Return to Seller: GlycoFi Next Tech to Exit Merck?

As the J.P. Morgan conference began to clog the San Francisco streets and restaurants on Sunday night, Alnylam Pharmaceuticals got the party started with a bang. In industry's first major deal of the year, Alnylam signed a broad agreement with Sanofi’s Genzyme Corp. and, separately and perhaps more dramatically, bought Merck & Co.’s RNA interference assets (essentially the remnants of Sirna Therapeutics) for $175 million ($25 million was cash and $150 million in Alnylam stock).

The latter deal unleashed the schadenfreude. Merck paid $1.1 billion for Sirna, then Alnylam’s biggest RNAi rival, back in 2006. It had been predictably if annoyingly tight lipped about any progress (or lack thereof) it was making with RNAi therapeutics ever since. And with 200 people within Merck working to surmount the therapeutic modality’s famous delivery challenges and more or less build an RNAi franchise for most of the past seven years, $1.1 billion was likely just the tip of the iceberg.

Why Alnylam wanted Sirna goes beyond (figuratively of course) putting the stuffed head of its former rival on the wall in the Cambridge company’s boardroom (but sure, on some level, that’s gotta be part of it?). Merck apparently did make some progress on sub-q delivery of RNAi and it had some IP that Alnylam likely wanted to tie up.

The broader point is that technologies once coveted by pharma but now seen as dead-end cost centers or just gathering dust may have utility – and potentially a lot of value – back out in the broader world. That’s been true for drug candidates for a long time – and we’ve seen plenty of deals where a company has acquired valuable drug compounds and eventually sold them off, even back to the VCs and executives that offloaded them in the first place (think Esperion, Vicuron, etc.).

Those originators are often the best placed to understand the compounds or technology and make another go at driving value. And Merck’s decision to part ways with Sirna and RNAi (and the ongoing reorganization the company’s R&D group) got us thinking about what other technologies the pharma may offload. One that comes to mind was another high-profile 2006 acquisition: the yeast-based antibody manufacturing play GlycoFi.

Allow us to speculate:

In May 2006 Merck plunked down $400 million to buy the technology. On a Sirna-scale, that’d mean a $10 million (or less!) down payment might be enough to extricate the technology. And GlycoFi founder Tillman Gerngross and his venture backers are now at the center of myriad antibody discovery partnerships via the decidedly profitable Adimab and a small handful of drug development start-ups enabled by the Adimab technology. They would be a logical set of suitors (Gerngross wouldn’t comment).

GlycoFi’s glycoengineering and optimization technologies would surely complement Adimab’s yeast-based antibody discovery tech. The company was never fully integrated into Merck and is still based in Lebanon, NH, home to Adimab and Gerngross’s other ventures (if the two companies don’t share an address, they’re at least within walking distance to each other near Dartmouth). GlycoFi was meant to enable Merck’s follow-on biologics strategy, but the big company’s ambitions around what is now biosimilars have shifted over the past several years. Biosimilars leadership specifically and R&D leadership more generally has turned over. GlycoFi’s ‘internal champion’ at Merck is likely gone. Merck is, like other big companies, shrinking its R&D footprint.

Adimab has somewhat famously – famous for the set that converges around Union Square in San Francisco this time of year, anyway – advertised its technologies and successful partnerships on the Powell-Mason cable cars that roll up the hill out front of JPM’s epicenter St. Francis hotel. The current biotech boom feels very much like a throwback and so it’d be fitting: maybe next year we’ll see GlycoFi on those cars instead?

JPM Survival Guide: DOTW Keeps the Party Going

The last few years have been quite a bash for biotech. Astoundingly, the NASDAQ Biotechnology Index (NBI) has added more now than it did during the genomics bubble.

Since the current biotech rally started around August 2011, the NBI has increased about 1,500 points. Around the turn-of-the-millennium, the NBI rose around 1,200 points in a year and a half. Then over the following roughly two years, the NBI proceeded to give back all but about 200 points of that gain by mid-2002.

That makes the ongoing, almost two-and-a-half year upswing the longest, highest biotech rally to date. 

Does this make anyone else nervous? Apparently not, at least not yet.  (In December, Mark Schoenebaum of ISI Group circulated a succinct, hypothetical argument for the bear case in biotech. But this is not his view on the sector.)

Going into the 32nd Annual J.P. Morgan Healthcare Conference, optimism in the sector is continuing unabated. The NBI is up over 5% already this year, by market close on Jan. 10.

That doesn’t even include the phenomenal, two-day 516% climb for Intercept Pharmaceuticals after its Data Safety Monitoring Board recommended stopping early for efficacy at an interim analysis of a Phase II trial of its obeticholic acid to treat the liver disease nonalcoholic steatohepatitis. Intercept isn’t an NBI component. In one week, the biotech has leapt from mid-cap into large-cap territory; it now has a market cap of $8.6 billion, up from $1.4 billion ahead of the news.

On the news front at JPM, Wall Street expects Celgene and Acorda will pre-announce 2014 guidance at JPM. Celgene has hinted it may also update its long-term guidance for 2015 and 2017. Exceeding even the very early JPM curve, Eli Lilly and Bristol-Myers Squibb have already pre-announced their 2014 guidance.

Other likely highlights include various details from big biopharmas with recent management changes. We could get hints from Teva about the direction it plans under newly appointed President and CEO Erez Vigodman, as well as some color from Amgen on why CFO Jonathan Peacock is departing.

The above should give you a few talking points, as will the deals discussed below. That’s essential when you run into industry colleagues you are just meeting or seeing for the first time in years.

A list of all the JPM parties is also indispensable. Last year was the first time we saw a spreadsheet of all these events. Despite the fact that the Excel document ran a couple of pages, shockingly there were still a few omissions discovered by us and a hedge fund manager who shall remain anonymous.

One of this year’s versions of the JPM party list, linked to above, has been upgraded to a PDF and carefully annotated to note invitation-only parties. Although we wonder, isn’t this list specifically designed for party crashers? Or, maybe it’s just so we’ll know all the fabulous parties we weren’t invited to? The most prosperous entities at any given time always seem to commandeer the penthouse at the pricey Clift Hotel, but of course no spot is cheap at the height of the conference.

Another JPM must is a lot of hand-washing – someone at the last JPM gave DOTW a horrible case of the stomach flu that felled us by Wednesday afternoon. Not to alarm anyone, but the number of flu cases in the U.S. is peaking right now, with a heavy concentration in the Western states. And a San Jose hospital reportedly set up an over-flow tent because of all the flu patients. So, avoid shaking hands with all those Silicon Valley VCs, unless you really need their money.

And for the ladies: no high heels, please. Unless you’re a former model trained to stand the fourteen hours of pain or you are powerful enough to have a suite where everyone is coming to you. Although JPM has promised it’s working to cut back on some (non-paying) attendees this year, so perhaps there will be ample seating at every major session and the hallway traffic will flow freely. Or not.

Most importantly, remember to 'slip' at least once and call the conference H&Q. So, everyone will know you’ve been coming to the conference for a long, long time.

As promised, we continue below to give you ample party-chatter fodder with the latest on biopharma wheeling and dealing in this week’s missive of  . . .

Forest/Aptalis: Forest Laboratories continues to build on the business development strategy of new CEO Brent Saunders with its $2.9 billion buy of privately-held Aptalis on Jan. 8. The specialty pharma has been trying to flesh out its key therapeutic areas – CNS, CV, GI, respiratory, and anti-infectives – since Saunders took over the top slot in October. This strategy began with Forest’s $240 million purchase of the antipsychotic Saphris (asenapine) from Merck & Co. in December; building on the company’s central nervous system franchise, which includes the antidepressants Viibryd (vilazodone) and Fetzima (levomilnacipran). Aptalis will give Forest multiple products in the GI space – Carafate (sucralfate) for duodenal ulcer disease and Canasa (mesalamine) for ulcerative proctitis, as well as others. The privately held company also has a strong presence in the cystic fibrosis space in Europe, where it owns three of the five approved drugs for pancreatic enzyme insufficiency: Zenpep, Ultrase and Viokase (pancrelipase, in three formulations). Forest sees this as a way of bolstering its Colobreathe (colistimethate sodium) business. The drug was approved in February 2012 in Europe for the treatment of cystic fibrosis patients aged 6 years and older with chronic lung infection caused by P. aeruginosa. The spec pharma hopes eventually to bring those products to the U.S. market. Forest is acquiring all outstanding shares of the TPG Capital-backed Aptalis with a mixture of cash and debt. The company has secured a $1.9 billion bridge loan to close the deal within the first half of the year, pending regulatory review. The acquisition is expected to add $700 million to 2015 revenues and be immediately accretive to earnings. -- Lisa LaMotta

Royalty Pharma/Fumapharm investors: Royalty Pharma – the investment firm that buys up royalty streams on marketed drugs – is doubling down on its investment in Biogen Idec’s multiple sclerosis drug Tecfidera (dimethyl fumarate), the stand out drug launch of 2013. The firm announced Jan. 6 it would acquire more interest in the earn-outs payable to the former shareholders of Fumapharm for $510 million. Biogen Idec gained dimethyl fumarate with the acquisition of Fumapharm in 2006. Royalty Pharma already owns an interest in Tecfidera from a deal inked with Fumapharm investors in 2012, when it paid $761 million for some rights, back before the drug was approved by FDA. Now it’s obvious why Royalty has come back for more. Tecfidera, which launched in April, appears on pace to generate more than $1 billion in its first 12 months on the market. The royalty company won’t say how much of the sales it stands to receive. Fumapharm investors still own rights to a “substantial portion” of the earn-outs, Royalty said. Under a complicated payout scheme laid out in Biogen Idec’s SEC filings it appears the entire earn-out is worth about 10% of Tecfidera sales annually if the drug reaches $3 billion in sales, which it now seems likely to do. -- Jessica Merrill

Biogen Idec/Sangamo: In a move that could help validate its proprietary genome-editing technology and further strengthen its balance sheet, Sangamo BioSciences signed a worldwide collaboration and licensing agreement with Biogen Idec on Jan. 9 to co-develop potentially curative stem cell therapies for sickle cell disease (SCD) and beta-thalassemia. During a same-day conference call, Sangamo President and CEO Edward Lanphier noted that those two hemoglobinopathies are serious diseases with sub-optimal current treatment options. There are a number of symptomatic approaches to treating the two conditions that do not address the underlying cause of the disease. And while a bone marrow transplant of hematopoietic stem cells can be curative, such procedures are rare due to a lack of ideal matching donors and the risk of graft versus host disease. Biogen is paying $20 million upfront for worldwide license to both Sangamo’s zinc finger nuclease technology platform and its preclinical intellectual property for treating the two diseases. Richmond, Calif.-based Sangamo also can earn up to $300 million in development, regulatory, commercialization and sales milestones under the agreement with Biogen, along with double-digit royalties on any product sales. In addition, the biotech has an option to co-promote for either indication in the U.S., a decision which the company will not need to make for some time, Lanphier said. Sangamo will continue to perform all R&D activities through the first clinical proof-of-concept trial in beta-thalassemia, while the companies will work together on the IND-enabling work for the program in SCD. Biogen will be responsible for all subsequent clinical development and commercialization of both programs, and will reimburse Sangamo for its internal and external R&D costs related to both programs. -- Joseph Haas

Johnson & Johnson: To bolster its network of innovation centers, the global health care company said this week it has helped establish a new incubator in Israel and has signed early stage collaborations or made investments with eight biotech and academic groups. Johnson & Johnson is teaming with the Israeli government, Takeda, and venture firm OrbiMed Advisors to open the facility in early 2014, adding to incubators J&J has opened with partners in Montreal, Toronto, San Francisco, and Boston. J&J’s Janssen group also runs an incubator in San Diego. The collaborations or licenses are with Cambridge, Mass. biotech Scholar Rock, to pursue new biologics that target TGF-beta 1 for immune-mediated disease; Intrexon, to develop new consumer hair and skin products; University of Texas's MD Anderson Cancer Center, to develop a translational program for cancer immunotherapy; diagnostic firm Nodality, to hone J&J’s immunology R&D, particularly in rheumatoid arthritis and inflammatory bowel disease; and Dutch firm Bioceros, for exclusive rights to develop a monoclonal antibody against an immune checkpoint modulator. Through its venture arm Johnson & Johnson Development Corp., the J&J Innovation group also announced investments in Assembly Therapeutics, which is developing allosteric modulators to treat Hepatitis B and other viral infections; TopiVert, which is working on topical medicine for inflammatory diseases; and SutroVax, a new entity spun out from antibody platform company Sutro Biopharma to pursue vaccines. -- Alex Lash

A Rush And A Push And The Financings Of The Fortnight Is Ours

Meet us at the St. Francis, and bring your own damn water!

Happy Morgan's Eve, everyone. If you’re like FOTF, you’ve been preparing for the week ahead by breaking your day into 25-minute conversations. If our kids need to talk to us, we tell them to take the stairs to the tenth floor, run down the hall, squeeze past 120 people coming out of the bathroom, steal some bottled water left outside a partnering suite, and find Room 1450. Come in, sit down, just  wait while we finish a few emails on our phones. Yes? You can’t sleep? Not exactly an unmet medical need. We’ve also wondered a few times if a toddler’s point blank sneeze into one’s mouth counts as a new form of immunotherapy.

For those of you with older children, you might be practicing for JPMorgan this week when the conversation inevitably turns to financing. Hit your yard-work milestones to trigger the next allowance tranche. That’s the way it is as long as you live under my term sheet, er, roof. 

Whatever the year, there’s always a sensation of falling out of a holiday tree, or warm cozy bed, directly into the boiling JPMorgan cauldron. This year, organizers gave us a bit of a break, pushing the conference back one week, but the slight lag was immediately filled up by a breakneck filing of IPO documents: Six so far in the new year alone, adding to several that squeezed their paperwork through before the ball dropped on New Year’s Eve. (We have details on one of those filers, Flexion Therapeutics, in our roundup below.) A few of those, plus others still in the IPO queue after filing in the back half of 2013, have significant Phase II or Phase III clinical milestones. Yet others that haven’t declared publicly their IPO intentions also have big milestones upcoming, and we can’t help but think their S-1’s won’t be too far behind if a few companies currently in the queue make their debuts soon.

In the next Start-Up, our colleague Stacy Lawrence previews several private companies with upcoming late-stage clinical data, and one thing’s clear: There’s not a lot of 100% novel technology working up the pipeline. That’s not to say the companies in question aren’t doing important or technically difficult work. But many of the products due for data have an element of de-risking that made for faster development and a more reasonable investment thesis, especially worth noting when the company is making a push in an indication where approval has been an elusive target.

For example, Intarcia Therapeutics is delivering an off-patent diabetes drug, exenatide, via a subcutaneous pump that carries a year’s worth of treatment. Intarcia hasn’t filed an S-1 yet, not publicly anyway, but its deep roster of crossover investors makes one hear a ticking clock -- or is that the beat of the subcutaneous pump?

We can’t help but pump Start-Up's upcoming A-List, the annual roundup of the year’s top Series A financings. The 2013 winners include entrants from the fields of gene therapy, immunotherapy, epigenetics and food allergies, and a few have had very unusual financial backers. Learning who's who will be your reward for surviving next week.

And a year from now, perhaps the 2014 A-Listers will include a biotech that has launched with equity crowdfunding. That would be a first. One crowdfund platform that we’ve reported on before, Poliwogg, will try to make a splash in San Francisco next week, so stay tuned to our colleagues from "The Pink Sheet" and Start-Up for more on that. We regret to inform, however, that splashing is generally frowned upon these days in California. Unlike IPOs, raindrops are in short supply, and 2013 was the driest year on record. So we ask you out-of-towners to think twice before showering while you’re here, and if a stranger on the street looks longingly at your Evian, be kind. We’re parched. Better yet, you can save water by drinking your fill of 2014’s first installment of...

Flexion Therapeutics: As its clinical candidates for treating osteoarthritis inch closer to pivotal studies, Flexion has joined the IPO parade. In case anyone’s knees hurt from all that marching, Flexion’s three compounds are formulated for long-lasting pain relief and injection directly into the knee joint. FX006, Flexion’s lead product for front-line use, is a formulation of a common steroid, triamcinolone, that in 2013 posted solid Phase IIb results, but the company still has work to do: it plans a second Phase IIb trial that is set to begin in the second quarter of 2014, to determine the drug’s optimal dose before Phase III. A second product, FX005, is a sustained-release p38 inhibitor; Flexion is positioning the product for end-stage (pre knee replacement) osteoarthritis pain. The company aims to file an IND for a third product, the TrkA antagonist FX007 for post-op pain, later this year. Both ‘005 and ‘007 were licensed from AstraZeneca PLC, in separate deals. Flexion’s founders, Michael Clayman and Neil Bodick, famously institutionalized “A-Team”-style rapid and inexpensive to-proof-of-concept drug development at Eli Lilly & Co. as creators of that company’s ‘Chorus’ model, and struck out on their own in 2007 to monetize POC assets as a stand-alone biotech. At the time, they anticipated that by licensing in pharma assets they could develop and flip them quickly. But the economics they were offered weren’t going to provide the kind of returns they originally anticipated. The company’s reinvention underscores the difficulty of timing biotech models to pharmaceutical tastes, and – at least during the comparably leaner years of 2011-12 – pointed to industry’s increased avoidance of clinical risk. Flexion’s private backers – Versant (~30%), Sofinnova (~19%), Pfizer (~17%), 5AM (~16%), and Novo AS (~11%) – surely hope that timing public investors’ enthusiasm for biopharma is an easier task. – Chris Morrison

AC Immune: When the big Alzheimer’s Phase III trials featuring anti-amyloid treatments failed in 2012, many eyes in the field turned to AC Immune. With arguably the deepest Alzheimer’s pipeline of any private biotech, the Swiss firm said January 9 it has raised a Series D round of 20 million Swiss francs ($22 million) from existing investors. It also said it has launched a Phase I trial of a vaccine to stimulate a patient’s antibodies against phosphorylated tau, a protein that accumulates in tangled formations within neurons. Tau tangles, along with amyloid plaques, are considered two signposts of Alzheimer’s disease, but much debate remains whether the pathologies are treatable or simply an effect of disease progression. Meanwhile, one of the world’s most closely watched Alzheimer’s trials has just begun dosing patients with AC Immune’s monoclonal antibody crenezumab. The trial is funded by Genentech, the Banner Institute, and the US National Institutes of Health, and it involves people in Colombia with high genetic risk of Alzheimer’s who have yet to show cognitive decline. If successful, it would be one of the first signals that anti-amyloid therapy has a preventative effect if administered before symptomatic onset. Dosing began in December, according to AC Immune. The firm has raised 84 million Swiss francs since its 2003 inception, all from individual investors. – Alex Lash

Receptos: Seven months after completing its IPO, Receptos turned back to public shareholders to raise more money, grossing $102 million in a follow-on public offering on January 8. The biotech sold 3.3 million shares for $30.75, a 120% increase from its $14-per-share IPO price. Days before the offer closed, Receptos started enrolling patients in the Phase III portion of its RADIANCE trial of lead candidate RPC1063 for relapsing multiple sclerosis. RPC1063 is being tested in a separate Phase II trial in ulcerative colitis, and Receptos plans to release top-line data on both indications in mid-2014. Recently the USPTO issued composition-of-matter patents on RPC1063, giving the compound patent coverage until at least May 2029. Receptos is busy with others in the pipeline too: it’s designing a Phase II study of RPC4046 in active eosiniphilic esophagitis. AbbVie partnered the anti-interleukin-13 antibody with Receptos in May. Once the study results are published, AbbVie has an option to enter into a worldwide co-development deal with Receptos, which would retain co-promotion rights and split US profits. In addition, this year Receptos expects to select a lead agent from its glucagon-like peptide-1 receptor small-molecule positive allosteric modulator program and start IND-enabling studies in Type II diabetes. -- Amanda Micklus

Blueprint Medicines: The Cambridge, Mass. biotech said January 7 it had secured a $25 million Series B round as it pushes its selective kinase inhibitors, aimed at specific mutations mapped through its platform, toward the clinic. It says its lead compounds should enter the clinic in 2015. They are an inhibitor of the mutation that drives both systemic mastocystosis, an overproduction of mast cells in various organs and tissues, and a subset of gastrointestinal stromal tumors; and an inhibitor of a mutation that leads to a specific type of hepatocellular carcinoma. The firm was initially funded by Third Rock Ventures and Fidelity Biosciences, but neither of those deep-pocketed groups has taken the lead for the B round. Instead, Swiss oncology investment specialists Nextech Invest led the round, with crossover investors Biotech Value Fund and Casdin Capital, Third Rock, and Fidelity, and other undisclosed investors joining in. The crossovers could be a sign that Blueprint is gathering itself for a run at the public markets this year. The firm has been led since last spring by an interim CEO, Third Rock partner Alexis Borisy, who took over for co-founder Chris Varma without an announcement. – A.L.

Best of the Rest (Highlights of Other Activity This Fortnight): Alexar Therapeutics, the latest biotech to come out of asset-based financing entity NeXeption, closed on a $21.5 million Series A round led by New Science Ventures and Third Point Ventures to support work on a topical liver X receptor agonist for inflammatory cutaneous disorders…Auspex, which has a S-1 on file to go public, raised more venture dollars: the orphan disease-focused biotech received $20 million in Series E financing and $15 million in a venture loan...Neuralstem will advance cell therapeutics and small molecules, including lead spinal cord stem cell-derived NSI566 for ALS, thanks to a $20 million registered direct offering…after postponing its IPO in November, GlycoMimetics revived the offering and set terms at 5.75 million shares for $8…and GW Pharmaceuticals, maker of cannabinoid prescription drug Sativex, raised $88 million in a FOPO. -- AM

Stampeding wildebeests (heading to the Celgene presentation?) courtesy of t3rmin4t0r under Creative Commons license.

Financings of the Fortnight Climbs Half Way To The Stars

Yeah yeah. We know. The life science venture shakeout isn’t over yet. It’ll get smaller before it gets bigger. Happy new year, everybody. That was the drumbeat we heard as we made the rounds at J.P. Morgan this week. But the California sun was shining, the street musicians were banging on their plastic buckets, and the doors of the St. Francis (don’t call it the Westin!) just kept on revolving.

Let us throw a few names at you. Sanderling Ventures. Alex Denner. Ascension Health. Hatteras Venture Partners. Shakeout notwithstanding, all have raised or are raising new health care funds, some by notable means. Hatteras is boosting its fund size 50% to $125 million by adding Small Business Administration loans under a new venture-friendly government program. 

Sanderling Ventures, whose last fund was of 2004 vintage – so long ago uncorked it doesn’t even register on START-UP’s latest annual gas-tank chart -- has laid down a marker that it’s looking to raise a seventh fund of $250 million, and GlaxoSmithKline says it will be a limited partner with a $50 million stake.

The venture arm of Ascension Health, one of the largest hospital groups in the US, has raised a third fund of $225 million. And Carl Icahn’s former biotech consigliere Alex Denner is also launching his new hedge fund, friends of FOTF tell us.

But the fund news we found most intriguing was that apparently CMEA Capital of San Francisco is giving an eighth fund a go, and it might be life-sciences only. We’re not sure of the details – and CMEA isn’t talking – but we do know this: two new partners with biotech experience have been dubbed "founding partners" of CMEA 8. It says so on the firm’s Web site. One is Kent Hawryluk, who has been an Indianapolis-based VC with Twilight Venture Partners for years. He helped found Marcadia Biotech in 2006 and sell it to Roche in late 2010 for nearly $300 million upfront. The other is Troy Wilson, who was president, CEO and co-founder of Intellikine until Takeda bought it about a year ago for up to $310 million.

With CMEA maintaining radio silence despite our entreaties, we’re left to speculate about the verbiage on Hawryluk and Wilson’s CMEA pages: 

“Our success at Marcadia is a reproducible formula for the portfolio companies of CMEA 8. We focused on transforming breakthrough science into a product needed by patients and Pharma. It was through capital efficiency, proper incentives, and hard work we were able to create value in such a short amount of time.”

And…

Wilson’s most recent success illustrates the strength of the CMEA 8 model. He was President and CEO of Intellikine, a company he co-founded. In just over four years, Intellikine discovered three drugs to treat cancer and advanced them into clinical testing… Along with several of his Intellikine colleagues, he recently co-founded Wellspring Biosciences. “It’s exactly the sort of company we want in CMEA 8,” he says.

Wellspring, by the way, is developing small molecules for cancer treatment, according to its bare-bones Web site.

Last we heard news from CMEA, it was launching the Velocity Development Corp. in 2011, a virtual development team for asset financing, as a carve-out of its seventh fund. In an earlier permutation, Velocity was supposed to be backed by Eli Lilly & Co. as part of Lilly’s “mirror fund” scheme, but instead it launched in mid-2011 as part of CMEA’s portfolio. Around the same time, Atlas Venture created its own asset-financing group, the Atlas Venture Development Corp. AVDC since has announced two projects, Arteaus Therapeutics and Annovation Biopharma, and in the following months, other asset-based venture schemes have debuted.

All the while, Velocity has been quiet. In discussing Velocity at the time of its launch, CMEA managing general partner Jim Watson, one of the San Francisco firm’s high-tech investors, said there would be no CMEA 8. Plans apparently have changed.  

A lot has certainly changed for Kleiner Perkins Caufield & Byers partner Risa Stack. On January 7, Stack said she was taking a position as a general manager and a primary deal maker for General Electric's healthyimagination, a $6 billion initiative to make health care affordable and accessible. Stack will develop strategy and drive execution of new initiatives with an initial focus on personalized medicine and health care data, her areas of expertise at KPCB.

Stack already was on the healthyimagination advisory board, and the initiative’s CEO Sue Siegel is a long-time friend and colleague, having worked at Mohr Davidow, a frequent co-investor with Kleiner Perkins in diagnostics.  Stack worked closely with co-founder Brook Byers, who also was heavily involved in many of her portfolio companies. (Byers is Kleiner’s board representative at Foundation Medicine, which just extended its Series B round – see item below.)  Several of Kleiner Perkins’ diagnostics portfolio companies, including Foundation, CardioDx and Veracyte, are in the early phases of product launch.  And with technologies abundant – even fungible, some say – it makes sense to look to integrators like GE to drive adoption.

Raise a fund? Ha. We at FOTF HQ can barely raise our fingers to the keyboard to write this column after four days of pounding the San Francisco pavement. Fortunately, there's nothing better to elevate one's chi and center one's chakras (we are in California, after all) than the year's first edition of...

Foundation Medicine: Coincidence? In Vivo Blog readers name Foundation Medicine’s Series B round their top financing deal of the year. Four days later, the company reveals it’s grabbed the attention, and cash, of three renowned investors who have added $13.5 million in new capital to push the Series B total to $56 million. Microsoft chairman Bill Gates, jVen Capital founder and former Digene chief Evan Jones, and Russian billionaire Yuri Milner topped off the round, following a September 2012 first closing that featured crossover investors Deerfield Management, Redmile Group and Casdin Capital; strategic backers Roche Venture Fund and WuXi Corporate Venture Fund; and VCs Third Rock Ventures, Google Ventures and Kleiner Perkins Caufield & Byers. The latest cash infusion arrives as Foundation continues to commercialize its first product, FoundationOne, a genomics test that oncologists use to choose appropriate treatments or clinical trials for cancer patients based on assays of their tumors. Foundation struck at least seven pharma partnerships during 2012, and it is planning to launch a hematologic malignancies test in 2013. Gates invested on his own rather than through his foundation, as he did in a 2011 round for Nimbus Discovery. Milner, known for his late-stage investments in Facebook, Twitter and Zynga, recently took a stake in 23andMe. And Jones, who has backed Veracyte, Fluidigm and CAS Medical Systems, took a board seat at Foundation. – Paul Bonanos

Ultragenyx Pharmaceutical: Last summer, START-UP posed the question “Was Enobia’s Sale A High-Water Mark For Rare Disease Deals?” Rare disease company Ultragenyx is trying to make that question look silly. The Northern California firm with close ties to rare-disease leader BioMarin Pharmaceutical said on December 20 it has raised a $75 million Series B round. It was led by Adage Capital Partners and featured a varied roster of heavyweight crossover public investors, corporate venture groups and its existing venture backers. The cash will go mainly toward the biotech’s lead clinical programs, UX-001, a Phase II replacement therapy for hereditary inclusion body myopathy, and UX-003, an enzyme replacement therapy to treat  mucopolysaccharidosis type 7, due to enter a Phase I/II trial this year. The cash also likely means that Ultragenyx will look to go public in the not-too-distant future, often a requisite to entice public investors to make private biotech investments, as our colleague Stacy Lawrence explained in a November START-UP feature. (For more crossover coverage, check out the new In Vivo magazine, in which Stacy has drawn back the curtain on Deerfield Management, which wants to become unequivocally the top health care hedge fund.) Despite the influx from global funds like T. Rowe Price, Blackrock and Jennison Associates, and the inclusion of rare-disease heavyweights Shire and Sanofi-Genzyme Bioventures, one of Ultragenyx’s original backers has the board chair: Eran Nadav of TPG Biotech. TPG and Fidelity Biosciences led the company’s $45 million Series A round – which landed it on START-UP’s 2011 A-List, by the way. – Alex Lash

Labrys Biologics/Solstice Biologics: By lumping two companies together, we don’t mean to imply they are two versions of one concept or two products spun out of one platform. On the contrary, they’re quite different. But they have the same lead Series A investor, venBio, and therein lies the rub. Labrys – $31 million committed, syndicate also includes InterWest Partners, Canaan Partners and Sofinnova Ventures – is a single-asset bet, an antibody to treat chronic migraine pulled from Pfizer’s shelf that should start Phase II this year; that’s the kind of idea venBio mainly was formed to go after. But Solstice – $18 million, and Aeris Capital joins venBio – is a bold technological idea, a reworking of RNA strands to help deliver their therapeutic promise into all kinds of cells. To date, constraints on delivering nucleic acids as drugs have limited the field to a few clinical applications. If Solstice’s RNA engineering works – a big if, as venBio cofounder Corey Goodman told "The Pink Sheet" Daily – it could crack the field wide open and justify the leeway venBio LPs gave Goodman’s team to seek out one or two early stage deals. Meanwhile, Labrys is to some extent a bet on Goodman’s drug connoisseurship. He ran Pfizer’s San Francisco biotech group for a couple years before the Wyeth merger shut down the group, and he was well acquainted with the migraine antibody. When Pfizer decided to outlicense it in early 2012, Goodman joined the competition quickly. – A.L.

Sarepta Therapeutics: On the heels of 48-week extension data from a Phase IIb trial in Duchenne muscular dystrophy (DMD) patients, Sarepta priced an underwritten public offering Dec. 13 netting the company $118.2 million. The Cambridge, Mass., firm announced it would offer more than 4.95 million new shares of common stock at $25.25 per share, a slight discount from its same-day closing price of $25.44. The raise capped off a turbulent 2012 for Sarepta. The company had an unclear future after 24-week data from eteplirsen’s Phase IIb trial in DMD produced mixed results. The share price sank as low as $3.24 in December 2011, adjusted for a subsequent reverse stock split, and the firm risked being de-listed by NASDAQ. Gains in early 2012 eroded gradually, and shares neared a new low as recently as July. However, a turnaround began that month as Sarepta engineered a six-for-one reverse stock split to bolster its share price. Then, in short order, it released impressive 36-week and 48-week data for eteplirsen. In the aftermath, Sarepta’s share price soared, peaking at $45 in early October. The improved trial results also brought about major interest in the company from institutional investors, Sarepta CEO Chris Garabedian said. They make up a large majority of the offering’s investors, he said, which comes after an at-the-market facility brought in $37.8 million after the 36-week data were released. -- Joseph Haas

The Best of the Rest: HealthCare Royalty Partners provided Nuron Biotech with $80 million in equity and royalty financing… Russian VC RusnanoMedInvest participated in venture rounds for Regado Biosciences ($51 million), Marinus Pharma ($21 million), and Lithera ($20.6 million)… Naurex completed a $38 million Series B round led by Baxter Ventures...Allakos raised $32 million in Series A funds to support work on immuno-inflammatory antibodies... for its FANG cancer vaccine platform, Gradalis pulled in a $24 million Series B… health IT company Within3 raised $20 million… NeRRe Therapeutics closed an $18.4 million Series A and got rights to GSK’s neurokinin antagonists… To further its anti-diabetic agent imeglimin, Poxel raised $17mm in Series B financing… NanoDimension led a $16 million Series B for Blend Therapeutics… GoBalto raised $12 million in a Series B round to support cloud-based software that simplifies clinical trials… TPG Biotech provided Trevi Therapeutics with $10 million in Series A financing… Avaxia Biologics pulled in a $6.4 million Series B to advance gut-targeted therapies… Actinium Pharma raised $5.1 million as part of a $20 million offering  prior to going public via a reverse merger… Tackling hypertrophic cardiomyopathy, Heart Metabolics closed on a $4 million Series A round… Tau Therapeutics collected $3 million to develop T-type calcium channel inhibitors for solid tumors… Transcriptic reportedly crowdfunded its seed round with help from AngelList and SecondMarket… Troika Venture Capital provided undisclosed financing to cancer metabolism firm StemPar Sciences… Rare disease player Synageva closed on a $118 million FOPO… A few weeks after signing on Leica Biosystems to create a companion dx for its NeuVax breast cancer candidate, Galena publicly raised $24 million… The regenerative medicine company Cytori Therapeutics completed a $20 million public offering… Targeting bioactive signaling lipids, Lpath finalized a $12 million follow-on… In a deal with Aspire Capital, Cyclacel raised $20 million… Nymox collected $15 million in a private placement to pay for trials of NX1207 in BPH and prostate cancer… Seaside 88 has provided NanoViricides with $5 million… Tonix Pharmaceuticals closed on a $3.4 million PIPE… Cancer Genetics set IPO terms at 5 million shares for $6-8… Stemline Therapeutics upped its planned IPO offering to 2.3 million shares at $10-12... Audeo Oncology postponed its IPO… To fund Procysbi commercialization, Raptor Pharma got a $50 million loan from HealthCare Royalty Partners… Oxford Finance loaned Agile Therapeutics $15 million… Arno Therapeutics raised an additional $2.15 million in convertible debt on $12.7 million initially collected in November… To help pay for its acquisition of cancer-trating laser equipment, Pinnacle Biologic received an undisclosed amount of debt financing... ADMA Biologics received $6 million in debt financing from Hercules Technology Growth Capital… Abbott officially spun off the biopharma unit AbbVie…and nine months after START-UP wrote about it here, Wellcome Trust launched a £200 million evergreen fund. -- Amanda Micklus

Photo of Powell Street in 1959 courtesy of Roger4336. He took it himself. Please note the previous location of Lefty O'Doul's. It has since moved.

Financings of the Fortnight Leaves Its Aching Feet In San Francisco

As FOTF favorite Ted Leo and the Pharmacists once sang, there was a whole lot of walking to do at last week's JPMorgan confab. One member of the team had blisters that turned his hosiery into a reprise of the Curt Schilling bloody sock incident. Another logged more than nine miles on foot in four days (2.5 miles the first day) without going more than a few blocks from the ground zero of the St. Francis.

Open wounds notwithstanding, we took the exercise as a blessing, because the annual healthcare confab is no place to eat right. (Go figure.) Soggy pre-made sandwiches, networking-break cookies, hotel catering, coffee, coffee, coffee, then instead of a proper dinner, cocktails and fried finger foods that magically appear every five minutes.

Indeed, what better place to walk off the pounds and kilos than the winter streets of San Francisco, glowing under clear 60-degree skies, and through the commons of Union Square, replete with the frequent fragrance of cannabinoid receptor agonist combustion? (Perhaps that particular odor was left lingering from the Monday night secret-society hootenanny of biotechies who surf, an offshoot of the Longboard Luau crowd who've hung ten for a good cause going on nearly two decades now.)

We kid, of course. Indeed, other than the outdoor aromas that can often surprise visitors to San Francisco, we thought the conference had a distinct lack of the getting-high-on-your-own-supply that often permeates the JPM atmosphere. FOTF chatted at the show with some of 2011's most prolific early-stage investors with plenty of cash in their pockets, but enthusiasm didn't bubble over into hype. When we mentioned that Series A investments in 2011 for biopharma were up 33% over 2010, Third Rock Ventures' Kevin Starr -- a man not shy about making a statement, sartorial or otherwise -- quickly countered that 2010 had set a depressingly low benchmark. (More coming soon on the year's Series A rounds in START-UP's annual A-List, in which we round up 11 new companies and, in a new twist for the feature, profile two investors that aren't on the list of usual early-stage suspects.)

While investors in the money were happy to chat -- Canaan Partners, Flagship Ventures and Cowen Royalty Healthcare Partners all had new funds to discuss -- the end of year venture data showed fundraising was a long way off from pre-recession highs, making more dropouts likely in the coming year. "Capital scarcity is tremendous," Forbion Capital Partners chairman Bart Bergstein told FOTF. That's good news for firms like Forbion, whose enthusiastic LPs signed up late last year for a second extra "top-up" fund of about $50 million to help push a few maturing portfolio companies toward an exit. But it's not good news for entrepreneurs who still have champagne wishes and FIPCO dreams, trying to stay afloat until they find IPO-friendly waters.

Those waters will be tested soon. The day after everyone flew home from San Francisco, Merrimack Pharmaceuticals launched its roadshow and set its sights on a $150 million IPO. Antibiotic developer Cempra Holdings and cancer stem cell biotech Versatem also set targets of $72 million and $45 million, respectively. (As we noted in this column in November, if the public market happily embraces Verastem, the bloom might be back on the rose.)

It's all about momentum, or the perception thereof. The firms vaulting from JPMorgan straight into a roadshow must be convinced that the new year's optimism has given them a running start. To that we say, never mind the blisters, here's the...

Warp Drive Bio: In a tranched deal with both equity and non-equity components totaling $125 million, newly launched Warp Drive has drawn what will surely be one of the largest Series A deals of 2012. The start-up aims to discover and synthesize new drugs based on genetic code found in naturally occurring microbes. Third Rock Ventures led the round, while Greylock Partners and Sanofi supplied the balance of the capital; the equity component is worth up to $75 million. For its contribution, Sanofi also receives collaborative development rights on an unspecified set of products, as well as a non-exclusive option to acquire the company for pre-determined terms; Warp Drive’s shareholders, on the other hand, can force a sale to Sanofi if the company reaches certain pre-set milestones as well. Third Rock partner Alexis Borisy said those terms include a potential return of 10 times the capital invested, and could value Warp Drive at more than $1 billion. Founded by Harvard professor and Third Rock partner Greg Verdine, the company has been incubated within Third Rock for a few years, but only now has officially launched; its co-founders include Harvard genetics professor George Church and University of California at San Francisco pharmaceutical sciences professor Jim Wells. -- Paul Bonanos

Synageva BioPharma: On January 10, Synageva closed a follow-on offering that reinforces public investor interest in rare diseases, an area where the venture community has also taken notice, exemplified by the recent pact between Shire and Atlas Venture. Having originally only planned to raise $60 million, Synageva ended up grossing $90 million by selling 3.6 million shares, including the overallotment, at $25.18, slightly lower than the stock had been trading in previous days. The stock then closed at $31.39 on January 10. In fact, the company’s shares have been steadily increasing the past several months since Synageva gained public status, and approximately $45 million cash on hand, by merging with publicly traded viral disease developer Trimeris in June. Synageva, which ended up with 75% ownership of the combined entity, is focused on orphan metabolic disorders, an area of great industry interest the past couple years that has produced creative liaisons such as the Shire-Atlas Venture tie-up. First up is lysosomal acid lipase deficiency, a lysosomal storage disorder that prevents the breakdown of certain fats and results in build-up of fatty material in the liver, spleen, and blood vessel walls. Synageva is tackling LAL deficiency with the enzyme replacement therapy SBC102, which completed enrollment for its first clinical trial, a Phase I/II study, in December and has orphan drug designations in the US and EU. Last year, prior to merging with Trimeris, Synageva raised $25 million in venture funding and signed two rare disease research collaborations with Mitsubishi Tanabe Pharma and to-BBB. -- Amanda Micklus

Elevation Pharmaceuticals: Respiratory disease-focused Elevation closed a two-tranche, $30 million B round on Jan. 4. With significant participation from new investor Novo Ventures, Elevation should have adequate capital to move its lead candidate, a nebulized formulation of glycopyrollate (EP-101), through to the start of Phase III. The B round will be broken into two tranches, $12 million that will be drawn down this year and another $18 million, if needed, in 2013. By the end of 2013, CEO Bill Gerhart told "The Pink Sheet," Elevation should have completed a pair of Phase IIb studies of its candidate for chronic obstructive pulmonary disease and have identified the minimum effective dose for Phase III study. Elevation may not need to use the second tranche if it lands a co-development and commercialization partner for EP-101 sooner than expected, Gerhardt said. “Our original hypothesis was that the optimal time for partnering would be just prior to entering Phase III … but we think that there might be an opportunity to partner the program earlier,” Gerhart said. The time lag between tranches let Elevation minimize dilution if it partners EP-101 but promises the necessary capital to get into Phase III if a partnership doesn't materialize. Novo Ventures led the B round, investing about half of the total proceeds, and will place partner Heath Lukatch on Elevation’s board of directors. The investors from Elevation’s Series A – Canaan Partners, TPG Growth, Care Capital and Mesa Verde Venture Partners – will provide the rest of the funds, which Gerhart described as an up round. Elevation's Series A, announced two years ago, totalled $32 million in two tranches. -- Joseph Haas

Acceleron Pharma: Just before Christmas, the Cambridge, Mass. firm announced a $30 million D round, notable in part because the firm's most important strategic partner, Celgene, participated deeply enough to place its business-development chief George Golumbeski on the Acceleron board of directors. Celgene previously had a small stake in the company from their first licensing deal, inked in 2008. The new round also pushes Acceleron's venture total over $100 million, with $180 million more raised from partnerships. All that, and it's just now taking its lead compound, ACE-011 or sotatercept, into late-stage trials in chemotherapy-related anemia in patients with metastatic non-small cell lung cancer. If eventually successful, the program would represent a nifty pivot for the firm and Celgene, which originally signed on to co-develop ACE-011 in 2008 as a bone-loss drug.-- Alex Lash

Deals Of The Week's Dance Card is Full

Industry business-development executives rang in the start of what should be a most interesting New Year's (the score's been set for a while, but the performance is NOW: the biosimilars, patent cliffs, companion diagnostics, ongoing financing uncertainty and the big gorilla, health care reform) with half a dozen deals, including Forma's second big partnership in six months and a joint licensing agreement between Alnylam and Arrowhead. 


Also this week 2012 saw its first NO DEAL! as Astellas opted out of a worldwide development and commercialization agreement with Theravance over the latter's Vibativ (telavancin), a bacteriacide, once-daily injection. 


An as if to shock the troops to attention ASAP, Teva announced on New Year's Day an unexpected -- at least by most of industry -- management change, with Bristol Myers' newly resigned head of business development and strategy Jeremy Levin slated to succeed Shlomo Yanai as CEO in May, almost guaranteeing a higher biz dev profile for the global generics/specialty pharmaco.

By the end of the week the calendar new year seemed way back in the rear view as industry's own annual celebration loomed larger. And of course everyone's timing their news to next week -- deals, fundraising, and cocktails await. We'll see you in San Francisco. Meanwhile, it's ...



Forma/Boehringer Ingelheim: Cambridge, MA -based computational drug discovery platform developer Forma Therapeutics Inc. struck its second big partnership in just over six months on Jan. 5. Boehringer Ingelheim GMBH agreed to pay $65 million upfront, plus another $750 million in potential pre-commercial milestone payments, to discover oncology treatments that affect protein-protein interactions. The companies will select an unspecified number of targets jointly; a few have been determined already, but the remainder will be selected over the course of the four-year deal. In late June, Genentech Inc. and Forma agreed to discover cancer metabolism drugs in a deal of undisclosed size. Genentech received an option to acquire the program, which if exercised would return money to Forma’s venture investors. The BI deal also has “a return for our shareholders built in,” according to Forma CEO Steven Tregay, although there’s no buyout option this time. He declined to provide further details. Forma, which has additional platform discovery deals with Eisai, Cubist Pharmaceuticals Inc. and Novartis, has raised $33 million from Lilly Ventures, Bio*One Capital and the Novartis Option Fund in two venture rounds since 2008. It’s planning to develop drugs on its own as well, although Tregay said it’s still building a broad pipeline rather than concentrating on one or two candidates--Paul Bonanos.

Biogen/Isis: Isis Pharmaceuticals Inc. announced Jan. 4 that it garnered a deal with Biogen Idec for its antisense technology, adding to the list of large companies that have partnered with the biotech. Biogen and Isis have agreed to collaborate on the development of ISIS-SMN, a Phase I compound meant for the treatment of a rare genetic disorder called spinal muscular atrophy (SMA). Biogen will pay Isis $29 million upfront as well as $45 million in potential milestones for the option to license the compound after it has reached the proof of concept phase. Should Biogen choose to license the drug, it will assume full development and regulatory responsibilities. Isis will be eligible for another $225 million in milestone payments, along with double-digit royalties on sales, and also will retain some commercialization rights. Isis and Biogen may be the first companies to bring a treatment to market for SMA, but others are not far behind. Both Novartis and Roche have invested in preclinical treatments for the disorder. Roche agreed to pay as much as $490 million to PTC Therapeutics Inc. for the rights to its SMA program--Lisa Lamotta.

Alnylam/Arrowhead: With Alnylam Pharmaceuticals Inc. focusing mainly on internal pipeline efforts following the termination of collaborations with Roche and Novartis late in 2010, the pioneering RNA-interference company has licensed Arrowhead Research Corp.’s Dynamic Polyconjugate (DPC) technology to use toward developing an RNAi therapeutic. Terms were not disclosed for the deal, announced Jan. 5. Alnylam says it will deploy the DPC technology – a systemic small-interfering RNA delivery platform that enables efficient target gene silencing via polymer-based formulation chemistry – against an undisclosed target in its proprietary “5x15” pipeline, five assets it hopes to drive into advanced clinical development by the end of 2015. As part of the deal Arrowhead acquires a license to Alnylam’s intellectual property related to targeting the hepatitis B virus. Alnylam can receive milestones and royalties from Arrowhead on any product derived from its HBV RNAi intellectual property, while Arrowhead likewise can earn milestones and royalties from any marketed product resulting from Alnylam’s licensure of the DPC technology. Meanwhile, on Jan. 4, Alnylam announced it had achieved positive preliminary results from a Phase I trial of ALN-PCS, one of the 5x15 assets. In the study, ALN-PCS, which targets the PCSK9 gene to treat severe cholesterolemia, demonstrated statistically significant RNAi silencing of PCSK9, up to 66%, and reductions of more than 50% in LDL cholesterol levels in participants--Joseph Haas.

Ipsen/Oncodesign: Ipsen, the mid-sized French pharmaceutical company, is tapping the research of fellow French CRO and drug discovery firm, Oncodesign, to develop its new LRRK2 kinase inhibitors, which have potential to treat Parkinson's disease. The research collaboration could see Ipsen paying Oncodesign €115 million ($146 million) in research and opt-in fees, development milestones and sales royalties. The Ipsen deal is the first involving drug discovery with a major pharma company for Oncodesign, a private CRO set up in 1995 to provide preclinical oncology pharmacology services. Its investors include a trio of French venture capital firms: CIC-Vizille Capital Innovation, CDC Enterprises and Avenir Entreprises. At the same time, new Parkinson's disease therapies fit neatly into Ipsen's focus on neurology, one of four therapeutic areas the specialty pharma is now concentrating on. One of its major marketed products is the botulinum toxin product for dystonia, Dysport (botulinum toxin type A). Ipsen has landed two options to exclusively license worldwide development, manufacturing and commercialization rights to Oncodesign's LRRK2 inhibitor program when it successfully reaches clinical proof of concept. Oncodesign will receive a technology access fee, funding for the program's research and early development activities and upon exercise of the license options, opt-in fees and additional development, regulatory and commercial milestone payments potentially totaling €115 million for the development of molecules in two or more indications, and tiered royalties on net sales. Mutations in the LRRK2 gene, which produces a protein with multiple activities, including GTPase and kinase activities, have been linked to genetically inherited Parkinson's disease, and Oncodesign has developed a macrocyclisation process, Nanocyclix, which it says produces potent and selective kinase inhibitors.--John Davis

Ironwood/Bionomics: As it begins with various partners to traverse various global regulatory landscapes with its IBS/constipation compound linaclotide, Ironwood Pharmaceuticals Inc. has been on the prowl for earlier-stage assets to back-fill its pipeline. On Jan. 4, the company said it would pay $3 million upfront for worldwide development and commercialization rights to BNC210, a clinical-stage anti-anxiety program from Australia’s Bionomics Ltd. All told, the deal could be worth $345 million plus royalties for Bionomics, including the upfront and $10 million in payments expected in the next two years. The deal marks Ironwood’s third since last January, but the first that adds a clinical compound to its pipeline. Previous deals included a discovery alliance around Protagonist Therapeutics peptide technology and a delivery pact with Depomed Inc. BNC210 has completed two Phase Ib studies in a total of more than 80 healthy volunteers, and according to the company, acts by a novel (but undisclosed) mechanism of action that should avoid side effects common to anxiety medicines. It is Bionomics’ second most advanced project, behind the unpartnered Phase II oncology compound BNC105. Ironwood joins a stable of partners at Bionomics that includes Genmab AS and Merck Serono SA--Chris Morrison.

Endo/BioDelivery Sciences: Endo Pharmaceuticals, which has radically reshaped its product portfolio in recent years in order to diversify away from overdependence on the pain medication Lidoderm (lidocaine transdermal) is assuming worldwide exclusive licensing rights to BEMA Buprenorphine (bioerodible MucoAdhesive delivery system) from BioDelivery Sciences. The drug is a chronic opioid-based pain therapy that fits well with Endo’s pain medication franchise. Endo paid $30 million upfront, and has agreed to pay additional milestones totaling $150 million, plus tiered royalties ranging from the mid-to-upper teen percentages of net sales. The milestone breakdown is as follows: $95 million in potential pre-defined intellectual property, development and regulatory milestones, plus $55 million in commercial milestones. The BEMA delivery technology consists of a small, bioerodible, polymer-thin film, which is applied to the inner lining of the cheek. BEMA buprenorphine met primary endpoints in a Phase II trial in 2009 and is currently in Phase III trials, with potential to file in 2012. BioDelivery estimates its sales could reach $500 million--Wendy Diller

image courtesy flickr user EDubya/creative commons license

The JPMorgan Healthcare Conference: Where Optimism Is Its Own Catalyst

The annual January health care confab in San Francisco is ostensibly run by JPMorgan but long ago took on a life of its own and spread well beyond the hallways of the Westin St. Francis. (Yes, they are crowded; we think we can all get over it.) One tweeter dubbed it "spring break for old white dudes in suits" but (thankfully) we think it has moved beyond that in so many ways too.

However, what the broader JPMorgan conference ecosystem can't escape is the sureness with which it knows its importance. It's not necessarily unearned or mistaken, this sense of self-worth. As a barometer for sentiment in the health care world, and biopharma in particular, the meeting and its attendant parties, satellite conferences, and offsite deal-building are impossible to beat. It doesn't really matter whether that's by design or by accident of geography and calendar.

Every year at JPMorgan, the mood's the thing. And this year, the mood was unmistakably optimistic. Perhaps the best part of that mood, that vibe, that intuition, is that nobody we talked to could really put their finger on Why. There were no concrete reasons offered for the buoyancy carrying people from meeting to meeting and from reception to reception. It just was.

And so, this was the year biotech CEOs talked with straight faces about their potential 2011 IPOs. This was the year a tiny biotech boasted about its technology from the sides of Powell-Mason cable cars (yes, Adimab bought every available ad for the week). This was the year one of the industry's oldest precommercial biotechs talked about launching not one but two drugs in the next 12 months (Vertex's straws did the trick). And this was the year that Big Pharma shifted from talking about dealing with patent expiries to talking about bulging pipelines (and of course returning cash to shareholders).

Like last year's meeting (also tinged, if not quite as much, with a sense of optimism) there is of course a reality that doesn't quite live up to the good mood. In 2010 fewer biotechs received Series A cash than in any recent year, and the average haul in those rounds was also lower than any year in recent memory, as we'll report in the next issue of START-UP. Hours after talking about its industry leading pipeline, Merck got a $7 billion wake-up call, losing that much market cap in response to some fuzzy bad news coming out of its voraxapar Phase III program. Industry's experiments with R&D models have yet to prove themselves -- or excite investors -- and it will be a long time before the results of that restructuring can demonstrate any success. Regulators remain safety-focused, payers remain in the drivers' seat.

We left San Francisco with the sense there are of a lot of deals in the industry pipeline. Hey, even those crazy kids Sanofi-Aventis and Genzyme may make a go of it (you might have heard about that one). Pharma is still in its first steps of a long march toward externalization of R&D, so we don't doubt the deals will come.

But unlike the majority of those future deals, we suspect 2011's optimism is front-end loaded. A mood is just a mood, after all.

The Health Policy Divide: East Coast vs. West Coast (Part 2: The Climate for Innovation)

The Council for American Medical Innovation hosted an event in Washington DC January 12 focused on the policy climate for innovation, and one theme was unmistakable: if the US doesn’t make a sustained effort, it risks losing its position of leadership in medical innovation to other countries hungry to attract those investments.

US policymakers, said Pharmaceutical Research & Manufacturers of America CEO John Castellani, need to take seriously the notion that industrial policy can and should encourage innovation.

That has been a common enough theme for the biopharma sector for decades, but the focus of international competition has changed. As the tweets from the conference make clear, everyone now sees China as the up-and-coming center for medical innovation, the country willing to do whatever it takes to attract the best and brightest innovators.

At the same time, the JP Morgan health care conference in San Francisco was devoting an entire track to Chinese companies—and, as the Wall Street Journal reports, it was standing room only.

By that metric, China’s efforts to attract investment in innovation sure seem to be working.

The Health Policy Divide: East Coast vs. West Coast (Part 1: The Reform Law)

The annual JP Morgan health care conference drew thousands of health care industry executives and investors to San Francisco this week, offering a nice chance to contrast the views of health care policy inside the Beltway and (far) outside.

We will start with today’s headline from Politico: Investors see health reform's potential. “As Republicans push forward on repealing health reform, planning the law’s demise, a different conversation is happening among thousands of health care investors gathered in San Francisco for this week’s J.P Morgan Health Care Conference: how to capitalize on health reform’s new business opportunities,” writes Sarah Kliff.

Indeed, presentations by insurers, PBMs, retail pharmacy and other service companies all touched on the potential benefits—yes, benefits—of the reform law on their prospects for growth. Now, that doesn’t mean investors are thrilled at the idea that insurers’ profit margins will (in effect) be regulated by the feds or that Medicare Advantage is facing steep cuts. But the outlook is decidedly optimistic.

Of course, that was not supposed to be the Politico headline today. But for the horrible events in Tuscon this weekend, the big health reform news would have been coming out of DC, where the House vote on repealing the law was supposed to happen January 12. That vote has been delayed, but not for good.

Indeed, as former Sen. Judd Gregg told the JP Morgan conference during a January 12 keynote, the vote to repeal the law will likely be the first of several staged votes to keep the anti-reform pressure on. Gregg expects the GOP to follow-up the first vote with a series of more targeted votes to repeal items like the individual mandate, the MA cuts, and so on, with each vote intended to dramatize the message that it will take a GOP sweep in 2012 to get rid of the law for good.

Gregg, incidentally, worries that the staged votes might “poison the well” on opportunities to do more “substantive legislation” in health care, focused squarely on what he sees as the overarching priority for the new Congress: deficit reduction. He believes there can and will be progress on areas like tax reform, social security reform, and cuts in discretionary spending—but argues that deficits can’t be avoided without more meaningful steps to address health care costs.

Still, the repeal votes will come soon enough. But it will be interesting to see whether the message from San Francisco this week starts to change the politics of health care reform in DC.

Notes From JP Morgan: Put On Your Happy Face?

For those trawling the halls of the Westin St. Francis and other nearby hotels at last week's JP Morgan confab, the buoyant outlook by most attendees resulted in an industry-wide sigh of relief.

But is the optimism justified? Or have we collectively morphed into ostriches, believing that if we squawk loud enough, our assertion that investors are returning to public biotech will make it so? To completely mash-up our animal metaphors, perhaps the positive outlook is really just due to the "dead cat bounce."

In truth the reality is nuanced. A pool of lucky "haves" add to their cash positions while the unlucky and far more numerous "have nots," which now includes smaller biotechs and VC firms, will continue to struggle.

Let's start with the good news. As we note in this January IN VIVO feature, publicly traded biotechs raised more than $6 billion in follow-on public offerings in 2009, compared with just $2.1 billion in 2008. Last year was the best year on record since 2000, when the torrid market and a NASDAQ pushing 5000 allowed biotech to raise more than $11 billion.

The strong boost in FOPOs has bankers and other Wall Street types believing that a thaw in the IPO market can't be far behind. But take heed: the $6 billion in FOPOs that's causing so many smiles was primarily the domain of more established industry brethren, including Vertex, Human Genome Sciences, and Dendreon, which all have late-stage assets facing regulatory decisions in coming months.

Indeed, those three companies alone pulled in more than $2.2 billion in 2009, one third of the FOPO largesse, according to Elsevier's Strategic Transactions database. (And FYI, according to the database, the largest single public offering in '09 went to the diagnostic and instrument maker Qiagen.)

Certainly the IPO stats posted for 2009 -- 12 health care companies pulled in nearly $3 billion --were a vast improvement on the 2008 climate, when just two companies debuted raising a paltry $92 million. But do IPOs such as Johnson & Johnson spin-out Movetis's €98 million coming-out party really translate into investor appetite for considerably riskier offerings in the queue? A J&J spinout with a Phase III asset is one thing; the regenerative play Tengion, antibiotic developer Trius Therapeutics, or anti-VEGF developer Aveo Pharmaceuticals are a different kettle. Will these start-ups suffer Omeros's fate? Will they even get out?

In that vein, we have to hand it to Ironwood. In a "grab the bull market by the horns" kind of move, on Jan. 20, the company filed plans with the SEC for a debut that could bring in nearly $270 million. Recall Ironwood first filed in November with a $173 million target. That price alone would be the most lucrative drug-related offer since mid-2007 -- not counting Talecris, the plasma producer and Bayer HealthCare spinout that raked in nearly $1 billion last fall. But Ironwood has decided to shoot even higher and sell 16.7 million shares at $14 to $16 per share.

Meanwhile there are other questions to ponder. Given the desperate straits of many VCs (more on this in a minute), is there a danger fledgling start-ups will be pushed from their financial nests prematurely, as their backers aim to demonstrate their exit prowess? And what happens if several of these IPOs go south? If Ironwood falls short of its $267 million goal, will the IPO window slam shut faster than you can say eye-pea-oh?

Maybe, but VCs seem willing to take the risk given their own financial constraints. "We need the stalking horse of a robust IPO market for deal prices to increase," one VC told IN VIVO Blog at last week's JP Morgan meeting.

Just how bad are things in VC land? On Tuesday Jan. 19, Atlas Venture, which invests in both tech and biotech, announced plans to consolidate operations, bringing its US and European teams together under one roof in Boston. Only the happy family won't necessarily be bigger -- in the process, Atlas is reducing headcount.

That news probably would have been unthinkable a year ago. Atlas actually raised money in '08, one of the lucky few to pull in money even as the economy was souring. (It closed its $283 million Fund VIII in January of 2009.) But it's hard not to raise questions about VC viability after last week's revelation that the total amount of money raised by venture firms from their limited partners fell sharply in 2009 to $15 billion, nearly half of 2008's total and the lowest since 2003.

"Our industry is going to contract in size," Mark Heesen, president of the National Venture Capital Association, said last month. Almost certainly, healthcare VCs won't be exempt.

That's troubling news for private biotechs looking for funding, especially if they aren't exactly newbies and need significant dry powder to advance a product to proof-of-concept. (Fourth-quarter VC financing stats are due out January 22, fyi.) And it means corporate venture groups like SR One, the Novartis Option Fund, and Johnson & Johnson Development Corp. will again play a critical role in new company creation. (It also means big pharma can use its cash to make VCs irrelevant.)

Either way, no one we've talked to recently predicts that earn-out heavy deals will fall by the wayside. On the rise of structured acquisitions, one VC told us unequivocally last week, "We love them." That's probably because such deals AREN'T alliances.

So what do you think, dear reader? The nascent optimism at JP Morgan last week seems rooted in the fact that 2009 ended so much better than it began. But how much does that really say?

(Image courtesy of flickrer BenSpark via a creative commons license.)