What Is the Buoyant Biotech IPO Scene Doing to Private Biotech M&A Trends? FOTF Says: Not Much

Despite a slight slowdown, there's considerable cash already sloshing around the biotech IPO space. There's (still!) plenty more stacked up in investor suitcases from California to the New York Island just waiting to back anything with a pulse. The momentum is here! This land grab is your land grab!

All of which should mean that biotech boards weighing exit options the past year or so have had choices that didn't exist for most companies in the preceding four or five years. Remember the lean times? The doldrums? You don't?

That revived optionality should translate into fewer companies agreeing to pharma takeovers. For the ones that do opt for the warm embrace of a bigger drug company, it should also translate into leverage. Those biopharma start-ups that choose to pull the M&A exit cord should be driving better bargains. But data we compiled from Strategic Transactions suggests neither is true. At least not yet.

It's worth remembering that even during the coldest days of the Biotech Winter, when asset prices were at their most depressed, pharma companies flush with cash didn't really go on a shopping spree. Volume of private biotech M&A never really spiked. We reported that in 2009, and it pretty much held true the next few years. Why? Assets were cheap, but pharma was picky. Prices slackened a bit, and it won't be surprising if they tick up now as biotech booms (despite this week's hiccup among the larger issues). But volume has stayed fairly constant.

In fact, the roughly two dozen private biotech M&A deals from 2013, compared with the past five years or so decade of data, slots in at just about average. Part of this might be due to company building strategies, born or embraced in the lean years, that emphasized capital efficiency, single-asset structures and baked-in-buyouts. Those were good ideas for the lean years, and they're still good ideas for these times-o-plenty.

Now, what about prices? Data is of course limited; not every acquired company discloses a price tag, and absolute values tend to be worthless unless you know how much money went into the target prior to a deal. Instead, we looked at step-up multiples, and by-and-large, those haven't changed much either.

Instead, up-front deal values on average have bounced around the 3x line for quite a while, and that's roughly in line with, and perhaps a a bit better than, the average pre-money to post-money step-ups we've seen in the biotech IPO space. But acquisition multiples are where we've heard, anecdotally, that things may be changing. So long as biotechs have the kind of optionality that public investors provide - i.e. not just getting onto the market but raising enough cash to have a credible alternative to a pharma partnering deal or outright acquisition - those upfronts might start sliding up. Or perhaps, instead, biobucks that are locked-up in earn-out payments will become easier to attain.

Speaking of optionality we know you've got choices for your every-other-week biopharma financing wrap-up. Thanks for sticking with ...

Acadia Pharmaceuticals: Just a week after reporting in its fiscal 2013 results that its cash on hand at year end totaled $185.8M, thanks mostly to a $108M secondary offering in May 2013, Acadia increased its cash position again on March 4, netting $171M in a FOPO of 6.4M shares for $28.50. The company, which could realize an additional $27M if underwriters buy up to 960k shares in the overallotment, is preparing to file an NDA in late 2014 for pimavanserin in psychosis associated with Parkinson’s disease and is working on pre-launch activities.  Acadia presented pivotal Phase III data at the March 2013 meeting of the American Academy of Neurology. Studies showed the serotonin 5HT2A antagonist/inverse agonist significantly reduced psychosis over placebo (the primary endpoint) and helped maintain patients’ motor control. There were also clinically meaningful benefits in measures of nighttime sleep, daytime wakefulness, and caregiver burden. At the end of 2013, Acadia began testing pimavanserin in Phase II for Alzheimer’s-related psychosis. The company also recently advanced into preclinical studies a muscarinic agonist for glaucoma through its deal with Allergan. --Amanda Micklus

Neurocrine Biosciences: The San Diego biotech focused on neurological and endocrine-based diseases priced a follow-on public offering February 26 to sell 8 million shares at $17.75 each, with net proceeds of $133.5 million. Neurocrine said it would use the proceeds to fund its R&D.  Primary among its programs is NBI-98854, a wholly owned vesicular monoamine transporter 2 (VMAT2) inhibitor in Phase II for tardive dyskinesia. In 2012, the biotech reported mixed results from a Phase IIa study of ‘98854 in which patients at one of eight sites fared better on placebo than study drug. Neurocrine has said it plans to keep that program for itself as it attempts to evolve into a fully integrated pharmaceutical company. If successful, it would be quite a turnaround story. In 2006, the firm was rocked by the FDA's refusal to approve its insomnia drug indiplon, then partnered with Pfizer. Its comeback began in earnest with strong clinical data from its gonadotropin-releasing hormone (GnRH) antagonist elagolix, which is now partnered with AbbVie and in Phase III for endometriosis and Phase II for uterine fibroids. This is the second large FOPO by Neurocrine in slightly over two years – it raised $83.2 million in January 2012 by selling 10.9 million shares at $8.10 apiece. This time around, it granted underwriters Jefferies and J.P. Morgan a 30-day option to buy up to 1.2 million additional shares. The stock closed trading March 5 at $17.84 per share, with a 52-week high of $20.29 and a low of $8.57. – Joseph Haas

Aquinox Pharmaceuticals: IPO activity slowed the past couple weeks, but Aquinox debuted March 6 by selling 4.2 million shares at $11 each. It hit the midpoint of its proposed range, but it ended up selling 14% more shares than it originally intended. Its lead compound, AQX-1125, is in Phase II for two indications, chronic obstructive pulmonary disease and bladder pain syndrome. Both trials started in 2013 after the firm pulled in an $18 million Series C round led by Johnson & Johnson Development Corp. and with participation from new investor Augment Investments and returnees Pfizer Venture Investments, Ventures West Capital and Baker Brothers Investment. AQX-1125 is an activator of the enzyme SHIP1, a modulator of the PI3 kinase pathway and, the company says, particularly important in preventing abnormal inflammation at mucosal surfaces. The founders of the Vancouver, BC firm discovered SHIP1 while at the University of British Columbia and created a mouse model whose immune system lacks SHIP1. The asset that became AQX-1125 came from Aquinox's 2009 deal for one of Swedish firm Biolipox's compound libraries. Lead underwriters Jefferies and Cowen, along with Canaccord Genuity, have the option to buy up to 555,000 additional shares.  – Alex Lash

Human Longevity: Pioneering biologist Craig Venter’s newest project will aim to compile a vast amount of genomic data to treat disorders associated with aging, with an eye on adding decades to the human lifespan. The former genome-mapping CEO of Celera Corp. and founder of the J. Craig Venter Institute unveiled the project March 4, revealing an initial funding round of $70 million. HLI didn’t name the full list of investors, but it includes lead backer KT Lim, a Malaysian billionaire whose holdings include a long list of casinos and resorts. Another investor, Illumina Inc., supplied HLI with two systems that can sequence a genome for $1,000, and normally list for $10 million apiece. The remainder of the roster includes an assortment of high net worth individuals, Venter said. HLI says it will initially create 40,000 genomic sequences annually, and may soon obtain 100,000. At first, most will come from consenting patients in University of California, San Diego research programs. HLI plans to unite genomic, microbiome and metabolome data to create profiles of healthy and unhealthy patients from all ages, including infants and supercentenarians. It will also investigate the associations between depleted stem cells and aging-related diseases, and will first address cancer before moving on to neurological, cardiovascular and liver disorders. – Paul Bonanos

Best Of The Rest (Highlights Of Other Activity This Fortnight): Novel dermatology drug developer Thesan Pharmaceuticals has now raised close to $66M, thanks to a $49M Novo Ventures-led Series B round that closed on February 24…days after Endo completed its $1.5B buy of Paladin, Paladin spin-off Knight Therapeutics, which will own rights to the rare disease drug Impavido for leishmaniasis, grossed $Cdn71M by selling warrants to GMP Securities, Cormark Securities, and other investors…Pain treatment maker Recro Pharma priced its IPO, selling 3.8 milion shares at $8 each to raise $30 million...Ampio Pharma netted $64M in a follow-on public offering to complete clinical trials of Ampion and Optina (for osteoarthritis of the knee and diabetic macular edema, respectively) and submit regulatory filings…using momentum from its recently filed NDA for Alzheimer’s combination memantine ER/donepezil (partnered with Forest), Adamas Pharmaceuticals filed for its IPO…and Abingworth closed its tenth life sciences fund, worth $375M. --Amanda Micklus

Financings of the Fortnight And the Neverending Venture Round

Somewhere out there, perhaps, is the end of NovImmune's Series B round.

More than a year ago, our friends at START-UP examined the fates of biotechs that had reeled in huge private financing rounds. Giant biotech venture rounds are back with a buzz in 2014 thanks to Juno Therapeutics, which launched in December with a $120 million Series A commitment. Last month it added on with cash from Venrock and Bezos Expeditions, aka Amazon.com chief Jeff Bezos' private money stash.

But in raw coinage, Juno's A round doesn't hold a candle to what NovImmune has raised in its Series B. Novi-who? It's a Swiss antibody developer founded 16 years ago that in 2006 first notched CHF 58 million ($46 million at the time) for its Series B. Eight years and three extensions later, the Series B now stands at CHF 200.5 million, most recently boosted by a CHF 60 million ($67 million) tranche announced February 18 and led by London life science specialists Rosetta Capital, whose partner Jonathan Hepple is joining the NovImmune board.

That makes NovImmune's Series B the largest biopharma venture round with at least one extension raised in the past decade, according to our Strategic Transactions database. FOTF reached CEO Jack Barbut via email, and he said NovImmune has kept the round open this long to create fairness for all shareholders. "This makes the share structure very easy," Barbut wrote. "For employees, common stock options (sweat equity), and for investors, preferred shares, all [have] the same liquidation rights and thus comply with Swiss statutes, which are very stringent on equal treatment for ALL shareholders." 

CEO since 2000, Barbut said when the Series B started, he didn't expect it to carry on this long. He doesn't know if this recent tranche will be the last.

We went back a decade into our Strategic Transactions database to see what kind of precedent there might be for NovImmune. We found 59 private companies whose extended rounds reached at least $50 million. Here are the handful, other than NovImmune, that topped $100 million:

Four of those companies have since gone public and one (Sangart) has gone under, shut down by its main investor, as first reported by Fierce Biotech. Meanwhile, Symphogen is in no hurry to go public, as its CEO told Start-Up in this feature last year.

NovImmune is not only top of the charts for money raised, but it also has no peer in the length of time of the round. None of the companies with blockbuster rounds took more than two years to secure their extensions. A few smaller rounds took longer. For example, Theraclone Sciences began raising its Series B in 2007 as Spaltudaq (we applaud the name change) and brought the total to $50 million about a year ago. Endocyte took five years to raise a nearly $80 million Series C before going public in 2011. And Alvine Pharmaceuticals spent more than four years building its Series A and is now waiting to find out if AbbVie will exercise an option to buy its lead Phase II program in celiac disease or the entire company outright. (If AbbVie does, it would be one of the very few corporate investors to buy out one of its portfolio companies.)

NovImmune's Barbut said his investors expect "some sort of liquidity event" too, of course, but in the nearer term he said the company is focused on finding a partner for NI-0101, its anti-TLR4 monoclonal antibody that has entered Phase I. It would also like to advance its NI-0501 program, an anti-interferon gamma antibody, and commercialize it solo. NI-0501 has orphan status in the US and EU in hemophagocytic lymphohistiocytosis, a deadly pediatric autoimmune disease, and has completed a Phase I study.

NovImmune doesn't seem to have cushioned its cash with a lot of non-dilutive funding. Its biggest deal to date is the outlicensing of an anti-IL17 antibody to Genentech in 2010, no financials disclosed. The candidate completed Phase I in 2013.

So we've got an orphan disease-focused biologics company with multiple, wholly owned clinical assets, a partnership with one top-tier biopharma, and the kind of cash runway that seems to attract more investment these days from the public markets. The IPO market has welcomed every stripe of biotech, from still-preclinical platforms to heavily capitalized specialty plays, in the past year, so NovImmune seems like an inevitable "ask." If its cards are well played -- keep in mind several banks are in NovImmune's investor pool -- an IPO could provide a nice bump for those who didn't have to ride the traditional valuation escalator (or be forced off of it) through later rounds.

We offer a bump, too -- a fist bump to Maureen Riordan, who did much of the work behind the scenes for this column. Without her this week, there would be no...

Melinta Therapeutics: Known as Rib-X Pharmaceuticals until last fall, antibiotic developer Melinta hasraised a $70 million Series 3 round led by existing investor Vatera Healthcare Partners. New investors included Falcon Flight, an affiliate of the Santo Domingo Group, and undisclosed backers. As Rib-X, the firm raised more traditionally named A, B and C rounds last decade. But a failed IPO try in 2011, and a set of new investors led by Vatera, have led to a housecleaning. In November 2012, the company disclosed a $67.5 million "Series 2" funding led by Vatera. Last fall, it unveiled its new name and new executive team, led by CEO Mary Szela. The Series 3 cash will help fund its Phase III study of antibiotic delafloxacin, a differentiated flouroquinolone in testing as an oral, single-dose therapy for uncomplicated gonorrhea. Melinta is aiming for an NDA filing in late 2014. In addition, the money will finance a two-trial Phase III program of delafloxacin in acute bacterial skin and skin structure infections, as well as lead-candidate selection from the firm’s RX-04 discovery program seeking to address serious and life-threatening Gram-negative infections via targeting of novel binding site on the bacterial ribosome. – Joseph Haas

Argos Therapeutics: Immunotherapy is hot, right? Well, yes and no. While the likes of Juno can command above and beyond $100 million in a single financing, cancer and infectious disease immunotherapy play Argos raised a mere $45 million in its February 7 IPO, its second try at launching onto the public markets. And that’s only after it had to dramatically cut the price to $8 a share from a $14 mid-point of its proposed range. It also had to increase the dilution, selling 5.6 million shares rather than the 4.3 million it had proposed. Existing investors bought 1.4 million shares of the IPO, or roughly a fourth of the deal. No word yet if the underwriters will exercise the overallotment, but the share price has largely treaded water since the offering. Argos investors can take some solace knowing the bargain-priced IPOs of 2013 ended up as top performers of the year. What's discounted now might have legs later, as Argos is one of many biotechs with notable clinical milestones in reach this year, as START-UP explored in January. Argos might see a boost later this year when it reports Phase IIb data for AGS-004 for treatment interruption in HIV/AIDS patients, although data due in 2016 -- Phase III survival data in renal cell carcinoma -- is more likely to be game-changing for Argos. The firm also expects this year to start two Phase II HIV eradication studies, one in adults and another in pediatric patients. Argos aims in these trials are ambitious – to eliminate the HIV virus or to reduce it to negligible levels. – Stacy Lawrence

Arrowhead Research: RNAi therapeutic developer Arrowhead said February 19 it grossed $104 million in a follow-on offering, selling 5.5 million shares at $18.95 a piece. Of the several public biotechs that sold $100 million-plus in stock this fortnight -- Ironwood Pharmaceuticals, Macrogenics, PTC Therapeutics and Puma Biotechnology were the others -- Arrowhead's inclusion would have been unthinkable this time last year, when it was bumping along in microcap land and had just a few million dollars in cash remaining. Arrowhead isn't strictly an RNAi developer; it has a peptide-drug conjugate in the clinic, too. But there's no doubt RNA interference, riding a revival of sorts highlighted by Alnylam Pharmaceuticals' giant deal last monthwith Sanofi/Genzyme, is driving the Arrowhead agenda. It's also worth noting that RA Capital, the hedge fund that helped propel the big Dicerna IPO, is also a key investor at Arrowhead as of last spring, having led a $35 million offering at $1.83 a share that recapped the company. With its stock now worth more than 10 times as much (it closed February 20 at $21.90) Arrowhead is pushing hard to get its lead RNAi compound, against Hepatitis B, into Phase II.  While RA, now a 9.9% owner, led a turnover in the company's cap table, it wasn't a bloodbath. Arrowhead's longtime CEO Chris Anzalone is still at the helm, and the board remains the same. – Alex Lash

Pronutria: Pronutria revealed February 13 a $12.5 million Series B round, with unnamed private investors participating alongside Flagship Ventures. CEO Robert Connelly told our colleagues at "The Pink Sheet" that Flagship provided less than half of the new round, while “business entities, individuals and family offices” supplied the remainder. Flagship created Pronutria within its VentureLabs program in 2011, quietly funding it with a $10.8 million Series A round over a two-year period before lifting the lid last October. Much of the Series B, which Connelly said is probably Pronutria's final venture round, will be used for clinical trials on two muscle-protecting candidates that preserve strength in frail, elderly people with sarcopenia, the loss of muscle mass that can occur during periods of hospitalization. The candidates, PN-107 and PN-365, are formulations of the amino acid leucine delivered as small “shot”-sized beverages similar to bottled energy products found on supermarket shelves. The specific pharmacokinetics and efficacy of each candidate, and the effects of their specific balances of amino acids, will be compared with each other in the trials. The company is still deciding on a regulatory pathway for each one, including possibly developing them as nutritional supplements, medical foods or pharmaceutical products, each of which has its own requirements. Initial clinical trials, now underway, are scheduled for completion by mid-year; Connelly said the company also is mulling parallel development of drug and non-drug formulations of similar product candidates. Further down the line, Pronutria is aiming for products addressing the metabolic, gastrointestinal, immune and renal disease areas, as well as beneficial products for patients with rare diseases and those going through chemotherapy. Whatever drug products Pronutria develops will reside in a separate business unit, which will help ease eventual sales or spin-outs. – Paul Bonanos

Best of the Rest (Highlights of Other Activity This Fortnight): Endocrine disease-focused Versartis raised $55M in Series E financing, and concurrently filed for an IPO…to support the launch of opioid dependence drug Bunavail in the second half of this year, BioDelivery Sciences grossed $60M in a registered direct offering…PTC Therapeutics publicly sold $126M in a FOPO to complete Phase III development and gain regulatory approval of ataluren in Duchenne muscular dystrophy and cystic fibrosis caused by nonsense mutations, in the wake of last month’s EMA/CHMP negative opinion on that candidate’s MAA…Concert Pharma priced its IPO at $14, the top end of its range, to net $78 million...three Israeli biotechs – Galmed, Bio Blast, and MediWound – are all hedging their bets and trying to float on Nasdaq…and PDL BioPharma, which manages patents and royalty assets, completed a $261M convertible notes offering. – Amanda Micklus

Photo courtesy of Mike Mantin  on flickr, via a Creative Commons license. 

These Days, You Can't Spell Financings Of The Fortnight Without "I-P-O"

It turns out a lot of the words that contain the letters "IPO" are biomedical words:

Pluripotent. Liposomal. Adiposis. Gallipot.

And it turns out a lot of biomedical companies have IPO in them, too. Since we last met 14 days ago, dear reader, a stunning 13 biotechs have made their public debuts, although if not for Eleven Biotherapeutics, it would have been 12.

There are all kinds of ways to slice and dice this baker's dozen; one way is to look at first-day pops. Indeed, our colleagues at "The Pink Sheet" will soon have a detailed look at the crazy first-day run-up of RNAi developer Dicerna Therapeutics; the 207% gain was the biggest in biotech since Antigenics jumped 241% in February 2000, according to Renaissance Capital.  (More on Dicerna's IPO in the roundup below.)

But with the momentum that began in earnest last spring showing no signs of tapering off, we're curious about a different indicator: insider purchases. As soon as IPOs began to rebound from the financial crisis, insiders often did heavy lifting to get the deals off the ground.

But those levels began to decline in 2013, as Atlas Venture partner Bruce Booth noted on his blog last fall. He also noted that insider participation could signal a cooling of the market. Well, yes, but as we noted on this blog in early 2012, it's hard to draw conclusions about deal-by-deal participation. Is heavy insider presence a sign of desperation to get a deal done, or is it a sign of singular enthusiasm? With crossover investors already on the cap table and wanting more at IPO, and with some VCs playing more frequently on the public side of the fence, it can be hard to tell. What's more, SEC filings don't always divulge the true level of insider participation.
 
With all that, let's round up what this year's IPOs have revealed:

Here are the 13 IPOs the past two weeks, plus GlycoMimetics on January 9, and the percentage of insider participation noted in the regulatory filings:

Company Name	Insider Participation at IPO
Dicerna	57%
GlycoMimetics	29%
Celladon	25%
Eleven	24%
Trevena	23%
uniQure	22%
Genocea	21%
Egalet	20%
Auspex	12%
Cara	7%
Ultragenyx	0%
Acucela	0%
Revance	0%
Biocept	0%

That's an average of 16% raised from insiders, but with caveats: some of these numbers (highlighted green) are based on filings which note that insiders indicated an interest of purchasing a certain amount. At the time of this writing, it's not clear whether they actually pulled the trigger, but often those indications don't change much. Other caveat: The percentages don't factor in the green shoe. In other words, some of the numbers you see above will change as more information emerges.

For what it's worth, our own IPO data show insider participation in 2013 averaged 14%. 

It's hard to say what all this means. Two years ago, when insiders shouldered heavy IPO loads -- taking on more risk instead of getting to precious exits -- it was easier to wonder about the desperation of it all. But now, more early stage biopharma investors (Third Rock Ventures, Flagship Ventures, OrbiMed Advisors, 5am Ventures and so on) are squaring the circle, from fundraising to new investment to IPO and back again, and biotech's boom means those extra IPO shares, if you can afford them, could be a lucrative proposition. And as our START-UP colleagues noted last year, biotech VCs haven't been shy about holding... and holding... and holding their shares well past IPO.

Is it worth mentioning that you also can't spell "ripoff" without IPO? Or perhaps we should leave you with this lighter linguistic play: The only anagram of IPO is "poi." A select few find the ancient Hawaiian staple of taro root mush delicious, but other people just need some time to appreciate it. Hmm, sounds like a recipe for what we cook up every two weeks, except we call it...

Dicerna Pharmaceuticals: RNA interference specialist Dicerna more than tripled in its first day of trading, making it the largest post-IPO pop since 2000. Demand for the offering was almost unprecedented with over $1 billion in orders, thanks in part to the RNAi-validating $700 million deal between Alnylam Pharmaceuticals and Sanofi's Genzyme that stole the show at January’s JP Morgan Healthcare conference. But unlike many IPO candidates going into 2014, Dicerna can't count on near-term milestones to support the stock. It expects to start clinical trials for the treatment of primary hyperoxaluria in 2015, with proof-of-concept data due later that year. It also expects to advance DCR-M1711 for cancers driven by the MYC oncogene in the first half of 2014, with proof-of-concept data in 2015. The biotech originally targeted $60 million, but by increasing its price to $15 and shares sold to six million, it ended up raising $90 million. The overallotment could add another $13.5 million. Last July, Dicerna raised a $60 million Series C round at $7 a share with crossover investors RA Capital, Deerfield Management and Brookside Capital Partners, as well as VCs Domain Associates, Skyline Venture Partners, Abingworth Bioventure, SROne and Oxford Biosciences Partners. At market close on February 6, Dicerna’s share price had settled to $33.98, down from its first-day high of $46, but still more than double the IPO offer price.  – Stacy Lawrence

uniQure: The groundbreaking Dutch company gained the first regulatory approval for a gene therapy in the Western world, but it isn’t the first to go public. The company followed bluebird bio and, just by a few days, Celladon into the public markets with its February 4 listing on the Nasdaq, pricing 5.4 million shares at $17 apiece, above the anticipated range of $13 to $15. uniQure netted $81.9 million in the transaction, net of discounts and expenses; a greenshoe option could add $13.8 million more to the offering’s value. uniQure made history in November 2012, when EMA approved its Glybera (alipogene tiparvovec) to treat rare metabolic disease lipoprotein lipase deficiency. It’s part of a renaissance of interest in the field of gene therapy, once considered overly risky, and VCs have stepped up investment in new treatments in the field. After meeting with US regulators, uniQure plans to file an IND for Glybera by midyear. The company will also use its IPO proceeds to complete its Lexington, Mass. manufacturing facility and advance pipeline candidates including Phase I/II hemophilia treatment AMT-060. The company is planning a 2014 commercial launch of Glybera in Europe, in conjunction with regional partner Chiesi Farmaceutici. – Paul Bonanos

Lumos Pharma: Two years after paying $695 for a crowdsourced logo, Lumos has reeled in real cash: a $14 million Series A round led by Sante Ventures and New Enterprise Associates. The Austin, Texas firm is working on a small molecule therapeutic for the rare disease Creatine Transporter Deficiency (CTD), which is in preclinical studies. Lumos was among the first companies to gain support from the National Institutes of Health's "TRND" program, or Treatments for Rare and Neglected Diseases. As our sister publication START-UP noted in late 2011, CEO Rick Hawkins, a serial biotech entrepreneur, turned to TRND for help in what he called the worst disruption in the capital markets he'd seen in 35 years. CTD is an inborn error of metabolism that results in a profound lack of creatine in the brain. It's an x-linked disorder, which means boys are more affected than girls, with severe autism-spectrum symptoms such as language and speech delay, epilepsy and destructive behavior. Lumos is repurposing a drug -- what it calls a kinetically similar analog of creatine -- previously studied as a solid tumor treatment, and tested in knockout mice at the University of Cincinnati. Kevin Lalande, Managing Director of Sante Ventures, and NEA Partner Ed Mathers will join the Lumos board. – Alex Lash

NightstaRx: We admit we first thought about writing up NightstaRx to poke gentle fun at its name. (It apparently is pronounced "Nightstar," which makes for the first silent "X" in the English language.) But we would never be that shallow; the firm merits a write-up for other, more legitimate reasons. First, the company is the initial therapeutic investment from Syncona Partners, the new £200 million ($325 million) evergreen venture fund of the mighty Wellcome Trust, which has been rather slow to get cranking (it was first announced nearly two years ago). Once known as Project Sigma, Syncona aims to fund private biotechs and keep full ownership, at least for a while. It's for-profit and although fully funded by Wellcome, it's separate from the Trust's investment division, which has billions of pounds of private equity holdings. Now that Syncona is truly up and running, it should b be a significant source of early stage funding for European biotechs. Our second reason to highlight NightstaRx, a spinout from the University of Oxford, is that Syncona's £12 million ($20 million) will help move forward a gene therapy treatment for choroideremia, an inherited form of progressive blindness. It's the latest entry in a venture-backed field of ocular gene therapy companies, as The treatment uses a small modified virus, AAV.REP1, to deliver the correct version of the mutated gene that causes to cells in the retina of the eye. Six months after treatment with this therapy, the first six patients showed improvement in their vision in dim light and two of the six were able to read more lines on the eye chart, according to a January 16 paper in the British medical journal Lancet. The vector is currently in Phase I trials and follow-on tests are expected to begin in 2016. – Sten Stovall and Alex Lash

Best of the Rest (Highlights of Other Activity This Fortnight): Cancer MAb company Igenica announced a second closing of $14 million to its June 2012 Series C round, raising the total proceeds to $47 million…In another add-on, Sialix, which is focused on sialic acids to treat cancer and inflammatory-mediated diseases, tapped angel investors to supplement its August 2011 Series B financing with a $1.2 million tranche, bringing the round total to $4 million…Through a public offering, renal drug developer Keryx Biopharmaceuticals netted $108.2 million (including the overallotment)… Large FOPOs were also completed by other cancer-focused biotechs: Geron ($97.3 million) and Tesaro ($94.8 million)… While numerous initial public offerings were completed, there are still an abundance of filers in the wings, hoping to go public soon; among them is UK biotech Circassia, intending to float on the London Stock Exchange's Main Market, which, if successful, would be the first UK-market IPO since Clinigen Group’s £6.6 million flotation on AIM in October 2012 (UK biotech Egalet just completed its $50 million IPO, but on Nasdaq)… Canadian spec pharma Aptalis Holdings withdrew its December 2013 IPO filing on Nasdaq in favor of a $2.9 billion buy-out by Forest Laboratories… Through the sale of debt, Emergent BioSolutions raised $250 million to fund its acquisition of Cangene… Also through a debt offering, Fluidigm brought in $170 million to finance its takeover of DVS Sciences. – Maureen Riordan

Many thanqkxs to Mr. Thomas for the Scrabble photo via a Creative Commons license.

Financings Of The Fortnight Asks For The Envelope, Please...

"And the Best Hair Restoration Product of 2013 goes to..."

It's awards season, as they say in Hollywood, and this blog is no stranger to polished hardware. A bit later, we’ve got another red-carpeted treat for you: The 2013 A-List winners. But first, a story…

Back when Financings of the Fortnight was a cub reporter on the high-tech beat, there was this new thing called a “Web browser” and a company called “Netscape.” The chief proponent of both was a young unassuming fellow named Marc Andreessen. He was, in the day’s currency, a bit of a rock star.  Perhaps you’ve heard of him.

Your correspondent happened to be at a small gathering to hear a panel discussion with Andreessen and others, including Apple Computer’s “evangelist” Guy Kawasaki (yes, tech companies bestowed ridiculous titles upon executives 20 years ago, too, and yes, that is actually his real name). The wiry, California-tanned and caffeinated Kawasaki regaled the audience with his bird/elephant rule for innovation:  one must consume information like a bird. Birds eat far more than their body weight, you see, and thus eat constantly. Then, at the other end, you take what you’ve learned and… how should we put this?... spread it around like an elephant. Andreessen, the big-boned, corn-fed Midwesterner, the phenotypic opposite of Kawasaki, followed. He picked up the mic and said, “Hi, I’m Marc. I try my best to eat like a bird, but usually I just shit like an elephant.”

We reconstruct this true tale to illustrate the trickle-down theory, to underline the importance of inputs and outputs, to draw attention to… oh, all right, we just like telling poop jokes.

But we admit trickle-down is fresh on our minds these days, what with the 2013 US venture data fresh in our inbox. Specifically: did the boffo IPO year for biotechs have any effect at the other end of the, uh, elephant? Have VCs begun spreading it around?

According to DJX Venture Source, health care venture investments in 2013 were up from 2012 ($8.2 billion vs. $7.8 billion) but fell well short of 2010 ($8.8 billion). Looking specifically at the biopharma and device sectors, which make up the bulk of healthcare investment, the 2013 numbers are down a tick from 2012 ($6.6 billion vs. $6.7 billion). No IPO effect there.

But much of the IPO activity in 2013 took place from spring through late summer. Perhaps the typical fourth quarter surge of investments was stronger than normal? Not in devices: 4Q was actually below the 1Q and 2Q totals. And in biopharma, the $1.3 billion for 4Q was the best quarter of the year, but a lower total than the 4Q totals of 2011 and 2012. Keep in mind that one-tenth of that quarterly total went to one company, Juno Therapeutics.

The rival MoneyTree report from PricewaterhouseCoopers and the National Venture Capital Association slices numbers in slightly different ways, but presents essentially the same trajectory. It also reports that first-time life science financings (biotech and device) were at near-record lows for the year: 154 deals total, just squeaking past 2012’s nadir of 148 deals.

So there hasn’t been much evidence of trickle-down, to which you might ask: Why should there be? Returns to old funds don’t simply translate into investments from new ones. LPs got to get paid.
And what if the IPO window slides shut, just as a new batch of hopefuls line up? It’s certainly not clear what kind of reception they’ll receive. Public investors fret that among a fresh flood of offerings, the quality will erode. “Biotech tends to fade when there is an over-supply of equity. More and more lower-quality IPOs continue to be thrust on generalists who don’t understand them,” says Andy Smith of biopharma specialist Mann Bioinvest. “To give management and VCs lots of money, that will continue. Do I want to divest another holding to buy into a new company? We are scraping the bottom of the barrel in terms of quality.”

That’s not what Cara Therapeutics, Dicerna Pharmaceuticals, Auspex Pharmaceuticals, Argos Therapeutics and others currently on their roadshows want to hear. But we think the bellwether for the next few months will be rare disease firm Ultragenyx Pharmaceutical. It’s got big clinical milestones coming up this year, and it’s the only one with a bulge bracket bank amongst its underwriters. (Not one, but two: J.P. Morgan and Morgan Stanley.) That’s a signal the big banks see money to be made, not just on the IPO itself but by establishing a relationship with a biotech that will subsequently be able to successfully raise funds on a large scale. (For more on Ultragenyx, see our roundup below.)

If IPOs continue apace, however, we see the VC trends shifting this year. There will be more liquidity, plus the momentum of new funds raised in 2013: OrbiMed Advisors, Third Rock Ventures, 5am Ventures, Atlas Venture, Frazier Healthcare, and others. They’ve got money to spend. In fact, among the unimpressive venture data from 2013, there was at least one sweet spot that, since the recession, has continued to attract more deals and more dollars: Series A financings.
In START-UP’s annual A-List, due out in a few days, we note that Series A deal flow increased for the fourth year in a row, as did the average dollars per round (in which figures were disclosed). Here’s a teaser:

We think the gradual increase, while overall venture numbers have remained unremarkable, is due to the growing emphasis on “long runway” A rounds, often funded by just one or two main groups. (Or in VC shorthand, A is the new A+B.) Plus, many early stage VCs have seed or equivalent programs for weeding out mediocre investments, but they’re not described or disclosed as seed round financings.  So: fewer first-time financings, but more enthusiasm for the ones that make it to a true Series A. That’s our theory. What’s yours?

While we’re in tease mode, how about the A-List winners of 2013? In alphabetical order, we present: 

Ajax Vascular

Allergen Research

Editas Medicine

electroCore

GeneCentric Diagnostics

Juno Therapeutics

Middle Peak Medical

PharmAkea Therapeutics

Spark Therapeutics

Syros Pharmaceuticals

Vivex Biomedical

For explanations of our choices, and a deeper look under the hood of the overall Series A numbers, you’ll have to read Start-Up’s A-List feature, due out next week. (Ultragenyx, by the way, is an A-List alumnus: Class of 2011.)

You can get a jump start, however, by continuing with us here, because Juno leads off our roundup this week, just on the other side of our little JPEG… But first, thanks to Stacy Lawrence for extra help with this edition. We also want to thank our families, our producers, Giorgio our makeup artist, our chauffeurs, our spa technicians, and last but not least...

 Juno Therapeutics: Gobs of money. Stunning patient results. Legal disputes. It’s been a busy couple of months for the new cancer immunotherapy start-up. Most recently, the firm said January 13 it reeled in extra Series A cash to push the round past $145 million, with the booster shot coming from Bezos Expeditions, the personal investment company of Amazon.com chief Jeff Bezos, and Venrock. Juno debuted in December with a $120 million Series A round and exclusive license to three autologous cell therapy programs, two of which reported very promising clinical data in 2013. Its programs come from Memorial Sloan-Kettering Cancer Center, the Fred Hutchinson Cancer Research Center, and Seattle Children’s Research Institute. But it turns out Juno also took license to a slice of chimeric antigen receptor (CAR) technologies from St. Jude Children's Research Hospital, and it has jumped in on St. Jude’s side in a dispute with the University of Pennsylvania, whose CAR T-cell program is licensed to Novartis. According to court documents, Juno signed the license agreement with St. Jude the day it made its public launch, December 3, and agreed to shoulder 80% of the legal fees in the dispute with Penn. (For a much fuller description than we can afford here, read our Pink Sheet colleague Brenda Sandburg’s account here.) The lead scientist behind Penn’s CAR T-cell program is Carl June. Now, of course, “Juno” was the queen of the Roman gods and certainly makes an appropriate name for a big important new company. But seeing how the company knew well before its launch it would be going a few rounds, legally speaking, with Penn – June v. Juno, in a manner of speaking – you have to wonder if the name is also a sly tweak of the nose. – Alex Lash

GlycoMimetics: Two months after postponing its IPO, GlycoMimetics succeeded in going public on January 10th, grossing $64.4 million by selling 8.1 million shares (including the over-allotment) for $8. The biotech ended up offering more than the 5.75 million shares it had planned but at a steep haircut to its $14-16 price range. The IPO is the first in the biotech space in 2014, or second if you count rare disease-focused Retrophin's move to Nasdaq from the OTC exchange. GlycoMimetics develops small molecules that mimic the structure of carbohydrates involved in key biological processes, in particular the complex carbohydrates that attach to the surface of proteins, altering their function and interactions with other molecules. Its first target is selectin, an adhesion protein involved in inflammation in multiple diseases. Lead compound GMI1070 (rivipansel), an E-, P-, and L-selectin antagonist, is in Phase II for painful vaso-occlusive crisis (VOC), a severe complication of sickle cell disease. It has US and EU orphan drug status, and if approved, the company claims it would be the first drug on the market to interrupt the underlying cause of VOC, which is currently treated by just managing the symptoms. Pfizer holds exclusive worldwide rights to GMI1070 under a 2011 deal. GlycoMimetics’ next project is preclinical GMI1271, in combination with chemotherapy for acute myeloid leukemia and other hematological cancers. An IND for the E-selectin inhibitor is planned for Q1 2014. Since the company’s 2003 founding, GlycoMimetics has raised nearly $63 million; its principal shareholders are New Enterprise Associates, Genzyme Ventures, Anthem Capital, Alliance Technology Ventures, and Rosetta Capital. – Amanda Micklus

Ultragenyx Pharmaceutical: For its upcoming IPO, Ultragenyx has proposed to sell 4.8 million shares at $14 to $17 per share; that would raise $75 million at the mid-point and value the company at $436 million. It expects to price on or around Jan. 30. The biotech already has a legion of top-flight crossover investors to ease its transition to the public markets, including Adage Capital Partners, Capital Research, Columbia Wanger Asset Management, Jennison Associates, BlackRock and Cowen’s investment arm Ramius. Cowen and Canaccord Genuity join bulge-bracketers J.P. Morgan and Morgan Stanley as underwriters. Existing shareholders paid an average price of $4.68 per share, according to the S-1 filing with the SEC. The biotech’s strategy has been to go after low-hanging fruit in the rare disease space by in-licensing candidates with a clear mechanism in which the patient is missing something that can be restored through treatment, CEO Emil Kakkis said on the road show. It expects clinical data from five programs in the next 18 months, and is one of several biotechs with IPO ambitions that have big clinical milestones this year, as we report in the current START-UP. Ultragenyx anticipates Phase I/II data for KRN23, a monoclonal antibody to treat adults with X-linked hypophosphatemia, and for recombinant human beta-glucuronidase (rhGus), an intravenous enzyme replacement therapy to treat mucopolysaccharidosis 7 patients. In late 2014, it also expects additional Phase II data for an extended-release, oral formulation of sialic acid to treat hereditary inclusion body myopathy. – Stacy Lawrence

Alkermes: The expert on long-acting injectable drugs used the J.P. Morgan stage to announce January 13 a $248 million financing through the sale of 5.9 million shares to Invesco Perpetual Income Fund and Invesco Perpetual High Income Fund at a price of $42.25 a share, a 2% premium. The sale gives Invesco a 4% stake in Alkermes. CEO Richard Pops followed the follow-on news with an announcement January 14 that the company expects to file a long-acting injectable form of the atypical antipsychotic Abilify (aripiprazole) in the second half of 2014, with a potential launch expected in 2015. Abilify is copromoted by Otsuka Pharmaceutical and Bristol-Myers Squibb. The Invesco investment adds to the $395.2 million on Alkermes’ balance sheet as of Sept. 30, 2013, and gives the company more flexibility as it moves into the next phase of its lifecycle as it continues to develop its late-stage neurology pipeline. The sale of a significant slice of outstanding shares hasn’t dampened investor spirits; Alkermes shares closed January 22 at $50.52, up 133% from where they stood a year ago. – Jessica Merrill and Alex Lash

Best of the Rest (Highlights of Other Activity This Fortnight): Two cancer-focused companies completed Series A rounds: Madison Vaccines, a firm with a Phase II prostate cancer vaccine (MVI816), brought in $8 million in an offering led by Venture Investors... University of Basel spin-off Piqur Therapeutics closed an oversubscribed Series A round from existing shareholders and new industry investors concurrent with the start of Phase I European trials for its mTOR inhibitor PQR309... Regenerative medicine company Athersys closed a $20.5 million registered direct offering of common stock and warrants to fund ongoing clinical trials; it has pipeline programs in inflammatory bowel disease, ischemic stroke, myocardial infarction damage, and graft-versus-host disease prevention... Three months after closing its $89.5 million IPO, rare disease therapeutics developer Acceleron Pharma priced a FOPO of 2.4 million shares at $50, grossing $120 million…after postponing its IPO in October 2013, Celladon (calcium dysregulation therapeutics) has revived the offering with a new S-1 filing… RNA start-up Moderna Therapeutics spun out its 15 oncology assets into Onkaido Therapeutics and invested $20 million in the new company, which will be run by run by Stephen Hoge, Moderna’s SVP of corporate development. – Maureen Riordan

Photo from the Gulltaggen award show courtesy of Jarle Naustvik via Creative Commons license.