-asset company refers to a virtual start-up formed around a single drug. All staff, funding, planning and operations are geared to advancing that drug to an exit, whether it be the sale of the asset or the company that houses it. The leanness of the operation, and the need to outsource R&D, is thought to lead to capital efficiency. The exclusive focus on a single project is thought to offer operational efficiency and speed to proof-of-concept. The single-asset vehicle can make a clean, attractive package for a buyer, unencumbered with staff, infrastructure and overhead.

Here’s where the contrarian view comes in. Everything is outsourced these days, including synthesis and chemistry, in vitro and in vivo tox, ADME, pharmacokinetics, etc. But not so much target selection or lead optimization. Also, the outsourcing of R&D requires staff to oversee the tasks and manage the relationship – initiating the work, measuring performance and assuring quality, reviewing interpreted data, etc. Depending on the amount and complexity of the work, this can add bloat and cost.

Opinions about the capabilities and quality of CROs vary among scientists. Hermann Mucke PhD, founder of HM Pharma Consultancy, says he “would not trust a CRO's claims of its ability to identify any target, or optimize any lead structure.” He allows that a platform company with a sideline business could do specific target-related tasks quite well, likely better than most companies. But he adds that it’s sometimes difficult to achieve that narrow match. And it also requires more teamwork between internal staff and service provider than classical outsourcing.

Mucke’s last point about teamwork raises another potential problem with the virtual model. In his 1974 book “Lives of a Cell,” Lewis Thomas described the phenomenon of groups of ants, bees, fish, termites or people behaving like a thinking organism. It happens, like magic, when the group reaches critical mass. But does it happen in a virtual company with a handful of employees working from home, sometimes at a considerable remove from the operations? Thomas, who died in 1993, was the former Dean of Yale School of Medicine and New York University School of Medicine, and President of Memorial Sloan-Kettering Cancer Center. He knew something about scientists working in teams.

The short horizon to an exit  also could make it hard to attract top scientific talent. Scientists tend to like to dig deep into a project and are open to following leads thrown up by serendipity. Pfizer’s Xalkori (crizotinib) is a good example. The molecule was discovered at Sugen and came into Pfizer’s portfolio when it acquired Pharmacia, Sugen’s parent. Pfizer scientists at La Jolla, Calif., several of whom started at Sugen, spent seven years hitting crizotinib’s c-MET target before a chance publication in Nature magazine clued them into ALK and set them set them on the right path. Xalkori launched four years later.

Now, getting back to GSK – in siding with VCs, is the pharma seeking speed and cost-cutting advantages or is it hoping to get an innovative drug out of the investment? Are GSK’s interests aligned with its partners?

Beats us. We just thought the question needed to be aired. - Mike Goodman

We also think the following deals merit your patient attention:

Merck/Cerecor: In its second deal with Merck in the past month, on April 19 neuroscience specialist Cerecor acquired exclusive worldwide rights to develop and commercialize MK-0657, Merck’s NMDA (N-methyl-D-aspartate) receptor subunit 2B antagonist for all indications including depression.  The molecule was originally developed by Merck for Parkinson’s disease, but failed to show efficacy in an early study. However it did show a promising signal of antidepressant activity.  Dr. James Vornov, Cerecor’s SVP of clinical development, said his team was particularly interested in the oral drug’s “potential to rapidly reduce depressive symptoms, including suicidal ideation” in patients refractory to available therapies. Terms of the deal were not disclosed. Cerecor will immediately assume full development and commercialization responsibilities. The agreement includes milestone payments and royalties “consistent with clinical stage licenses in neuroscience.” Deals in the psychiatric space tend to feature low upfronts and moderate-large downstream payments, in keeping with the high-risk nature of neuropsychiatric drug development. In March, Cerecor received exclusive worldwide rights to develop and sell Merck’s catechol-O-methyltransferase (COMT) inhibitors, with potential applications in Parkinson’s disease, schizophrenia, and addictive behaviors. Financial terms were not disclosed. Founded in 2011, the start-up specializes in translating early stage neuroscience therapies into early human trials, and developing them for market. Merck’s mid and late-stage neuroscience pipeline shows no candidates for disorders of mood or behavior; but there are two for insomnia, two for neurodegenerative diseases, and one for neuromuscular blockade. - M.G.

AstraZeneca/Alchemia: In its ambition to transform the company through deal-making, AstraZeneca has signed yet another early-stage collaboration, this time a multi-target drug discovery deal with Australian oncology drug developer Alchemia. The agreement, announced April 23, gives AstraZeneca access to Alchemia’s Diversity Scanning Array (DSA) and associated Versatile Assembly on Stable Templates (VAST) chemistry platform to discover novel small-molecule drugs in a multitude of therapeutic areas, including oncology, respiratory and cardiovascular disease. Alchemia will receive an undisclosed upfront payment and is eligible for preclinical, clinical and commercial milestone payments of up to $240 million. The Alchemia’s DSA is a suite of 14,000 novel compounds that scan three dimensional molecular shapes and peptidomimetic functionality. It forms the basis of the VAST discovery platform which can identify the shape and binding elements required for target modulation. The deal is the fifth AstraZeneca has signed since unveiling its turnaround strategy to investors in March; the most recent was with Bind Therapeutics. - Jessica Merrill

Opko Health/Prolor Biotech: Opko Health announced April 24 that it will acquire Israel’s Prolor Biotech in an all-stock transaction valued at roughly $480 million. The stock-swap deal, expected to close during the second half of this year, is structured so that Prolor’s management and personnel will remain in place, serving as the biologics subsidiary of Opko, which already produces small-molecule drugs, vaccines and diagnostics. Prolor’s business focus is on developing longer-acting formulations of approved protein products, with a lead product for growth hormone deficiency, the Phase III human growth hormone hGH-CTP. Prolor intends to begin a Phase III trial in adults later this year, with a plan to position hGH-CTP as a weekly injectable more convenient for both adult and pediatric patients than the current daily-injection therapies. Opko Executive VP Steve Rubin said his firm placed a lot of value on acquiring the GHD product, which has orphan drug designation in both the U.S. and Europe in both adult and pediatric populations. The EU designation would protect the product, if approved, from direct competition for 10 years, he added. “This is the way we’re building Opko,” he said. “This gives us four products that will be in Phase III, which is very important to us. They’ll come on to the market at different times.” During an investor call, Prolor President Shai Novik spoke of how the deal structure – in which Prolor shareholders will receive 0.9951 shares of Opko stock for every full share in Prolor – will give his company’s investors the opportunity for lasting value by participating in Opko as long-term investors. The deal values shares in Opko at $7.03 a piece and Prolor shares at $7.00, a 20% premium over the Israeli firm’s closing price on April 23. - Joseph Haas

Bristol-Myers Squibb/Merck: Confident that its daclatasvir will prove the best-in-class NS5A replication complex inhibitor for hepatitis C, Bristol-Myers Squibb on April 22 signed its second non-exclusive partnership this month to test the compound in tandem with another company’s HCV candidate. The agreement to test Phase III daclatasvir in a Phase II combination trial with Merck’s MK-5172 follows on a similar arrangement signed with Vertex April 5 to test the NS5A inhibitor with nucleotide analog VX-135. The deal includes no financial considerations; Merck will fund the trial, with Bristol only contributing the volume of study drug needed, Doug Manion, Bristol’s senior VP of development, neuroscience, virology and Japan, said. The arrangement is open-ended, like other combo trial collaborations Bristol has entered – if the two companies want to move on to Phase III work with the combination being studied, they need to work out a new agreement. Manion said NS5A inhibition is a compelling pathway for treating HCV, in part because the exact function of the NS5A gene product in HCV is not fully understood. “It’s very complicated,” he said. “It does a large number of things and the virus can’t survive without it, we know that for sure. We were the first company to actually ‘crack the nut’ in terms of how to drug it.” Bristol plans to file the combination of daclatasvir and its proprietary Phase III protease inhibitor asunaprevir for Japanese approval later this year, specifically to treat genotype 1b of the virus, the version most prevalent in Japan. - J.A.H.

Achaogen/BARDA: The private anti-infectives company Achaogen secured $60 million from the Biomedical Advanced Research and Development Authority, a division of the U.S. Department of Health and Human Services, to advance its lead program. Disclosed on April 24, the funding is an extension of a 2010 contract with BARDA that brings the total to $103 million. The latest funding will go to conduct a global Phase III superiority study of plazomicin (ACHN-490) to treat patients with serious gram-negative bacterial infections due to carbapenem-resistant Enterobacteriaceae (CRE) infections. The trial is slated to start in the fourth quarter. Plazomicin is a next-generation aminoglycoside antibiotic; it’s also being developed against biothreat agents such as Yersinia pestis, which causes plague, and Francisella tularensis, which causes tularemia. Plazomicin is engineered to overcome known aminoglycoside resistance mechanisms. - Stacy Lawrence

Deal Of The Week: Nyet!

The Russian government’s announcement on April 19 that its ministry of foreign investment has rejected Abbott Laboratories Inc.’s plans to buy a domestic vaccine manufacturer, NGO Petrovax Pharm, highlights the nuances and complexities of deal making in emerging markets.

As required by Russian law, Abbott filed for permission to buy Petrovax in the fall of 2012. Published reports put the reported bid at $280 million, plus a $25 million future payment. The government’s motives for the kibosh remain unclear as of this writing, but Russia, as is the case in many countries, considers vaccines to be a strategic priority and might not want any foreign company, let alone Abbott, to own the company.

Abbott’s motives are more transparent. Many pharma companies see Russia as an attractive growth opportunity, especially since the government has embarked on a major initiative to build its life sciences ecosystem. And while the country’s operating environment is complicated, so are those of other emerging markets. Abbott is no longer a pharmaceutical company, since it spun out that portion of its business on Jan. 1 to create AbbVie Inc. But it did hang on to the company’s established products business unit focused on mature and off-patent branded drugs, which includes a seasonal flu vaccine, Influvac, and which would have been responsible for Petrovax. 

Petrovax, founded in 1996 by a team of Russian flu-vaccine researchers, is one of a handful of domestic makers of innovative medicines and one of the few owners of GMP-approved production facilities in Russia. As such, it is an intriguing example of the kind of domestic company the Russian government hopes will flourish as the country modernizes its biopharmaceutical industry. A patented influenza vaccine Grippol, discovered by Petrovax, is a best seller in Russia, and the company also makes the immunomodulator polyoxidonium.

But Russia has woefully few companies focused on developing their own innovative drugs and relies heavily on imports from foreign drug manufacturers for the most modern medicines. In 2009, it implemented Pharma2020, a blueprint for reinvigorating the domestic biopharma industry and building a scientific ecosystem that will lead to discovery on its own soils of new drugs. The near-term goal of the program is to encourage tech-transfer among foreign and domestic companies, in order to strengthen the local industry.

While these, along with broader government initiatives to improve Russia’s healthcare system and standard of living, are spurring Western interest, they lead to questions about how Russia can best balance the goals of foreign biopharma companies with its desire to be self-sufficient and foster a thriving domestic industry. Now that Russia has entered the World Trade Organization, the questions gain in relevance.

All of this will be the topic of discussion at the “Spotlight On The BRICs: Russia Track,” one of several clusters of panels that open the biotech industry’s big annual convention on April 22 in Chicago.  The author of this week’s DOTW column is slated to moderate one of the panels associated with this track, specifically on Russia’s Pharma2020/ modernization program.

“The Pink Sheet”/ EBI’s Chris Morrison will be moderating two panels: Battle of Biotech Wits, which he describes as “BIO’s only game show, where the audience gets to vote in real time on which panelists are giving the best answers to today’s most difficult and pressing questions.” A second he’s spearheading on “Adventures in Academic Partnering,” explores “what pharma wants from its increasingly large suite of academic partners, and how are industry’s leading companies structuring deals that gain them access to academia’s top technologies.”  Other EBI correspondents will be in attendance, notably Start-Up biopharma editor Alex Lash and PharmAsia News India editor Vikas Dandekar.

PharmAsiaNews executive editor Josh Berlin’s panel “Finding Innovation In Emerging Markets” ties directly to a driver we’re seeing more of—tapping innovation in and bringing innovation specifically developed for emerging markets to those regions. It’s a phenomenon known as ‘reverse innovation,’ and you can expect to see more of it as big Western companies hungry for growth, and looking over their shoulders at rising savvy competitors in the East, are aware of, if not quite ready to adapt.

Specifically, reverse innovation is “the global uptake by a multinational company (MNC) of a novel technology or strategy originally designed to address a specific need in an emerging market. One of the deal-makers active this week, Ascletis Inc., as a hybrid U.S. –Chinese company, with aims to tap new drug discoveries in both the East and West to bring to China, epitomizes this trend. And although we can’t say that Abbott’s strategy for Petrovax amounted to reverse innovation – we have no way to know if it planned to export Grippol, for example—Russians themselves clearly want to build up their pharma exports.  However early they are in the evolution, it’s something the industry is watching,  even as it musters on through the daily grind of more traditional deals…Wendy Diller

Roche/Ascletis: Roche and Ascletis are collaborating to develop and commercialize Roche’s investigational hepatitis C drug danoprevir in China, under a deal announced on April 15. The deal calls for Ascletis to fund and oversee the regulatory process, development and manufacturing of the drug in greater China, including Taiwan, Hong Kong, and Macau and receive payments upon reaching certain development and commercial milestones. The partners will collaborate on clinical development and commercialization. No direct antiviral agents are available currently for HCV in China, where more than 10 million people are infected with the disease. The majority of these are genotype 1b, which is highly responsive to danoprevir. Roche has no plans to develop danoprevir, a protease inhibitor, which also is effective against genotype 4, for the West, where the drug would face intense competition.

Two-year-old Ascletis, with headquarters in Research Triangle Park, N.C., and Hangzhou, in the Zhejiang Province of China, in-licenses and develops clinical-stage assets developed elsewhere with a goal of commercializing them in China. It also works to discover new drugs in China and bring them through mid-stage trials before striking revenue-generating global partnerships. For now, the company is focused on oncology and infectious diseases. It has raised one of biotechnology’s largest Series A rounds, a two-tranche $100 million financing led by Chinese real estate billionaire Jinxing Qi, along with other unnamed private investors in China, the U.S. and elsewhere.--WD

GNS Healthcare/CMS: GNS Healthcare, a data analytics firm, is partnering with the Centers for Medicare & Medicaid Services to assess the Department of Health and Human Services’s quality measures. In an agreement announced April 18, GNS will apply its Reverse Engineering and Forward Simulation analytics and machine learning platform to determine the impact that CMS quality measures have on the quality of patient care.
Collected and reported in an effort to produce patient which is effective, safe, patient-centered, equitable and timely, the CMS quality measures now are being linked to valued-based incentive payments to health care providers. The GNS effort will help analyze causal relationships between measures and outcomes for a triennial report CMS produces on quality measures.-- Joseph Haas

Eli Lilly/Siemens: Eli Lilly & Co. continues to plunge ahead with its Alzheimer’s disease programs despite some high-profile setbacks. It announced on April 17 that it has bought two tau imaging tracers and related technologies from Siemens Medical Solutions U.S.. The tracers are used with positron emission tomography to create images of tau tangles in the brain, and could be useful in monitoring treatment response and progression of Alzheimer’s disease, said Daniel Skovronsky, who founded Avid Radiopharmaecuticals Inc., sold it to Lilly in 2011, and became the pharma’s vice president, Tailored Therapeutics. He also remains CEO of Avid, which operates as a stand-alone division.

The tracers’ precise utility is undetermined given that they have only undergone Phase I testing. Most likely, they will complement Lilly’s beta amyloid PET agent Amyvid (florbetapir), which FDA approved in April 2012. Avid developed that agent, a key driver of Lilly’s decision to buy the company for $300 million upfront and up to $500 million in earn outs. Terms of the Siemens deal were not disclosed, and regardless of the monetary value, it indicates that Alzheimer’s remains “a significant commitment” for the company, which now “leads” the industry with its “robust Alzheimer’s program targeting both beta amyloid and tau, through therapeutic and diagnostic programs,” Skovronsky said. Lilly has two Alzheimer’s drugs in development, one in Phase III and one in Phase II, and a third compound slated to enter the clinic by mid-year. Each represents a different approach to treatment, but all target amyloid-beta in some way. Lilly also has a tau program in preclinical trials, with the first compound expected to enter the clinic within the next two years.--WD

Pfenex/Agila Biotech: Strides Arcolab Ltd.'s U.S. unit, Agila Biotech, has agreed to a joint venture with U.S.-based Pfenex Inc. aimed at developing six biosimilar drugs to be marketed globally. Agila will be responsible for preclinical and Phase I testing as well manufacturing, while Pfenex will develop an optimized production strain, process and analytical package for each product. In the fourth quarter, the JV will start clinical testing of a biosimilar of Bayer's Betaseron (interferon beta-1B) to treat multiple sclerosis. Agila holds a 51% stake in the JV. The manufacturing of the biosimilars will be at a new Malaysian facility that Agila and Bio-XCell agreed last month to build. Pfenex is a 2009 spin-out from Dow Chemical Co.--Stacy Lawrence

Santaris/Bristol-Myers Squibb: In the third RNA partnership in the last month, Bristol-Myers Squibb Co. and Santaris Pharma AS have entered into a broad discovery and development deal. For the biotech, it brings a new partner into the string of deals that continue to be its main source of capital.

The deal disclosed on April 16 is to discover and develop candidates using the biotech’s Locked Nucleic Acid (LNA) platform. Santaris develops oligonucleotide therapeutics that target disease-related messenger RNAs (mRNAs) and microRNAs. Santaris will receive $10 million upfront and up to $90 million in potential milestones and research funding, in addition to undisclosed royalties on worldwide sales of any resulting products.
Santaris already has a partnership with Pfizer Inc., which expanded an existing deal in 2011. The original deal was made with Wyeth in 2009, prior to the latter’s acquisition by Pfizer. The biotech also secured deals with Shire PLC in 2009 and GlaxoSmithKline PLC in 2007. The biotech said last year it had raised more than $125 million in non-dilutive capital through its collaborations. Santaris isn’t planning any financing and that it expects to rely upon existing and new deals for cash. Isis Pharmaceuticals Inc. and Moderna Therapeutics Inc. each secured big pharma partnerships for RNA within the last month.--SL

Xencor/CSL: Australian drugmaker CSL Ltd. has licensed Xencor Inc.’s technology platform for use with its monoclonal antibodies. Financial details of the license were not disclosed, but the companies said that Xencor will receive an upfront payment plus preclinical, clinical, regulatory and sales milestone payments, as well as royalties on product sales. Xencor’s Xtend platform increases the half-life of proteins, allowing for a better pharmacokinetic drug profile by introducing subtle changes to the protein sequence.
CSL is best known for its work in blood plasma and vaccines. The company has products for hemophilia, immunodeficiency, and blood loss during surgery in their pipeline. The companies did not reveal what therapeutic areas would be pursued under the collaboration, but CSL will provide the targets.

CSL and Xencor first teamed up in 2009 when the Australian company paid an undisclosed upfront, development milestones and royalties for access to Xencor’s XmAb platform, a suite of engineered antibody Fc domains and tools that optimize antibody candidates. The first candidate from the collaboration was moved into clinical testing in early 2012.--Lisa Lamotta

Epizyme/Abbott: Epizyme, focused on personalized medicine approaches to cancer, announced a partnership with Abbott on April 18 to develop a molecular companion diagnostic test for one of its candidates. The test is to be paired with EPZ-5676, an inhibitor which targets the DOT1L histone methyltransferase for mixed-lineage (MLL-r) leukemia, an aggressive genetically defined subtype of acute myeloid and acute lymphoblastic leukemia. Deal terms were not disclosed.

Abbott will use its proprietary FISH (fluorescence in situ hybridization) technology to develop a test that can detect cancer-causing MLL genetic alterations that affect the function of DOT1L. Epizyme plans to use the test to find ideal leukemia patients for ‘5676, its most advanced clinical candidate. Currently in Phase I, the small-molecule compound is licensed ex-U.S. to Celgene.--JAH

Financings of the Fortnight Keeps Its Dauber Up

Baseball fanatics out there might remember Roger Craig, a pitcher for the hapless expansion 1962 New York Metropolitans, then much later the manager of several memorable San Francisco Giants teams in the 1980s. As the San Fran skipper, Craig was a spinner of many homespun threads. The one that sticks with most Giants fans of a certain age was Craig’s catch-all pick-me-up: Don’t get your dauber down.

No one has yet to spot a dauber, much less one that’s down, but we all got the message. Baseball’s a long play, as you financial types might say. Don’t let the small sample sizes harsh your mellow. Case in point: DowJones VentureSource just released its first-quarter venture data, and everything, at first glance, is down: Money in (fundraising), money out (investment), and money recouped (IPOs and M&A activity). It was the lowest amount of venture investment in three years, and the fewest acquisitions since 2009.

That’s for all venture sectors; but there were bright spots in our little corner of the world. For example, a life-science specific VC survey from law firm Fenwick & West says in 2012 up rounds outnumbered down rounds 52% to 17%, an uptick from a 47%-25% ratio in 2011.

And despite increasing reluctance of life-science VCs to invest in new companies, the quarter’s second-largest fund raised was Third Rock Ventures’ new $516 million vehicle, its third (might we suggest T-shirts that say “III ROCK III”?). The folks at Fenwick have crunched fundraising data from DowJones and other sources and estimate that those earmarked for life-science investment are in decline, from $3 billion in 2011 to $2.5 billion in 2012. With Third Rock III – a pure life sciences play -- by Fenwick’s measure we’re already 20% of the way to last year’s total.

According to DowJones, biopharmaceuticals accounted for $938 million, about half the health care total, and right in the middle of the 13 quarterly totals rung up since the start of 2010. So take the overall venture drop with a spoonful of sugar: there have been far worse quarters in the past few years, such as the $583 million invested in Q1 2012. In fact, have a little more sugar: Broken down by industry subsector, “biotechnology therapeutics” beat out “online communities” as the biggest breadwinner with $476 million invested. (The gap between that and the $938 million attributed to “biopharmaceuticals” goes to show how much extra stuff, like diagnostics and specialty pharma, VentureSource lumps into the biopharmaceuticals category.)

With all the bustle in the IPO hedgerow the past two weeks, we think the VentureSource first-quarter overview seems prematurely grim. VentureSource tallied nine IPOs total, but that seems low. By our own count, there were seven through March 31 in health care alone, four of which were biopharmaceuticals. (Enanta, TetraPhase, KaloBios, and Stemline Therapeutics). Add to that this fortnight’s issues, Omthera Pharmaceuticals and Chimerix (see below), plus a burgeoning backlog of companies (Portola Pharmaceuticals, Epizyme, Receptos, and more) looking to break through to the public markets, and the outlook has begun to brighten. It’s not just the queue; it’s the fact that Chimerix broke the $100 million mark, a rare feat for a biotech IPO. Granted, it had help from existing investors, as did Omthera, but that’s been par for the course since the Great Recession receded. Nine digits is nine digits.

For all the venture capital that flowed into biotech this quarter, perhaps our favorite slice was the mere $15,000 that helped launch Cortera, the brain-child of students at the University of California, San Francisco. (Team leader Connie Cheung, whose winning presentation can be seen here, tells the IN VIVO Blog the name will soon change to Spiria.) They won a competition tied to the school’s entrepreneurship course, and the seed funding was provided by Burrill & Co., whose chief Steve Burrill is one of the course’s directors. The Spiria team says it has a brain-mapping system for neurosurgeons that’s faster and safer than established methods. If that holds true, they’ve got excellent timing; the National Institutes of Health is coordinating a brain-mapping effort, and GlaxoSmithKline has pledged to seed up to 20 academic labs doing early work that could lead to ‘electroceutical’ therapies, or the alteration of biological function through electrical pulses instead of chemicals or biologics. The latest edition of Start-Up will have a fuller explanation.

While you’re in a Start-Up mood, check out our colleague Stacy Lawrence's coverage of VCs doing rather un-venture-like things: funding late-stage drug trials on behalf of Big Pharma. The drug stays with the Pharma owner while the fees, milestone payments and (if all goes well) sales royalties flow to the VCs and their LPs. If the model grows beyond the handful of venture firms giving it a go, the metrics of venture exits might need re-thinking, because the entities the VCs set up to run the trial aren’t necessarily meant to go public or be acquired.

Finally, we send our thoughts and respect to the folks in Boston and West, Texas, each dealing with tragedy this week. Boston is home to much of our readership, and one effort to fundraise on behalf of the bombing’s victims and their families is getting a big push from the local tech and venture crowd, with an assist from the writers of Fortune’s Term Sheet. Thanks to all who refuse to get their daubers down.

And who knows, perhaps we’ll figure out what a dauber is by the time we get to the end of the latest installment of…

Cleave Biosciences: The early-stage oncology company has reeled in New Enterprise Associates to join its Series A syndicate, bumping the round that started in 2011 to $54 million without a clinical candidate in sight. NEA joins US Venture Partners, 5AM Ventures, Clarus Ventures, OrbiMed and Astellas Venture Management, as well as Osage University Partners, which joined later with a $2 million investment tied to its relationship with UNIV TK. (For more on the unique Osage strategy, click here.) Cleave was formed around three novel targets discovered in the Cal Tech lab of Raymond Deshaies, who co-founded Proteolix with USVP partner and Cleave board member Larry Lasky. Cleave’s initial Series A draw of $44 million and its exploration of protein homeostasis landed it a spot on START-UP’s 2011 A-List. It expects the Series A cash to last two or three more years and push a first drug candidate – not yet identified -- into the clinic. Other compounds addressing protein homeostasis have gained commercial approval for multiple myeloma, Millennium Pharmaceuticals’ Velcade (bortezomib) and Onyx Pharmaceuticals’ Kyprolis (carfilzomib), which came to Onyx when it bought Proteolix in 2009. Cleave will first pursue a proof-of-concept trial in multiple myeloma. Armed with its novel targets, however, the firm believes it can apply its compounds to solid tumors. NEA’s Robert Garland will take a seat on the board.– Lisa LaMotta

Anacor Pharmaceuticals: The Palo Alto, Calif. firm has had enough success discovering drugs with its boron chemistry platform that the Bill & Melinda Gates Foundation will fund new programs to discover treatments for two worm diseases and tuberculosis. The foundation will pay Anacor $17.7 million and take a $5 million equity stake, the latest biotech investment the world’s largest charitable group has made as part of a recent initiative. (Our Start-Up colleagues wrote about it here.) Beyond the programs for river blindness and elephantiasis, both caused by parasitic worms, and tuberculosis, Anacor will also use the Gates money to expand its library of boron compounds to screen for more neglected-disease treatments and open the library to the Gates Foundation and other nonprofit, governmental and academic researchers. Anacor’s lead compound is tavaborole to treat onychomychosis, a type of toenail fungus, and preliminary Phase III data were released earlier this year. The firm plans to file an NDA for tavaborole in mid-2013. The $22.7 million infusion from Gates nearly matches the largest fundraisings Anacor has managed since its 2010 IPO. In 2012 it raised secondary financings of $20 million and $23 million, and it has also brought in smaller amounts via private placement and alliance. – Alex Lash

Chimerix: No wonder the IPO pipeline keeps filling up. Conditions for new issues are improving, which allowed antiviral drug developer Chimerix to boost the number of shares in its offering while maintaining a strong price. Chimerix raised $107.4 million in its April 11 offering, selling 8.4 million shares at $14 apiece. The company had previously said it would aim to sell 6.1 million shares between $13 and $15 each, but it responded to high demand and fulfilled its underwriters’ greenshoe option by selling more shares within the same price range. The company will conduct Phase III trials on lead candidate CMX001, a broad-spectrum oral lipid conjugate of antiviral drug cidofovir (sold by Gilead as Vistide) to treat cytomegalovirus in patients who have undergone hematopoietic stem cell transplants. Chimerix is also investigating the drug to combat other double-stranded DNA viruses such as adenovirus, herpes simplex virus and BK virus, as well as smallpox. The company has a partnership with Merck around CMX157, another lipid conjugate targeting HIV. Chimerix shares rose 34% in their first day of trading to close at $18.79, and spent most of the week between $18 and $19.50. – Paul Bonanos

Auris Medical: The Swiss firm said April 16 it has attracted a chunky $50.4 million in a Series C financing, the most raised by a private biotech in Europe so far this year. With two Phase III-ready candidates for tinnitus and acute hearing loss, Auris has a pioneering position in new drugs for hearing disorders. The cash will be used to move them through to registration, the firm said. AM-101 is being developed for the treatment of acute tinnitus, and AM-111 for the treatment of inner ear hearing loss, and both have completed Phase IIb proof-of-concept studies. The compounds are formulated in a biocompatible gel and given by intratympanic injection, through the eardrum, and they then rely on passive diffusion to reach their site of action in the cochlea. Developing new otologic drugs hasn't attracted the same amount of attention as new ophthalmic drugs, even though hearing loss is more common than declining sight. The cochlea, or inner ear, is tiny and difficult to get at, and there are a plethora of hearing aids and implants already available to address the commonest hearing disorder, the age-related loss of hearing associated with a lifetime of loud noises and other adverse events. When Auris CEO and founder Thomas Meyer started out in 2003, he funded the company himself, and found it difficult to convince others of his seriousness. The new round shows his persistence has paid off, and other efforts have also recently emerged. The funds come from Paris-based Sofinnova Partners and US-based Sofinnova Ventures, two firms with common ancestry but which are otherwise independent of each other. – John Davis

All The Rest: GenSight Biologics closed a $40M Series A to support ophthalmic gene therapies… Syros Pharma raised $30M in a Series A for its work on novel gene control medicines… Allecra Therapeutics, a 2013 start-up collaborating with Orchid on overcoming bacterial resistance to antibiotics, completed a €15M Series A co-led by Edmond de Rothschild and Forbion... Dievini Hopp Bio Tech Holding provided a €13.9M Series E for topical drug delivery company Novaliq… Orphan drug accelerator Cydan raised $16M… InnoBio and Sofinnova Partners were the investors on neuro-metabolic-focused MedDay’s €8M Series A… Merck Serono Ventures led a £2.1M round for Canbex Therapeutics… Beat BioTherapeutics was seeded with $2.5M to fund a gene therapeutic for heart failure…Seraxis, working on cell therapies for Type I diabetes, raised an undisclosed amount in Series A financing… Boehringer Ingelheim Venture Fund reportedly provided Series B financing for Eyevensys… University of Copenhagen spin-off Avilex received seed funding from Novo Seeds… GI therapeutics company Synergy publicly sold $90M worth of common stock… Omthera grossed $64M in its IPO... Chemokine-targeting ChemoCentryx closed a $60M FOPO… Less than a year after completing an IPO, Durata Therapeutics raised $50M in a secondary offering… Oncology tests and services firm Cancer Genetics raised $6.9M in its IPO after postponing and refilling multiple times… ADMA Biologics, which reverse merged and became a public reporting entity via the Form 10 process, amended its IPO terms… Harvard Apparatus Regenerative Technology postponed its IPO… VistaGen raised $36M from a subsidiary of Bergamo Acquisition Corp. … RNAi platform company Silence Therapeutics completed a £19M PIPE… To support Phase IIb trials of diabetes candidate GFT505, Genfit raised €14.3M… Lincoln Park Capital Fund might invest up to $18.5M in Anthera, which also signed a $20M debt financing with MidCap Financial… MEI Pharma will use $15.2M in PIPE proceeds for lead candidate pracinostat for advanced hematologic malignancies… Jennison Associates invested $10.1M in Coronado Biosciences… OxiGene sold $5M in zero coupon convertible preferred stock… Resverlogix is spinning off RVX Therapeutics to focus on an epigenetics platform in autoimmune disease and cancer… StemCells got a $10M loan from Silicon Valley Bank. -- Amanda Micklus

Deals of the Week: Ante Up For Antisense, Pharma Places Another Isis Bet

Isis Pharmaceuticals has been on a roll of late. The antisense platform play is busy highlighting its incredibly deep line-up of candidates and partners, now that it secured an FDA approval for Kynamro (mipomersen) to treat homozygous familial hypercholesterolemia (HoFH). And investors seem to like what they see; Isis shares are up 84% this year and may be poised to exceed an all-time high price set in 2001. But any long-term success the company hopes to enjoy depends on eventually ramping up commercial revenue.

The biotech has 28 clinical and preclinical candidates; nine of which will have Phase III or “important” Phase II data by early 2014. To develop this embarrassment of pipeline riches, Isis has a large roster of partners. This week it added a new one, Roche, bringing the number of major biopharma partners to seven. The others are AstraZeneca, Biogen Idec, Bristol-Myers Squibb, Eli Lilly, Sanofi’s Genzyme and GlaxoSmithKline.

Isis has raised about $2 billion through partnerships, much more than its $834 million in net proceeds from equity sales or $784 million borrowed in long-term debt deals. The biotech expects to finish this year with $325 million in cash. Last year, Isis did four major biopharma deals, three with Biogen Idec and one with AstraZeneca.

From those four deals alone, in 2012 Isis received $96 million in up-front payments with the potential to earn more than $2 billion in milestone payments and licensing fees. At year-end, all told, Isis had the potential to earn as much as $5.1 billion in future milestone payments.

Its latest option deal with Roche is for Huntington’s disease treatments; it brings to the table Isis’ antisense oligonucleotide technology (ASO), as well as Roche’s brain shuttle technology, a method to deliver oligos into the central nervous system. The initial research will focus on blocking all forms of huntingtin (HTT) protein. In addition, the partners will also work to block production of disease-causing forms of HTT protein and to treat asymptomatic patients.

Roche will pay Isis $30 million upfront, as well as tiered double-digit royalties on any products that result. Isis is eligible for $252 million in development milestones, including a large payment at the end of Phase I. Roche will also pay $80 million in commercial milestones. Isis will be responsible for discovery and development through Phase I, at which time Roche has an option to license all compounds that result from the collaboration and take over global development and commercialization. Products under the collaboration are expected to be IND-ready by the end of 2014.

“Isis now has a stronger balance sheet where it can be much more selective in choosing partners, and can choose when to partner,” noted Dallas Webb of BB Biotech, a major Isis investor that held 7.9% of its shares at Dec. 31. “Additionally, the company has a clear focus on rare diseases, where its technology can be used to target previously un-addressable disease mechanisms.”

Isis plans to put about three to five candidates into the clinic annually. It’s defined five major research areas as its primary territory: cardiovascular disease, severe and rare diseases, metabolic diseases, cancer and inflammation.

While early stage research partnerships continue to pay the bills, to make it on its own Isis needs to start banking some serious product revenue. Wall Street isn’t particularly optimistic that will materialize in the near-term. The consensus estimate for 2013 Isis revenues is just $110 million, with $116 million expected for 2014. Even without Kynamro, in 2012 Isis had $102 million in revenues and a $68.9 million operating loss. Still, Isis says it has five products it could bring to market within the next five years.

These include ISIS-TTR to treat transthyretin (TTR) amyloidosis, a severe and rare genetic disease in which the patient produces a misfolded form of TTR that progressively accumulates in tissues, and ISIS-SMN to treat spinal muscular atrophy (SMA), a severe motor-neuron disease that is a leading genetic cause of infant mortality. The former is partnered with GSK and is in a Phase III trial, while Biogen Idec has an option to the latter, which is slated to start a Phase II/III trial in infants before year-end with another Phase II/III trial in children scheduled for the first quarter of 2014.

Isis also has two ongoing Phase II trials for ISIS-APOCIII, to treat severe hypertriglyceridemia. The unpartnered candidate will have data from one trial in the next few months and the other by year end. A Phase III trial is expected to start late this year or early next year.

Webb said investors are currently focused on SMN and will follow the asset closely in the next 12-18 months. He noted the upcoming APOCIII data and he expects TTR will move more into the spotlight in the next year or so. “These compounds on top of the Kynamro approval should lead to an increased focus on the pipeline, where we believe a lot of value remains to be unlocked,” he said.

In addition, Isis is hoping to bulk up its Kynamro label. Isis and partner Genzyme have an ongoing Phase III/IV trial in severe heterozygous familial hypercholesterolemia (HeFH) patients with data due late next year. Not only is the patient population much larger for HeFH, but the subcutaneous drug is dosed 3x weekly rather than the 1x a week with HoFH patients. However, Webb sees the true value of Kynamro as the validation of Isis’ technology and an establishment of FDA’s willingness to approve an antisense compound.

Other Isis investors as of Dec. 31, 2012 include top-flight mutual fund groups Fidelity Management (14.9% of shares outstanding) and T. Rowe Price (2.2%), as well as hedge fund BlackRock (3%). In the fourth quarter, only two of its top 10 holders trimmed positions and each only by single-digit percentages. But another seven added to positions, four of them by double- or triple-digits. Fidelity held pat in the fourth quarter as the largest Isis holder.

Isis/Roche wasn't the only deal of the week, of course. In fact, it wasn't even the only antisense deal. Keep reading for the rest of the week's deal-making highlights in this week's edition of  . . .

Sarepta/University of Western Australia: Another company developing new antisense drugs deepened its commitment to commercializing academic research in this area on April 11, when Sarepta Therapeutics. agreed to license a portfolio of patented technologies addressing Duchenne muscular dystrophy from the University of Western Australia. For $7.1 million in up-front and milestone payments, as well as a low single-digit royalty on sales of any approved products that come from the collaboration, Sarepta will receive intellectual property concerning exon-skipping technology, which is used to excise a key piece of dystrophin RNA during the transcription process, resulting in functional dystrophin that gives strength to muscle fibers. The Cambridge, Mass.-based company already uses the technique in its lead candidate eteplirsen, a Phase II drug for DMD, which repairs exon 51; Sarepta obtained the exon-skipping technology for that drug from Perth-based UWA under a 2008 agreement. The company also has three other preclinical drugs that address exons 45, 50 and 53. Sarepta says that by combining the newly obtained patents with its own phosphorodiamidate morpholino oligomer technology, it can create exon-skipping drugs capable of treating the majority of DMD patients worldwide. One in 3,500 boys is born with the muscle-wasting disorder, which usually leads to death by age 30. -- Paul Bonanos

GlaxoSmithKline/A*STAR: GlaxoSmithKline and Singapore’s Institute of Chemical and Engineering Sciences Agency for Science, Technology and Research are working together to develop new formulations of existing medicines specifically for emerging markets. The collaboration, which the organizations announced on April 9, will continue for five years and focus on development of “evidence-based formulations,” or EBFs, of GSK’s off-patent drugs, in order to improve patient outcomes in emerging markets. ICES is part of Singapore’s A*STAR network, which is charged with helping to grow Singapore’s economy by building and maintaining a world-class scientific research infrastructure. A*STAR oversees 14 biomedical, physical and engineering sciences institutes and six consortia in Singapore. ICES and GSK have been working together since 2003, and GSK also works with other divisions of A*STAR. ICES is contributing expertise in synthesis, formulation and process development, while GSK will provide drug candidates, and optimization and product development skills. Through the alliance, ICES will be able to enhance its knowledge of drug formulation, analytical capabilities, and scale up and will develop a pool of local expertise in specialized formulations.  The aim, from GSK’s perspective is to bring affordable medicine to more people. Terms were not disclosed, but the deal enhances Singapore’s position as a regional hub for drug development. Singapore is the regional headquarters for a number of multinational pharma companies, including GSK, Abbott Laboratories (now AbbVie), Roche, Merck & Co., Bayer, Pfizer, and Novartis. -- Wendy Diller

Resverlogix/RVX Therapeutics: Unlike Isis, which is embracing its platform, Resverlogix  is spinning out its platform into a separate private company, temporarily named RVX Therapeutics. The publicly listed Canadian biotech said it wants to make the move in anticipation of its own potential takeout following June Phase IIb data for lead candidate RVX-208, a BET bromodomains inhibitor. RVX-208 is designed to treat atherosclerosis by increasing serum levels of apolipoprotein A-1, a building block that makes up 70 percent of HDL cholesterol. RVX-208 is also in Phase II testing to treat diabetes and will soon be in a Phase II trial for Alzheimer’s disease. In the spin-out, RVX Therapeutics will get the epigenetics platform, excluding any ApoA-1 and RVX-208 technology. The platform is based on targeting BET (Bromodomain and ExtraTerminal Domain) proteins. Resverlogix compounds bind to BET bromodomains and prevent them from engaging proteins associated with DNA called histones. The newco would either be supported by a royalty from a potential Resverlogix acquirer or it would perhaps IPO. The spinout is subject to a shareholder vote, which will likely be at the end of May. Shareholders would receive one share in the new company for each Resverlogix share they hold at a date of record in late April. Investors haven’t exactly embraced the deal, sending shares down about 12% since the April 8 announcement. -- Stacy Lawrence

Aeterna Zentaris/Ergomed Clinical Research: The Canadian biotech and the European contract research organization partnered to conduct a Phase III trial for AEZS-108 in endometrial cancer. Structured to share risk with Ergomed Clinical Research, the deal calls for the CRO to assume 30%, or up to $10 million, of the clinical and regulatory costs associated with the trial that are estimated to total about $30 million. In return, Ergomed stands to receive a single-digit percentage of any net income to Aeterna Zentaris for AEZS-108 in this indication, up to a pre-specified maximum amount. The trial for the doxorubicin peptide conjugate will be of 500 patients and have a primary endpoint of overall survival.
Aeterna Zentaris had a major disappointment in March, when an independent Data Safety Monitoring Board recommended the discontinuation of a Phase III trial for perifosine to treat multiple myeloma since it was deemed highly unlikely the study would achieve a significant difference on progression-free survival, the study’s primary endpoint. Aeterna Zentaris shares are down 22% this year, giving it a market cap below $50 million. -- S.L.

GlaxoSmithKline/Academic Institutions: GlaxoSmithKline will dedicate $1 million in prize money and research funding of an undisclosed amount for up to 40 researchers across 20 academic and other nonprofit institutions to answer early questions about the possibility of using extremely focused electrical impulses to modulate the neural signals that control vital organs. With so-called “electroceuticals,” the aim is to do with electrical information what drug makers currently try to do with biologics and small molecules: control blood pressure, cytokine production, glucose function, or any number of biological functions that lead to disease when out of whack. “Correcting disorders with treatment in their own electrical language” is how Kristoffer Famm, the vice president in charge of GSK’s new bioelectronics group, and his co-authors describe their goal in the latest issue of Nature. Before treatments come to light, there are years of work ahead in mapping the neural activity associated with various diseases. Famm says the funding, to be parceled out to two researchers per lab, is aimed at jump-starting the mapping projects or building upon works in progress.
The field is gaining momentum with the new U.S. brain-mapping initiative and a Stanford University breakthrough that creates see-through brains that allow researchers to highlight and study networks of neurons as they fire. At the end of 2013, GSK expects to convene a meeting where researchers will zero in on a key hurdle the field needs to overcome; GSK will then put up $1 million as a prize to the group that solves the problem. -- Alex Lash

Photo Credit: Ramberto Cumagun

Versant Looks For "Off-The-Beaten-Path" Deals In Canada, Europe

Versant Ventures has been deepening its commitment to international expansion lately. The firm is replicating its San Diego-based discovery engine, Inception Sciences, in Vancouver, tightening its ties with the Canadian research community and spinning out new companies as its predecessor has been doing for almost two years. And with new partners in its Basel, Switzerland office, the firm expects to forge new deals in Europe -- especially in off-the-beaten-path areas -- while enjoying closer proximity to both academic scientists and European acquirers.

Operating principal Jerel Davis says the firm has had some presence in Europe dating back to 2008, when venture partner Thomas Woiwode established a beachhead.  But new partners Guido Magni and Gianni Gromo, both former Roche colleagues of Versant partner Brad Bolzon, have arrived in recent months to flesh out the Basel office. The firm backed genetic vaccine start-up Okairos in September 2010, but more deals are expected soon. Stay tuned – the “Pink Sheet DAILY” expects to have full coverage of what’s on the way, and the next issue of START-UP will feature a deeper look at Versant’s international strategy.

The European office hopes to extend its reach throughout the continent and into Israel, while the Vancouver office will be in close touch with the Montreal research community while remaining “a short flight away from San Francisco and San Diego,” Davis says. He adds that the Canadian arm of Inception will likely spin out new companies in a fashion similar to Inception’s third project, which included an option for Roche to acquire it as it files an IND.

Deals Of The Week Wonders Whether Heated Competition To Buy Ache Laboratorios Will Muddy The Brazilian Waters

Could a bidding war for Brazil’s privately held Ache Laboratorios do for Latin America what Abbott Laboratories’ gargantuan purchase of part of India’s Piramal Healthcare did for biopharma M&A in India?

Call it the “Piramal effect,” if you will. Abbott reset expectations among India’s domestic pharma world with its $3.72 billion purchase in 2010 of Piramal’s branded generics business. Brazil hasn’t yet seen the kind of blockbuster deal that would raise prices across the board; the highest value deal in that market to date is Sanofi’s $662 million buyout of Brazilian generics firm Medley Pharmaceuticals in 2009.

Sanofi got in early – staking its claim before big pharma’s buying spree in emerging markets generated significant deal inflation – but the deal hardly lifted the value of Brazilian companies across the board. That transaction was followed by smaller deals, such as Takeda’s $251.5 million (BRL 500 million) buyout of Brazilian branded generics specialist Multilab Indústria e Comércio de Produtos Farma about one year ago, which also included potential for up to BRL 40 million in earn-outs.

But, now comes word that could blow all previous Brazilian deals out of the water – Abbott and two of its big pharma competitors, Pfizer and Novartis, are preparing a second round of bids to buy Ache, Brazil’s leader in the sale of prescription drugs. The rumored price tag for Ache, fourth overall domestically in drug sales when over-the-counter products are included, ranges between $4 billion and $5 billion, a matter complicated by talk that at least one of three ownership families does not wish to sell. Ache’s public stance is that it is not up for acquisition.

Ache reported net earnings of $270 million for the 12 months ending Sept. 30, 2012. Nonetheless, a source familiar with the company told Deals of the Week that Ache remains an appealing investment for big pharma due to higher gross margins than its domestic competition, high top-line growth and strong relationships with distributors. In an emerging-markets competition where it is difficult to acquire worthy assets without overpaying, the three pharmas are facing a reality that a price tag above $5 billion – about 20 times EBITDA (earnings before interest, taxes, depreciation and amortization) – may be required just to get a foot in the door.

One pharma executive who asked not to be named told DOTW that his company is so discouraged by prices for assets in the primary emerging markets that it already is looking to next-generation possibilities such as Nigeria and Colombia.

As an article in The Atlantic notes, for overall business climate, Brazil recently has been viewed as the shining jewel of the so-called BRICS nations (Brazil, Russia, India, China, South Africa), with an average real gross domestic product growth rate of 4% between 2004 and 2010, including an eye-opening 7.5% in 2010. Add in low unemployment and a fairly industry-friendly regulatory environment, and Brazil perhaps was positioned to join China as the top emerging market for biopharma.

An early 2013 Business Monitor International report states that total pharmaceutical expenditure in Brazil in 2011 was more than $28.7 billion, and that total was expected to grow by 7.6% in local currency terms in 2012 (while declining in U.S. dollar spending due to exchange-rate fluctuations.) However, the biopharma opportunity in Brazil is being diminished by drug rebates, which are increasing both in total numbers and in size.

Meanwhile, GDP declined 0.9% in Brazil last year, combining with a 6% inflation rate to tarnish the South American giant’s emergence. Outside investment hoping to tap Brazil’s huge population, highlighted by a rising consumer class, faces what is known as “the Brazil cost” – a combination of high tariffs, poor infrastructure and red tape that increase the cost of doing business, the Atlantic reported.

But industry interest in tapping the Brazilian market cannot be denied. A review of Elsevier Business Intelligence’s Strategic Transactions database reveals six major equity investments in Brazilian biopharma holdings this decade. Beside last May’s Takeda/Multilab transaction, these include:

• Valeant Pharmaceuticals paying $28 million in May 2010 for Instituto Terapeutico Delta, a private branded generics and OTC company focused largely on dermatology;
• Pfizer anteing $240 million plus performance-based earn-outs to acquire 40% of generics firm Laboratorio Teuto Brasileiro in October 2010;
• Amgen ponying up $215 million in cash for Bergamo, a hospital-focused company with an emphasis on oncology, in April 2011;
• Merck investing an undisclosed amount in February 2012 to create and own a 51% stake in a Brazilian joint venture with Supera Farma Laboratorios, Cristalia Produtos Quimicos Farmaceuticos and Eurofarma Laboratorios; and
• UCB Group paying an undisclosed sum with potential for performance-based earn-outs to acquire 51% of specialty pharma Meizler Biopharma. The May 2012 deal included an option for UCB to buy out the remainder of the company.

While we await the outcome of the multi-company pursuit of Ache – GlaxoSmithKline reportedly dropped out of the bidding a while back – other biopharma deal-making was completed in the past week as we tally up …

AstraZeneca/AlphaCore: Following through on CEO Pascal Soriot’s promise to rebuild the company’s cardiovascular pipeline, AstraZeneca announced its third cardiovascular deal in two weeks. In the latest tie up, announced April 3, AstraZeneca’s biologics unit MedImmune acquired private biotech AlphaCore Pharma for an undisclosed sum. The big pharma gains ACP-501, a recombinant human lecithin-cholesterol acyltransferase (LCAT) enzyme that is believed to play a major role in removing cholesterol from the body and also may increase levels of high-density lipoprotein (HDL) cholesterol, better known as “good cholesterol.” A Phase I trial testing the drug met its primary safety and tolerability endpoint and also showed that ACP-501 raised HDL cholesterol in patients taking it. The cholesterol space is a high-risk, high-reward area of drug development, given the growing regulatory and commercial hurdles. But Soriot vowed AstraZeneca would embrace risk as a key to unlocking success in the drug-development process during an overview March 21 in which he unveiled his turnaround plan for the company. Cardiovascular disease is one of three core therapeutic areas the company has committed to. In March, the company signed two deals in the field: an option agreement with messenger RNA developer Moderna Therapeutics for up to 40 programs in exchange for $240 million upfront and a research partnership with Sweden’s Karolinska Institute. - Jessica Merrill

Bind Therapeutics/Pfizer: Nanotech company Bind Therapeutics has inked its second deal with a major player this year, signing a collaboration with Pfizer on April 3. Pfizer will pay Bind to combine its Accurins technology with small molecules provided by the big pharma. Pfizer will pay $50 million in upfront and near-term development expenses per molecule and Bind is eligible for $160 million in regulatory and commercial milestones for each product that reaches the market. Bind did not retain any commercialization rights, but will receive tiered royalties on worldwide sales. The company would not reveal the number or kinds of molecules covered by the deal or the therapeutic area of focus, but did say the agreement covers more than one molecule. The Accurins technology has been explored in the areas of oncology, inflammatory diseases like arthritis and cardiovascular indications. In January, Bind announced a similarly sized agreement with Amgen to develop and commercialize kinase inhibitor nanomedicines to treat solid tumors. - Lisa LaMotta

Ra Pharma/Merck: Less than a year after exiting stealth mode, Ra Pharmaceuticals has landed its first partnership, aligning with Merck to help the pharma discover and develop drugs for difficult-to-hit protein targets. Under the agreement announced April 1, Ra will use its proprietary Extreme Diversity platform to find and develop cyclomimetic candidates that can address intracellular protein-protein reactions in multiple undisclosed therapeutic areas. Ra will receive an undisclosed upfront payment and research funding; discovery, development, regulatory and commercialization milestones could bring its full remuneration to $200 million. While the deal stemmed from early conversations between Ra executives and Reid Leonard, head of Merck Research Ventures Fund, it does not include an equity component for the pharma, Ra President and CEO Doug Treco said. It also includes no risk-sharing, such as a co-promotion option down the road. Ra is developing what it terms a new class of drugs, peptide-like molecules offering the diversity and specificity of antibodies along with the attributes of small molecules, such as oral bioavailability. Cyclomimetics, the cyclic polymer drug candidates produced with Ra’s technology, are characterized by their cyclic structure and backbone as well as side-chain modifications that can provide beneficial properties not offered by natural peptides, the company says. It claims that Ra’s platform produces molecules that are highly specific and stable, offering improved cell permeability and potential for increased bioavailability as well as longer half-lives. - Joseph Haas

Astellas/Ambrx: In its latest tie-up with a major pharmaceutical player, Ambrx announced April 5 that it will collaborate with Japanese pharma Astellas Pharma on a series of antibody-drug conjugates (ADCs) in the oncology setting. Astellas will pay the biotech $15 million upfront, as well as $285 million in potential development, regulatory and sales-based milestones to discover and develop an undisclosed number of molecules that use its site-specific ADC technology. Last June, Ambrx inked a deal with almost identical financials with Merck. While details of the targets the companies intended to focus on were not disclosed, it was revealed that they would focus on areas “beyond oncology.” Ambrx also has tie-ups with Eli Lilly and Bristol-Myers Squibb. Previously it had arrangements with Wyeth, Roche and Merck Serono. ADC technology, which allows drugs to be targeted to a specific site carrying a therapeutic payload, have become a hot space since Seattle Genetics got approval of its ADC lymphoma drug Adcetris (brentuximab vedotin) in August 2011. - L.L.

Agios/Foundation Medicine: Agios Pharmaceuticals and Foundation Medicine signed a pact April 4 to use the latter’s clinical assay, FoundationOne, to create diagnostics which could identify ideal patients for Agios’ compounds aimed at cancer metabolism. No financial terms were disclosed. The diagnostic-discovery collaboration will focus on Agios candidates intended to inhibit tumors that carry mutations in the IDH1 and IDH2 metabolic enzymes. The work will seek to identify tumor genomic alterations that would be most likely to respond to Agios’ candidates, and to potentially develop and commercialize companion diagnostics for Agios compounds. Foundation, which developed the FoundationOne genome analysis profiling system for personalized cancer treatment decision-making, raised a $42.5 million Series B financing in 2012 with a syndicate of venture capital and corporate venture outfits. The round was topped off with an additional $13.5 million this past January from individual investors including Bill Gates, Yuri Millner and new board member Evan Jones. Agios, partnered since 2010 with Celgene on cancer metabolism R&D efforts, raised a $78 million Series C round in 2011 and announced plans to branch out therapeutically into rare genetic disorders. - J.A.H.

Novartis/ImmunoGen: ImmunoGen on April 4 updated the status of its 2010 licensing agreement with Novartis to apply the biotech’s Targeted Antibody Payload (TAP) technology platform to create cancer-fighting antibodies for undisclosed targets chosen by the multinational pharma. Under an amendment to the agreement, Novartis has exclusively licensed one compound against a still-undisclosed target, while taking a non-exclusive license to a second compound which can be converted later to an exclusive license. ImmunoGen will receive $4.5 million upfront under the amendment and could earn between $200 million and $238 million in milestones pegged to the two compounds, plus potential sales royalties. Of the upfront money, $1 million is an option exercise fee, while the remaining $3.5 million, which could be credited against future milestone payments, will be paid if Novartis terminates development of one or both compounds. In a same-day note, Cowen & Company analyst Simos Simeonidis called the developments “an incremental positive for ImmunoGen” that helps to validate the TAP platform. In October 2010, Novartis paid $45 million upfront for the license, intended to help it create antibody-drug conjugate (ADC) therapeutics for cancer. The deal offered the potential for up to $200.5 million in milestones for each target leading to development of an ADC, as well as sales royalties on any products reaching market. - J.A.H.

ArQule/Daiichi Sankyo: In our “No-Deal” of the week, collaborators ArQule and Daiichi Sankyo have decided to terminate an early-stage collaboration around Phase I oncology compound ARQ-092. The news comes just months after a Phase III setback of the companies’ later-stage oncology compound tivantinib, which the two companies will continue developing together. Daiichi opted to license ARQ-092 in November 2011 and paid $10 million upfront at the time, as well as Phase I development expenses. ArQule stood to gain $255 million in milestone payments and the deal included development of multiple compounds; the program now has been returned to the Woburn, Mass.-based company. Meanwhile, tivantinib failed to show overall survival in a late-stage trial in non-small cell lung cancer. The drug’s development focus now has been shifted to liver cancer. The partners signed their initial agreement for tivantinib (known then as ARQ-197) in November 2008. Daiichi agreed to pay $60 million upfront, as well as $560 million in milestones to license the c-Met receptor tyrosine kinase inhibitor. - L.L.

Photo Credit: Muddy Amazonia

Uneasy Lies The Head That Wears a Financings of the Fortnight Crown

Compared to other types of financing, royalty-based deals in the biopharma world are rare. That’s because a company needs products with future revenue to parlay into a near-term lump sum, and the relative few companies that have such products often don’t need the immediate cash or can get it other ways.

So when a royalty deal – or a debt deal using product royalties as collateral – crops up, we take notice. And they seem to be cropping up more often. Just our imaginations? Not according to Elsevier’s Strategic Transactions database, which offered up ten deals in 2012, the most in any of the past ten years. 2011 was a close second with 9 deals, and with three more this year, 22 of the 47 we found in the past ten years are of recent vintage. (These numbers reflect only the publicly disclosed deals; there are certainly more, as investors in this space often keep activities out of the spotlight.)

In dollar terms, the total since the start of 2003 is $5.7 billion. The last two years and change have seen $2.7 billion worth of deals, a proportion akin to the deal flow.

The richest deal in recent years is Royalty Pharma’s $761 million purchase of the earn-out rights from the shareholders of Fumapharm, the German firm that sold to Biogen Idec in 2006. The deal could end up extra sweet for Royalty, now that the Food and Drug Administration has approved the main product in the Fumapharm dossier, the oral multiple sclerosis treatment BG-12, renamed Tecfidera.

Another near-blockbuster was Royalty’s $609 million purchase of DPP-IV rights from Astellas Pharma’s Prosidion division. A bit farther down the pay scale, but still significant, were Dendreon’s sale of Victrelis royalties to CPPIB Credit Investments for $125 million, and Nektar Therapeutics’ $124 million deal with an offshoot of Royalty Pharma for its royalties to Mircera and Cimzia, both of which were formulated with Nektar’s pegylation technology.

Now add one more to the list. This fortnight, weight-loss drug maker Vivus used royalties of its Qsymia, weighed down so far by slow sales, as collateral to borrow up to $110 million. (We describe the deal below in our roundup.) And of course, in what could be the ne plus ultra of all royalty deals, Royalty Pharma (who else?) is dangling $6.6 billion to buy Elan, which after its major divestments is basically a holding company for royalties from multiple sclerosis treatment Tysabri. Elan has resisted so far, instead promising shareholders it will pay out a dividend based on the Tysabri stream. This week an Irish regulatory panel gave Royalty a May deadline to firm up its offer.

The dance began in late February soon after Biogen Idec bought out Elan’s share of the drug, paying Elan $3.2 billion plus the promise of tiered sales royalties. Whether Royalty Pharma succeeds in its hostile buyout is more a matter for our Deals of the Week compatriots, but it’s our duty to note that Royalty and its brethren have plenty more to spend. Royalty raised $600 million in debt in 2012 to put toward investments. Its previous debt raise included $850 million to give back to shareholders. Healthcare Royalty Partners, which dropped the "Cowen" from its name in December, raised a $1 billion fund in early 2012.

Royalty funds are to venture capital what bonds are to stocks: a lower-risk, lower-return investment, and often built with complex structures that purposely limit both parties' risk. They're certainly not going to replace a big chunk of venture capital, because they can't fund companies without current or near-future revenue streams. But as the numbers show, they're providing billions of dollars of capital to an industry that can always use a few extra pennies.

It's no jest. Whether you’re biotech royalty or an indentured serf, you’re always welcome in the biweekly court of…

Vivus: Initial sales of the Vivus weight-loss drug Qsymia (phentermine/topiramate) have been slow, so the company fortified its balance sheet with $50 million in new debt. The "synthetic capped royalty financing" from Pharmakon Advisors, announced March 26, allows Vivus to raise another $60 million in debt before the end of 2013, at a time of Vivus’ choosing. Under the terms of the arrangement, Vivus is obligated to repay the Pharmakon fund according to a schedule of pre-set payments between 2014 and 2018, or 25% of Qsymia royalties, whichever is valued lower. Analysts expect that Vivus would make quarterly payments between $7 million and $10.3 million during most of the four-year schedule, if it opts to raise the other $60 million later this year. The total repaid is likely to be about $162 million, according to analysts. Sales of Qsymia were just $2 million during the fourth quarter of 2012, its first full quarter on the market since FDA approved the drug in July 2012. Vivus had $213 million in cash and equivalents on Dec. 31, and spent $58 million on its operations during the fourth quarter. The company is seeking to modify its current Risk Evaluation & Mitigation Strategy for Qsymia, which limits sales of the drug to mail-order pharmacies; an FDA decision allowing it to sell via traditional pharmacies could come in late April or early May. – Paul Bonanos

Novira Therapeutics: The antiviral startup said March 26 it has topped off last year’s Series A with $7.5 million from Versant Ventures, matching the earlier co-lead investors and bringing the round’s total to $25 million. Novira is one of the few startups around working on treatments for Hepatitis B, its lead program, and for HIV. That, plus its pursuit of a relatively new mechanism of action – capsid assembly inhibition -- was enough to put Novira on our sister publication Start-Up’s annual A-List, which highlights the year’s most intriguing recipients of Series A money. 5am Ventures and Canaan Partners led the initial Series A investment, which came after the company spent years subsisting on angel and nonprofit funding and casting about for a way forward. The angels who nurtured the firm through its pre-Series A years also participated in the A round. Only after Lalo Flores, former head of antiviral research at Merck & Co. took over did Novira steer toward capsid assembly. It aims to file an IND for its lead HBV program by year’s end. The company's oral therapeutic candidates could potentially be used as both a monotherapy or in combination with currently used drugs. The company says the Series A money should be enough to move that initial program into Phase Ib or Phase IIa. For Versant’s contribution, the firm will place one of its new European team members, Gianni Gromo, in a board seat. Gromo is one of three Versant partners based in Basel, Switzerland and has ties to Versant’s top biopharma managing director Brad Bolzon from their days at Roche. – Alex Lash

Theraclone Sciences: Another antiviral add-on this week, with Seattle-based Theraclone bringing its Series B total to $50 million with contributions from a host of existing investors including Arch Venture Partners, Canaan Partners, MPM Capital, and Healthcare Ventures. In addition to the extra $8 million from investors, the antibody platform company also secured $6 million in debt from MidCap Financial and Silicon Valley Bank. The firm’s lead programs in the clinic are aimed at pandemic and seasonal flu, partnered with Zenyaku Kogyo, and human cytomegalovirus (HCMV). It has a discovery-phase antibody partnership with Pfizer, as well, and it has worked with Scripps scientists and the International AIDS Vaccine Institute on research to identify more than a dozen “broadly neutralizing” antibodies that might eventually lead to a vaccine for HIV. Theraclone’s platform screens for antibodies from the B cells of the lucky humans who demonstrate natural resistance to particular diseases. Once called Spaltudaq, Theraclone is one of a handful of biotechs to emerge from the Seattle incubator Accelerator and has had its share of tribulations, the worst of which was the sudden death of its CEO David Fanning in 2010. – A.L.

Receptos: The San Diego biotech filed April 4 its intent to go public, joining the growing queue of life science firms with hopes of breaking through to public markets. The firm is farther along in the IPO process than it might have been in previous times, as it actually filed its S-1 confidentially in February under new securities rules ushered in by last year's JOBS Act. Its lead compound is in Phase II testing against relapsing multiple sclerosis and inflammatory bowel disease. Its top four shareholders, each with slightly more than 15% ownership, are Flagship Ventures, Lilly Ventures, ARCH Venture Partners, and Venrock. An IPO would also benefit a much newer venture fund, Osage University Partners, which is trying to prove the worth of a new model based on schools’ participation rights that we describe in the March issue of Start-Up. Based on work that elucidates the structures of G-coupled protein receptors, Receptos spun out of the Scripps Research Institute, which has a partnership with Osage, which would send a slice of its carried interest back to Scripps if the fund succeeds. A Receptos IPO would certainly help. It has not yet set terms of the offer. Credit Suisse and Leerink Swann are leading the underwriting team. Other health care firms on file to go public include Bausch & Lomb, Chimerix, Omthera Pharmaceuticals, Harvard Apparatus Regenerative Technology, Ambit Biosciences, and Sophiris Bio. – A.L.

All The Rest: Raising $38mm from Invesco Asset Management in the biggest venture financing of the fortnight was infirst Healthcare, founded less than a year ago to launch new consumer cough and cold and pain medicines…Through a $33mm Series E financing (concurrent with the conversion of $71mm in debt into Series E preferred stock), Revance Therapeutics aims to complete Phase III trials for RT001, a topical botulinum toxin type A for crow’s feet wrinkles…Led by two China-focused venture funds, research and diagnostics MAb firm OriGene Technologies brought in $21.3mm in its Series D round…With participation from J&J Development and Pfizer Venture, Aquinox Pharma secured $18mm in Series C financing to help advance its Phase II AQX-1125 for COPD… To support development of spec pharma Taris Biomedical’s LiRIS (Lidocaine-Releasing Intravesical System) Phase II interstitial cystitis candidate, return backers added $12.5mm to the $37.3mm the company had previously raised…Schizophrenia drug firm Reviva Pharmaceuticals received $12mm in early-stage debt and equity funding from undisclosed investors… In a Series A round, Hurel Corp. (artificial tissue constructs and microfluidic cell-based assay platforms) snagged $9.2mm from Spring Mountain Capital… Genomic data analysis start-up Bina Technologies brought in $6.25mm of a planned $8mm Series B round…In the second close of initial financing secured in November 2012 when it spun-off from InDevR, rapid virus quantification firm ViroCyt has brought the total funding to $5mm…Undisclosed equity financing secured from the Innovation & Investment Fund Gelderland (managed by PPM Oost) along with several angel backers will enable InteRNA Technologies to progress its lead candidate miR-3157 for melanoma through preclinical studies…In a private placement, public Australian company Prana Biotech issued 35.9mm new fully paid ordinary shares at a price of A$0.195, for $7.3mm in proceeds to fund further development of PBT2, now in two concurrent Phase II trials in Huntington disease and Alzheimer's disease… Through a follow-on offering of up to 165.7mm new Hong Kong-listed shares at HK$24.60, Chinese CRO Sinopharm Group could reap $515.3mm in proceeds to expand its sales network and complete additional M&As… Arca Biopharma hopes to bring in $20mm in a FOPO to fund a Phase IIb trial of Gencaro (bucindolol hydrochloride) for atrial fibrillation… With proceeds from a public offering of units, public Toronto spec pharma Trimel Pharmaceuticals hopes to fund costs related to an NDA filing and further clinical trials for its CompleoTRT bioadhesive intranasal gel technology for male hypogonadism… Eye care giant Bausch & Lomb – owned by PE firm Warburg Pincus, which acquired it and took it private in a $3.67bn 2007 buy-out – filed for an initial public offering that could raise as much as $1.5bn… Two biotechs sent ranges for IPOS, but have yet to price: Chimerix (oral antivirals) plans to sell 6.1mm shares at $13-15, while dyslipidemia therapeutics company Omthera Pharmaceuticals said it hopes to get between $12-14 through the sale of 5.8mm shares… Cell Therapeutics, using proceeds from a $15mm senior secured term loan with Hercules Technology Growth Capital, hopes to advance Phase III pacritinib (for myelofibrosis) and promote recently EMA-approved non-Hodgkin lymphoma treatment Pixuvri (pixantrone) in Europe…In a second debt financing by Hercules, CNS stem cell therapeutics developer Neuralstem issued the finance company 649k warrants to purchase Neuralstem stock at an exercise price of $1.08…In exchange for up to $16mm, ophthalmologic drug developer InSite Vision will sell its future royalties on bacterial eye infection medicine Besivance (besifloxacin ophthalmic suspension) to SWK Funding LLC…Cancer-focused public Australian biotech Prima Biomed hopes to raise $15.6mm in a rights offering of up to 150mm new fully paid ordinary shares. - Maureen Riordan

Royally weird photo courtesy of flickrer simononly.