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
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