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.

2013 Alliance Of The Year Nominee: Celgene/OncoMed

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

Celgene loves the option-based deal almost as much as it loves bringing new oncology candidates into its early-stage pipeline, and Deals of the Year can prove that mathematically.

The big biotech's early December tie-up with OncoMed for a six-pack of anti-cancer stem cell therapeutic candidates was Celgene's ninth deal of 2013, after negotiating seven transactions in 2012. And of those 16, at least nine involve cancer and eight were option-based agreements.

The deal once again put Celgene at the forefront of early-stage oncology dealmaking and added to the already impressive smorgasbord of drug candidates and technologies to which it holds rights or options. This is not to say the complicated deal with OncoMed was business as usual, for it was one of the most complicated agreements of the year in biopharmaceuticals, necessitating a term sheet that might have resembled a Rube Goldberg machine, and quite lucrative for OncoMed -- potentially very lucrative.

To wit: Celgene paid $177.25 million up front ($155 million cash along with a $22.25 million equity investment in OncoMed, which totaled 1.47mm shares at $15.13, a 15% premium.) It also committed to a myriad of milestones dependent on the success of up to six different projects.

In return, Celgene will receive option rights on six novel stem cell therapeutic candidates, including the lead asset, demcizumab (OMP-21M18), a humanized MAb inhibitor of Delta-Like Ligand 4 (DLL4) in the Notch signaling pathway. The deal also covers five preclinical or discovery-stage large-molecule programs to target cancer by stopping cancer stem cells from replicating and/or differentiating such cells to make them more vulnerable to chemotherapy. Celgene gets full license to one of the preclinical programs, while OncoMed retains U.S. co-development and co-commercialization rights on the other five assets.

Celgene can exercise its option on demcizumab after the completion of planned Phase II studies. The antibody is being tested in three Phase Ib trials with standard of care: with gemcitabine and Abraxane in first-line advanced pancreatic cancer, with carboplatin and pemetrexed in first-line advanced NSCLC, and with paclitaxel in patients with platinum-resistant ovarian cancer. The last of those is a Phase Ib/II study being conducted at MD Anderson Cancer Center.

If Celgene options demcizumab, the two companies will share global development costs, with Celgene covering two-thirds of the expense. If the drug is approved by FDA, they will co-commercialize it in the U.S., with 50/50 profit sharing. Outside the U.S., Celgene would develop and commercialize the antibody, with OncoMed eligible for milestones and tiered double-digit royalties.

In September Celgene got label-expansion approval for Abraxane to treat pancreatic cancer, which Hastings says is the greatest unmet medical need in cancer at present. But the executive said Celgene was motivated just as strongly by demcizumab’s showing to date in NSCLC patients.

“They were equally impressed with the NSCLC data, in terms of response rate and some durability that we’re seeing there,” Hastings said. “What this deal enables us to do is more Phase II studies than we would have done on our own, so we’ll be looking at additional Phase II studies beyond these two to give the drug multiple shots.”

Celgene also gets rights to OncoMed’s preclinical anti-DLL4/vascular endothelial growth factor bispecific antibody, as well as four preclinical or discovery-stage biologics programs that target other cancer stem cell pathways, including RSPO-LGR, a pathway in which human R-spondin proteins are targeted by antibodies to disrupt binding with their receptors, the leucine-rich repeat-containing G-protein coupled receptors. Celgene’s exclusive license is to one of those four biologics programs.

For the four programs not outright-licensed by Celgene, the Redwood City, Calif., biotech gets terms similar to those negotiated for demcizumab – two-to-one global development cost-sharing with Celgene covering the larger portion, 50/50 U.S. co-commercialization with profit-sharing, and mid-single-digit to mid-double-digit royalties on sales outside the U.S. For the licensed program, OncoMed can earn mid-single-digit to mid-double-digit royalties on worldwide sales.

Got all that? If you care about bio-bucks totals, OncoMed could earn more than $3 billion over the lifetime of the collaboration, if virtually every box in the agreement gets checked off. Even if earn-outs don't reach 10 figures, though, it's a lucrative and validating deal for OncoMed, which just raised $88.8 million in an IPO this past July.

image via Wikimedia commons

2013 Financing of the Year Nominee: Juno Therapeutics

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

With a name connoting royalty and godliness, it’s no wonder Juno Therapeutics received one of the year’s richest rounds of funding. And although its namesake’s existence was only in the minds of her ancient followers, the ambitious start-up’s $120 million Series A funding was no myth. Launched in December, the Seattle-based company instantly became a major player in the rapidly evolving cancer immunotherapy sector.

Juno unites researchers from three different institutions: Fred Hutchinson Cancer Center and the Seattle Children’s Research Institute in Seattle, and Memorial Sloan-Kettering Cancer Center in New York. Prior to the deal creating Juno, MSKCC’s closely watched chimeric antigen receptor T cell program was conspicuously un-partnered, especially after the cancer center revealed in March that it had induced a complete response – total remission – in a handful of patients; at December’s American Society of Hematology meeting in New Orleans, it unveiled further data showing full remission in 15 out of 17 patients treated with its immunotherapy.

That data has researchers ecstatic, and persuaded investors to fund Juno’s clinical research. The company uses autologous cell therapies, in which a patient’s own immune cells are removed from the body, genetically modified, and re-infused into the body so that they target tumor cells. The Hutch had a similar CART program underway, as well as a high-affinity T cell receptor program that aims for specific proteins inside tumor cells. Investor and board member Robert Nelsen of ARCH Venture Partners told us that Juno plans to begin no fewer than 13 trials by the end of 2014, in a variety of cancers. (ARCH invested alongside the Alaska Permanent Fund, a diversified, state-operated group.)

Juno is also notable because it unites cancer centers sometimes seen as rivals; Nelsen said they’ll essentially fight it out scientifically in pursuit of the best treatments. “Everyone has the big goal in mind,” he said. “We’ll run parallel programs and let the data decide. The scientists are perfectly willing to throw competing programs in, and see which ones are better.” Others are competing too. Novartis struck a deal for the University of Pennsylvania professor Carl June’s well-regarded CART program in August 2012, bypassing VCs altogether and taking rights for an undisclosed upfront payment and future milestones; at ASH, the pharma released data showing full remission in 19 of 22 patients.

Juno is well-positioned to capitalize on multiple trends. Barriers are falling in the broader area of genetic modification of cells using viral vectors, the field of gene therapy; the European approval of uniQure’s Glybera (alipogene tiparvovec) last year led to a spate of fundings in 2013. And BMS’s antibody Yervoy (ipilimumab) for melanoma, a cancer immunotherapy that doesn’t require genetic tweaking, is one of the year’s success stories; analysts believe sales will clear $1 billion this year.

Researchers don't talk about curative treatments lightly, but the "C" word has been tossed around when discussing Juno's and June's techniques. If it's too early to say Juno has achieved that goal, there's still time for it to claim a smaller victory in 2013, if only you'll consider it for the Roger in our Financings category.

Thanks to Flickr user Richard Mortel for bringing his camera to the Vatican; we've reproduced his photo under Creative Commons license.

2013 M&A Of The Year Nominee: Amgen/Onyx

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

Step right up and cast your vote. No reason to hem or haw. Amgen’s $10.4 billion acquisition of Onyx Pharmaceuticals deserves your vote for M&A of the year.

What’s that you say? The deal held no intrigue? No eleventh-hour white knight who stepped in and drove a nail-biting bidding war? No surprises that made you dribble coffee down your chin while reading the morning news?

Well, it’s not as though every deal can be shrouded in as much conspiracy as Roche’s takeover of Genentech, or done at a price that leaves you staggering to the water cooler ala Gilead’s acquisition of Pharmasset.

But what’s so bad about a straightforward acquisition that hedges for the buyer and still rewards the seller, one where the purchase price, at $125 per share, meets a middle ground? Remember how Amgen originally offered $120 per share, which was rejected by Onyx, which thought it could get more like $130 to $140 per share?

How civilized then that they settled squarely on $125 without dragging us through a drawn out campaign. Onyx’s investors still ended up receiving a hefty payout, with the final price representing a 43.9% premium over the stock’s closing price in June before Amgen’s original offer was disclosed.

And, $10.4 is nothing to shrug at either. Amgen’s acquisition of Onyx was the most expensive M&A of the year, reason enough to cast your vote in its favor.

Don’t forget the perfectly sensible strategic rationale behind Amgen’s decision to buy Onyx. The big biotech gains the proteasome inhibitor Kyprolis (carfilzomib) for multiple myeloma, and Nexavar (sorafenib) partnered with Bayer, for liver and kidney cancer, drugs that are already on the market in the U.S. and will immediately contribute to Amgen’s top-line. The company needs new drugs to fill a revenue gap. Before the acquisition it was expecting that sales would be lower in 2015 than in 2013.

The addition of Kyprolis fills that void – and it gives Amgen some street cred in oncology, a therapeutic area it has targeted for future growth, though its marketed cancer portfolio mainly includes supportive care products, not cancer interventions.

Onyx serves as a leg up for Amgen as it looks to establish itself as a major oncology innovator and bring forward a pipeline of oncology drugs it has cobbled together partly through acquisitions.

Wait, you’re still not sold? You’d prefer a deal that’s more high-risk, high-reward? Well, you can rest assured Amgen’s still has plenty of risk to absorb. Kyprolis made it to the market through an accelerated review, but Amgen needs the results of two ongoing Phase III trials, ASPIRE and FOCUS, to play out in the drug’s favor before it can secure full approval and expand into Europe.

In November, a Bank of America analyst issued a note citing reports of cardiovascular events with Kyprolis. That, understandably, has spooked some investors while they wait for the Phase III data to report out in 2014. Amgen called the whole flap a misunderstanding that stemmed from the analyst’s dinner meeting with Celgene management and clarified that event rates are no different from what is already included in the Kyprolis label. The data monitoring committee overseeing the study has not reported any specific safety concerns, Amgen added. There's your intrigue!

Still, these things do get you thinking about the $10.4 billion Amgen paid for Onyx and what could happen between now and when the company reaps a return. In the drug industry, things are never straightforward despite how they might appear. Are you happy now? Then step right up and cast your vote.

flickr image via Dr Colleen Morgan under creative commons

Financings of the Fortnight Says Up You Worms! You Butterflies!

Forgive us if you don’t have small children, but events of the past fortnight have put a certain Dr. Seuss book in mind.

IPOs are certainly up. Not just the number of biotech firms going public – more than 20 this year, just past the half-way mark – but the pop for companies that, a couple years ago, public investors probably would have sneezed at. Bluebird bio, a gene therapy developer, nearly double its IPO price; Epizyme, doing epigenetic work, more than double its IPO price; rare-disease firm Prosensa Holdings, more than double. US IPO indices, where the bulk of the IPO activity is happening, are up about 20% for the year.

How much are the warm breezes blowing through the IPO window contributing to venture optimism? That’s a question we’re asking START-UP’s third annual life science venture survey. Here are the previous two years’ results. First, 2011:

And 2012:

In Seussian terms, 2011 and 2012 were not great years for up. This year? We don't want to unblind the data yet; the survey is still open. But we can tell you this: So far the VCs who feel positive about the industry say the IPO window is a major factor.

Can it continue? As we write this, yet another preclinical biotech has breached the public barricade; Agios Pharmaceuticals, which only recently filed its first IND, raised more than $100 million (see blurb below). We like to think the early-stage firms – the Agioses, Epizymes, Verastems, and Reguluses (Reguli?) -- are an excellent gauge of investor sentiment. The public side is listening to the early-stage story.

The venture investment data don’t all reflect the same bounce. According to the MoneyTree survey from the National Venture Capital Association and PwC, there have been 202 biotech investments in the US through the first half of 2013. The pace will need to pick up substantially to match 2012’s total of 477 deals, according to the survey (though seeing how pace usually picks up in the second half, don’t bet against it). Total dollars in are about on pace: $2.2 billion invested so far this year, slightly more than half of 2012’s total of $4.2 billion.

The Dow Jones VentureSource data has different numbers but the same trends: 127 biopharma venture deals so far this year, less than half of last year’s total of 279; and $1.9 billion into biopharma so far this year, roughly half of last year’s total of $3.7 billion.

It’s not our job to make predictions, but we're confident that if the IPO issues continue apace, those fair-to-middling half-year venture investment numbers will be a distant memory. The lure of the public markets is strong – even stronger when it’s rewarding companies that are years away from significant clinical data -- and it also should pull investment into companies that want to use IPOs as leverage in acquisition negotiations.

It will be interesting to see how the IPO window affects the need for corporate venture, which has been increasingly important the past few years. In the 2012 START-UP survey, 60% of respondents said it was important to maintain healthy life science industries and 19% said it was crucial. We haven’t closed out this year’s survey, but so far we haven’t seen any indication of those numbers fading. (For results and analysis from the 2011 survey, click here; for 2012, click here.)

On a related note, the current IN VIVO has an inside look at the corporate venture team at General Electric, dubbed healthymagination, which has recruited health care veterans from Kleiner Perkins Caufield & Byers and Mohr Davidow to help the GE behemoth see – and potentially acquire – disruptive technologies before they become billion-dollar acquisitions. They shy away from pharmaceuticals, so you won’t see a lot of FOTF ink spilled about their investments, but it’s an insightful read nonetheless.

You’ll find no greater disruptive technology in children’s literature than Dr. Seuss's Cat in the Hat, by the way. If you’ve never read it, it’s not too late, no matter how old you are. But first, we encourage you to finish the rest of this edition of…

Agios Pharmaceuticals: Chalk up another IPO win for an early-stage biotech. Agios sold 5.9 million shares at $18 apiece July 23 to raise $106 million, a step up from the 5 million shares it hoped to sell in the $14 to $16 range. Working on metabolism targets to treat cancer and rare metabolic disease, Agios just recently filed its first IND for its lead candidate, AG-221, a small molecule that targets cancers with mutations in the enzyme isocitrate dehydrogenase 1, or IDH1. The company expects to start clinical trials this year. Some of the firm’s work is promised to partner Celgene, which signed a broad co-development deal with Agios in 2010, later revised in 2011. Before the IPO, Celgene was Agios’ second largest shareholder with 17% ownership and was expected to buy more shares in the offering, worth $12.75 million, according to regulatory filings. ARCH Venture Partners and Flagship Ventures each held 16.4%. The largest pre-IPO shareholder was Third Rock Ventures (23.7%), and the upsized offering represents the venture firm’s second big IPO haul – at least on paper – this summer. Third Rock was also top owner of bluebird bio, a gene therapy developer which debuted in June at $17 per share and has since doubled its share price. Bluebird and Agios are the first IPOs from Third Rock’s portfolio of mainly early stage biotechs, and it is benefiting from the public markets’ sudden embrace of riskier endeavors based on relatively new area of research. Recent successful debuts include Epizyme, an epigenetics company, OncoMed Pharmaceuticals, working on cancer stem cells (see blurb below), and Prosensa and PTC Therapeutics, with drugs tackling the rare Duchenne’s muscular dystrophy. Preclinical cancer stem cell company Verastem went public in early 2012.  J.P. Morgan and Goldman Sachs led the Agios underwriting team, which has the option to sell an extra 883,333 shares. – Alex Lash

Merrimack Pharmaceuticals: The oncology developer raised $148 million in parallel equity and debt offerings as it moves several compounds through early clinical trials. Both sales closed July 17, the first financings for the firm since its IPO in 2012. The $125 million debt component consisted of convertible notes that bear 4.5% interest a year and mature in 2020. On the equity side, Merrimack sold 5.75 million shares at $5 each, which includes the option exercised by underwriters to sell an extra 750,000 shares. It netted the company $27 million. Merrimack’s science is based on building simulations of cancer pathway networks, which has led them to create several drug types: monoclonal antibodies, bispecific antibodies, antibody mixtures, and nanoparticle-formulated chemotherapies. Its most advanced compound is MM-398, an encapsulated irinotecan currently in Phase III, with orphan designation in the US and Europe for metastatic pancreatic cancer in patients who have failed gemcitabine treatment. The underwriters, led by JP Morgan and BofA Merrill Lynch, also have an option to sell an additional $18.75 million in convertible notes. Before its IPO last year, Merrimack had raised $270 million in private financing. – A.L.

OncoMed Pharmaceuticals: The developer of cancer treatments netted $89 million through its initial public offering on July 17. Including the overallotment, the company sold 5.6 million shares at $17, higher than the anticipated $14-16 range. OncoMed, which targets cancer stem cells with both biologics and small molecules, plans to use the IPO proceeds to advance its key projects through Phase II trials and to support ongoing partnerships. Cancer stem cells are the subset of cells within a tumor that help a cancer regenerate and proliferate even after treatment, although their existence and function is still a matter of debate in solid tumors. OncoMed’s wholly-owned demcizumab, which inhibits DLL4 in the Notch signaling pathway, is in Phase Ib trials for solid tumors including pancreatic and non-small cell lung cancers. Its most advanced partnerships are for OMP59R5, in Phase Ib/II, and the Phase I anti-Notch MAb OMP52M51, both shared with GlaxoSmithKline. OncoMed’s other key collaboration is with Bayer to develop biologics and small molecules that target the Wnt pathway. Since its 2004 inception, OncoMed has raised close to $170 million in two rounds of venture funding. Pre-IPO, US Venture Partners was the company’s largest shareholder (17.3%), followed by Latterell Venture Partners and GSK. OncoMed reported $24.7mm in revenues for 2012 (on a $22 million loss), and had about $60 million in cash on hand as of March 31, 2013. – Beth Detuzzi

Alcresta: The small Newton, Mass.-based nutritionals company has raised a $10 million Series B round that it says will get it to commercialization and provide options when entering partnering discussions. Alcresta’s original three investors – Third Rock Ventures, Frazier Healthcare Ventures and Bessemer Venture Partners – have returned to provide the B round. Founded by former Alnara Pharmaceuticals executives Alexey Margolin and Robert Gallotto, Alcresta is developing a nutritional supplement with omega-3 and omega-6 fatty acids that are more easily digested and absorbable for patients who have digestive problems. The fatty acids are an important part of cardiovascular and brain health. Most nutritional drinks and infant formula include the triglyceride form of the fatty acids, but certain patients – including premature infants, some elderly, and cancer patients – lack the proper enzymes to digest the nutrients in the triglyceride form. Gallotto told our Pink Sheet colleagues that Alcresta has yet to burn through its Series A financing. It chose to raise more money before it receives product approval to keep the option of commercializing its first product on its own. The company currently has two point-of-care products in development, one for patients who need to be fed with a feeding tube and one for patients who can swallow their own food. Both products are designed to be mixed with nutritional supplements that patients are already taking. If they work as planned, they would jumpstart the digestive process. Alcresta has an unusual business model. It shares its staff, headquarters, and investors with a sister company, Allena, which is developing similar enzyme-based products that will be considered pharmaceuticals. Allena focuses on innovative non-systemic oral protein therapeutics to treat nephrologic and urologic conditions. – Lisa LaMotta

All The Rest: In addition to closing a $14M Series A round, Amphivena Therapeutics also secured an option-to-acquire from Janssen…to support Phase II studies of AbGn-168H for psoriasis, AbGenomics received $9.6M in funding…RusnanoMedInvest led a $6.7M add-on to Lithera’s Series C, which now totals $27.3M…transgenic mice producer Harbour Antibodies raised €2.3M and signed a concurrent deal with Pfizer…UK firm ReNeuron grossed £25.35M through a private placement and also received a £7.8M grant from the Welsh government…after closing its reverse merger with Tranzyme, Ocera closed on a $20M PIPE…a sole health care-dedicated investor backed Rexahn in a $5.7M RDO…oral drug delivery company Oramed raised $4.6M in an RDO…to fund lead candidate Arikace for orphan lung infections, Insmed completed a $62.4M FOPO…Verastem, which is targeting cancer stem cells, publicly raised $55M…acute and chronic pain drug developer AcelRx grossed $51M in a secondary offering…microRNA-targeting Regulus closed on a $42.8M follow-on…cancer company TG Therapeutics did a $35M FOPO…with a focus on back-of-the-eye diseases, pSivida raised $10.8M publicly…Oxygen Biotherapeutics completed a $5.7M public offering of Series C 8% convertible preferred stock…Heat Biologics, developer of allogeneic cellular vaccines for cancer and infectious diseases, priced its IPO at $10, the bottom end of its range, to gross $25M…Onconova and Iroko set terms for their IPOs...in advance of a Series B round planned for later this year, Immunomic Therapeutics raised $3M in debt…and Quest Diagnostics gained $485M by selling to Royalty Pharma rights to future royalties on the Phase III cancer candidate ibrutinib. -- Amanda Micklus

Deals Of The Week: Kicking The Tires

Apparently, virtually by the time it became “news,” it transformed into “non-news.” News reports of Roche’s interest in acquiring ultra-rare disease focused Alexion Pharmaceuticals surfaced suddenly July 12 and just as rapidly evaporated the following week, as Wall Street analysts noted the prohibitive premium price and lack of cost-saving synergies.

That doesn’t mean that “tire-kicking” season is over in biopharma, if indeed it ever ends. During a steamy summer season highlighted by the running of the bulls in Spain, the jockeying for position of the bikers in France, and world-class tennis being followed quickly by world-class golf in the U.K., renewed speculation about the fate of cancer specialist Onyx Pharmaceuticals after it it put itself up for sale in in late June surfaced just as the Roche/Alexion story sputtered to an end.

Recall that Amgen got the ball rolling on Onyx speculation with a $120-per-share bid confirmed by Onyx on June 30. Onyx declined the offer but also put itself on the auction block, hoping to attract an even greater price tag. Now, perhaps four or more companies are interested in the oncology firm, possibly including its long-time partner Bayer and competitors in the multiple myeloma space such as Celgene and Takeda.

Media reports also cited Bristol-Myers Squibb and Gilead Sciences as possible suitors, while Pfizer was mentioned as a player, then backed off due reportedly to the price premium. Also not in the running, according to speculation, are Sanofi, GlaxoSmithKline, Novartisand Biogen Idec.

Roche’s reputed interest in Alexion, while understandable because of the Connecticut biotech’s all-out success with Soliris (eculizumab), the highest-priced drug in the world, also is puzzling because of questions about how the Swiss pharma would derive value from such a pricey acquisition. The company has only one commercial product – for a pair of ultra-orphan diseases – albeit a rapidly growing, billion-dollar product, bolstered by an up-and-coming robust pipeline. Reports – unconfirmed – had Roche looking over financing vehicles in order to make a purchase in the range of $25 billion for Alexion.

Deutsche Bank analyst Robyn Karnauskas wrote July 15 that while many European large pharma companies might be able to afford Alexion, they would balk at the price. Roche likely would be better off pursuing “a product/company with more strategic fit or transformational potential,” she said. Projecting Alexion total revenues of $1.7 billion in 2014 and $2.6 billion in 2015, the reported Roche bid would translate into multiples of 15x next year and 10x in 2015, she estimated.

An analyst at UBS Investment Research, Matthew Roden, who covers Alexion, wrote July 15 that the company is an attractive and likely take-out target but would offer few points of potential synergy with Roche. It would be more of a “bolt-on” transaction than a “fold-in” acquisition, he suggested.

“Since the Alexion business model requires a high degree of patient touch and very specialized sales force to reach idiosyncratic PNH (paroxysmal nocturnal hemoglobinuria) and aHUS (atypical hemolytic uremic syndrome) markets, we see limited capability for SG&A cost savings through a deal beyond regulatory structure,” Roden said.

His U.K.-based colleague Andrew Whitney, who covers Roche, noted July 15 that an offer of about $130-per-share for Alexion would represent 35 times the UBS projections for 2014 earnings by the biotech.
So, while Roche/Alexion apparently is not happening and Onyx could end up in the hands of a big pharma, a big biotech or some business model in between, DOTW can offer these transactions that reached the point of signatures along the dotted line …

Spectrum/Talon: Spectrum Pharmaceuticals acquired Talon Therapeutics in the hopes of expanding the indications for Marqibo. The liposomal form of vincristine received accelerated approval from FDA in August 2012 to treat third-line patients with Philadelphia chromosome-negative acute lymphoblastic leukemia (ALL). Spectrum hopes Phase III data to treat newly diagnosed, elderly non-Hodgkin’s lymphoma patients will pan out and lead to an approval in NHL, thereby significantly expanding the potential market for Marqibo. A Phase III trial of Marquibo in newly diagnosed ALL patients also is ongoing. This trial is intended to serve as a confirmatory trial for the accelerated approval. Disclosed on July 17, the deal was slated to close a day later. Spectrum paid $11.3 million in cash, in addition to 3 million of its shares. Spectrum shares closed at $8.77 on July 17. At that price, Spectrum paid $37.6 million in cash and stock, plus contingent value rights (CVRs) worth up to $195 million. CVRs are tied to Marqibo sales milestones and an approval for Menadione, a Phase II topical lotion for the treatment of the skin toxicity associated with epidermal growth factor receptor anti-cancer (anti-EGFR) agents. Spectrum plans to launch Marqibo before early December, with a price point similar to other improved formulations of oncology treatments, like Abraxane, a long-acting, nanotech formulation of paclitaxel, or Doxil, a liposome-encapsulated doxorubicin. Private equity firm Warburg Pincus and hedge fund Deerfield Management recapitalized Talon in 2010, buying at least $69 million in equity in the last three years. - Stacy Lawrence

Pfizer/Sequella: Anti-infective drug specialist Sequella has licensed a mid-stage tuberculosis antibiotic from Pfizer. The privately held Rockville, MD, company acquired worldwide rights to sutezolid, previously known as PNU-100480, for an undisclosed amount. Pfizer previously investigated the oxazolidinone antibiotic in both drug-sensitive and multi-drug resistant tuberculosis, conducting Phase II and pivotal trials in Africa and Russia respectively. Sutezolid complements the Phase II drug SQ109, Sequella’s lead program in Mycobacterium tuberculosis; the company plans to investigate pairing the two in a combination therapy. The 16-year-old company has another TB drug, SQ609, as well as programs in Helicobacter pylori, Clostridium difficile and M. avium paratuberculosis. Sequella traditionally has supported itself by raising capital from hedge funds and other private investors as well as government grants. It also completed a partnership with Maxwell Biotech Venture Fund in 2011, giving the Russian investor territorial rights to SQ109. Pfizer said it is shifting its anti-infective focus from treatment to prevention, and has been seeking to partner drug candidates such as sutezolid. The drug also could be studied in Gram-positive infections such as methicillin-resistant Staphylococcus aureus and vancomycin-resistant Enterococcus, as well as other forms of tuberculosis. – Paul Bonanos

Medtronic/Amgen: Medtronic reps who sell the firm’s interventional spine devices will need to expand their skill set to include drug sales beginning this month. Under a three-year strategic partnership with Amgen, announced July 15, Medtronic will start promoting the biotech's Prolia (denuosumab) to U.S. spine specialists by July 31. Prolia is an FDA-approved biologic for the treatment of postmenopausal women with osteoporosis at high risk for fracture. For Amgen, the deal offers access to Medtronic’s expansive customer base of spine physicians, “who are at the forefront of evaluating and treating women with fractures caused by [postmenopausal osteoporosis],” said Marion McCourt, a VP with Amgen, in a July 15 press release. “This partnership allows us to intervene shortly after an osteoporosis-related fracture has occurred, and encourage therapeutic interventional to help reduce the risk of a subsequent fracture.” The upshot for Medtronic is not as clear cut. Financial terms of the agreement were not disclosed. “This new agreement increases awareness and access to our current base of orthopedic and spine physicians already treating patients with osteoporotic vertebral compression fractures,” said Doug King, president of Medtronic Spine. “Identifying successful treatment options and access to care at the site of service for the growing number of women with osteoporosis at high risk for fracture is our primary objective.” - David Filmore

Royalty/Quest: Quest Diagnostics has divested its stake in the highly-anticipated cancer drug ibrutinib as it continues to refocus its business on information services and simplify its operations. Quest sold the single-digit royalty stream to Royalty Pharma for $485 million, the companies announced July 18. Ibrutinib, an oral Bruton’s tyrosine kinase inhibitor (BTK), is being developed by Pharmacyclics and Johnson & Johnson for the treatment of chronic lymphocytic leukemia, small lymphocytic lymphoma and mantle cell lymphoma. Pharmacyclics submitted an NDA for the drug to FDA on July 10. Earlier this year, the regulatory agency granted the drug its new breakthrough designation, a means of pushing highly-effective drugs through regulatory approval more quickly. The drug is expected to receive a fast track review and could be on the market by early next year. Analysts estimate worldwide peak sales between $2 billion and $3.5 billion. Royalty Pharma buys up royalty streams from other companies – the investment firm has stakes in several of the largest drugs on the market, including AbbVie’s blockbuster rheumatoid arthritis drug Humira (adalimumab), Pfizer’s fibromyalgia pill Lyrica (preagbalin), J&J’s RA drug Remicade (infliximab), Biogen Idec’s recently approved multiple sclerosis pill Tecfidera (dimethyl fumarate), and Merck’s diabetes blockbuster Januvia (sitagliptin). - Lisa LaMotta

Auxilium/Sobi: Auxilium Pharmaceuticals has found a new partner to take over commercialization of its treatment for Dupuytren’s contracture and Peyronie’s disease, Xiapex (collagenase clostridium histolyticum), in Europe after its prior partnership fell through due to slow sales of the drug. Swedish Orphan Biovitrum (Sobi) will take over where Pfizer left off, taking on commercialization of the drug in the 28 EU member countries, Switzerland, Norway, Iceland, 18 Central Eastern Europe/Commonwealth of Independent countries, including Russia and Turkey, and 22 Middle Eastern & North African countries. In exchange for the commercialization rights, Auxilium will receive tiered double-digit royalties on all sales and will be eligible for up to $40 million in milestone payments that are tied to undisclosed sales benchmarks. Pfizer originally signed on to commercialize Xiapex in Europe in 2009. At the time, Pfizer paid Auxilium $75 million upfront, and agreed to pay $150 million in regulatory milestones and $260 million based on undisclosed sales milestones. In addition, Auxilium was to receive increasing tiered royalties based on sales in Pfizer's territories. Pfizer to pull out of the partnership in November 2012, but did not stop promoting the product until the end of March. It will continue supplying the product to physicians until mid-October. - L.L.

Rexahn/University of Maryland, Baltimore: Rexahn Pharmaceuticals has in-licensed a novel drug delivery platform, Nano-Polymer-Drug Conjugate Systems (NPDCS), from the University of Maryland, Baltimore, the company announced July 17. The technology delivers chemotherapeutics directly into tumors, potentially increasing efficacy and reducing toxicity. Rexahn plans to use the technology to develop RX-21101, a preclinical-stage polymer conjugated form of docetaxel. By minimizing the circulating concentration of docetaxel in the blood and maximizing the concentration in the cancer tumor, RX-21101 may increase anti-tumor activity while lowering adverse events. The financials were not disclosed. Rexahn, based in Rockville, Md., has three oncology candidates in clinical development, the lead of which is Archexin, an akt1 inhibitor partnered with Teva Pharmaceutical Industries. - Jessica Merrill

Bausch & Lomb/Mimetogen: Eye-care company Bausch & Lomb has acquired the option to license a Phase II compound for dry eye syndrome from Mimetogen Pharmaceuticals. The compound, MIM-D3, stimulates the production of mucin, which is essential for lubrication of the eye. The drug was shown to be effective and safe in Phase II studies and a late-stage trial is expected to begin before the end of the year. B&L paid Mimetogen an undisclosed option fee and will have the opportunity to pursue development upon Phase III results. At that time, B&L will assume all development costs and will pay Mimetogen development and sales milestones, as well as royalties. Dry eye affects 25 million people in the U.S. alone and tends to affect more people as they age. The global market is currently worth $2.5 billion and is growing at a rate of 10% annually. - L.L.

Alexion/Ensemble: Bringing to a close a week highlighted by Roche’s apparent buyout interest, Alexion signed a drug-discovery collaboration July 18 with Ensemble Therapeutics. Financial terms were not disclosed, but Ensemble gets an upfront payment and research funding, along with potential for development and commercial milestones under the agreement. Ensemble, whose Ensemblin technology platform can produce novel small-molecule candidates to address targets normally addressed by biologic therapies, will screen more than 10 million macrocyles against undisclosed disease drug targets specified by Alexion. Alexion, which focuses on life-threatening, ultra-rare disorders, will have exclusive worldwide rights to develop and commercialize any candidates emerging from the collaboration. Recently hired Executive VP and Head of Global R&D Martin Mackay said this transaction is meant to expand Alexion’s product portfolio. “We seek to broaden the number of pathways toward developing potentially transformative first-in-class drug candidates for patients with selected severe and life-threatening ultra-rare disorders,” he said in a release. - Joseph Haas

Ocera/Tranzyme: Ocera Therapeutics has made its way to the public markets through a reverse merger with the publicly-traded biotech Tranzyme. The new company will focus on developing Ocera’s lead drug, an ammonia scavenger OCR-002 in development for hyperammonemia, the ammonia build-up in the blood when the liver is no longer able to remove toxic substances from the blood. That build-up can cause hepatic encephalopathy, marked by worsening brain function, which eventually can lead to brain swelling, coma and death. Ocera’s investors also committed $20 million in a private placement financing, cash that will see the company through most of a Phase IIb trial testing OCR-002. Becoming a publicly-traded company wasn’t the impetus for the transaction, however, CEO Linda Grais said. “The strategic rationale was really the strength of the combined management team, particularly bringing the clinical development team from Tranzyme together with the program from Ocera,” said Grais. “We realized that this was a team that would take us a long time to build from scratch.” Though Tranzyme’s research was focused in gastrointestinal disease, its Research Triangle Park, NC, team led by Chief Medical Officer Franck Rousseau has extensive experience in liver disease. Before joining Tranzyme, he worked at Gilead asTherapeutic Area Head, Hepatic Diseases and VP Clinical Development. Tranzyme ran into trouble in 2012 when a Phaes III trial in postoperative ileus on lead drug TZP102 failed to meet its primary and secondary endpoints. It began reviewing strategic options early this year. - J.M.

Photo credit: Wikimedia Commons

Deals of the Week Gets Better Connected, Dips A Toe In Digital Health

Digital health is a bit of a catch-all. It encompasses everything from inexpensive exercise- and diet-recording gadgets to sophisticated multimillion dollar disease management systems, online pharmacies and website-based behavioral therapies. Truth be told, this DOTW correspondent, like many pharma execs, has always put the drugs first.

But there's no denying the clamor of expert opinion claiming digital health will be a powerful disrupter of health care markets in the future, potentially transforming pharma and device companies into service providers. "Digital health is going to happen, it may take time and will advance in fits and starts, but it will happen without the help of the establishment," Simon Cook, CEO of VC firm DFJ Esprit, told the London meeting of the Digital Health Forum, DHF13, earlier this month. "Nine out of 10 digital health businesses will fail, but a few will succeed and change the health care system." DFJ has investments in biopharma companies like Kiadis Pharma and Oxford Immunotec, as well as the internet nutritional company, Graze.

The transformation is coming faster now than two or three years ago, Cook said, because of the increasing pressure on individuals to take control of their own health, coupled with the increasing pervasiveness of smart phones and apps, making people comfortable with digital technology.

The investment community also is more engaged. Low-capital intensity business models are starting to emerge for digital health companies and are "incredibly compelling" for venture capitalists, said Alex van Someren, managing partner of seed funds at Amadeus Capital Partners. Amadeus, along with Archimedia Investments, put £1.6 million ($2.4 million) into the health care cloud platform, Qinec, in November 2012, and took part in May 2013 in a £2 million financing round for TrialReach, a company trying to improve patient awareness of clinical trials.

But small investment rounds, which characterize the digital health sector, often slip below the radar, or are not disclosed publicly, leading to a lack of comprehensive information about deal flows and valuations.

In the increasingly hot area of patient engagement and consumer health, much of the attention devoted to digital health has focused on continuous health monitoring followed by instant intervention via 24/7 connectivity. Innovators have focused on the concept for years, progressing slowly, but newcomers say they're at a turning point. U.K-start-up CellNovo, backed by investors and VCs to the tune of more than $40 million, is one of a slew of companies trying to address this challenge, and believes it is the most advanced in the diabetes sector.

Cellnovo has developed algorithms and software which allow physicians to monitor patients remotely in a sophisticated manner not seen with other company's systems. It anticipates a commercial launch of its digitally interconnected blood sugar monitor, insulin patch pump and exercise diary later this year, said Executive Chairman Eric Beard.

The theory that digital tools can improve the quality of care while saving money is exactly what the US and other countries are striving for as they work to reform their health care systems. In that sense, digital health tools are aligned with systemic priorities, and its benefits have not gone unnoticed by pharmaceutical companies as they and others try to grapple with harsh demands. Johnson & Johnson's business unit, Janssen Healthcare Innovation (JHI) is accelerating J&J's change from a product-centric to a health care solutions company. The company has noticed digital health start-ups often struggle to scale-up, and intends to offer master classes to European entrepreneurs in business development, to enhance the digital health ecosystem, in collaboration with partners.

But while we await the detonation of digital disruption, pharma and biotech have continued to forge deals and agreements, as we unveil ...

AstraZeneca/Roche: AstraZeneca and Roche are teaming up in a medicinal chemistry data-sharing collaboration with the aim of accelerating drug discovery. The deal announced June 26 is a sign big pharma may be more willing to work together in the pre-competitive space to improve the pace of drug development than in the past. Under the arrangement,  the two companies will use a technology called matched molecular pair analysis (MMPA) to identify chemical modifications that can be applied to each company's individual compounds to improve metabolism, pharmacokinetics or safety. The aim is to identify potential new drug candidates faster by using their combined databases of experimental results. Roche and AstraZeneca are committed to making the data generated by the program available to the broader research community, and are open to additional drug manufacturers joining the collaboration. The data-sharing will be managed by MedChemica, an expert in MMPA technology. - Jessica Merrill

MorphoSys/Celgene: Germany's MorphoSys has forged a potentially transformative alliance with Celgene, under which the latter receives worldwide rights to MorphoSys' CD38-targeting antibody, MOR202. The product, which is in Phase I/IIa trials in multiple myeloma, is believed to be Celgene's first clinical-stage antibody for the disease, a therapeutic area it dominates. In return for the rights, MorphoSys receives an upfront fee of $92 million, and Celgene will purchase $60 million worth of shares in MorphoSys at a premium of at least 15% to the biotech's closing share price of $37.06 on June 26. MorphoSys also will receive development, regulatory and sales milestones, plus double-digit royalties outside of a co-promotion territory in Europe, the companies announced June 27. The deal gives the partners the financial firepower to speed MOR202 to the market, while potentially broadening its indications beyond multiple myeloma. - John Davis

Aspen/Merck: South Africa's Aspen Pharmacare Holdings, the largest generics drug firm in Africa, continued its geographic, manufacturing and portfolio expansion efforts in a complex deal valued at more than $1 billion with Merck, roughly one week after revealing it hopes to acquire two mature thrombosis drugs and a manufacturing site from GlaxoSmithKline. For approximately $600 million, Aspen will buy a portfolio of 14 drugs from Merck and acquire active pharmaceutical ingredient manufacturing and related sales sites in the Netherlands and the U.S. In the deal, Aspen will get the Boxtel site in the Netherlands as well as part of two other API plants in that country, along with a manufacturing site in Iowa. Sales offices in the Netherlands and Illinois also will be included in the package. News surfaced June 18 that GSK is mulling an offer from Aspen to purchase Arixtra and Fraxiparine, which generated aggregate sales of $670 million in 2012, as well as a manufacturing site in France. - Joseph Haas

Cytokinetics/Astellas: Cytokinetics has signed a two-year research collaboration including rights to its skeletal muscle activator CK-2127107 with Astellas Pharma. The deal, announced June 25, is the second Cytokinetics has signed in two weeks, extending the company's cash runway and providing financial flexibility to carry on with the development of its lead drug tirasemtiv independently. Like '107, tirasemtiv is a skeletal troponin muscle activator, currently being tested in a Phase IIb clinical trial in patients with amyotrophic lateral sclerosis; data are expected by the end of the year. The license for '107 to Astellas is for non-neuromuscular disorders. The development plan encompasses potential indications like cachexia and sarcopenia. The deal does not exclude the potential to study other skeletal activator mechanisms that may emerge from the research in neuromuscular indications. Cytokinetics will receive $40 million initially from Astellas, including a $16 million upfront payment and $24 million in R&D reimbursement over the first two years of the collaboration. The biotech stands to receive as much as $450 million in development and commercial milestones, as well as royalties on any drugs emerging from the collaboration. Cytokinetics announced an expanded collaboration with Amgen June 12, under which it received $25 million upfront in exchange for giving Amgen rights to the heart failure candidate omecamtiv in Japan; the two already are partnered in other parts of the world - JM

Seattle Genetics/Bayer/Agensys: Antibody-drug conjugate specialist Seattle Genetics executed its seventh partnership since the start of 2009 around its auristatin-based ADC technology platform on June 25. This time, the Bothell, Wash., biotech will receive $20 million upfront from Bayer for a multi-target oncology collaboration. Seattle Genetics could earn up to $500 million in milestones under the Bayer agreement, as well as royalties on any products reaching the market. Targets were not disclosed. Bayer will be responsible for all R&D costs, plus manufacturing and commercialization. Seattle Genetics, which brought the first ADC to market for oncology with the 2011 U.S. approval of Adcetris (brentuximab vedotin), now has partnerships with five of the 12 big pharma companies, as well as three Japanese pharma and four biotech firms. In a release, VP of Corporate Development Natasha Hernday said Seattle Genetics has 15 ADCs in clinical development between proprietary and partnered programs, and is in line to earn up to $3.5 billion in milestones and royalties from its strategic partnerships. The biotech also announced June 27 it had taken an option under its 2007 collaboration with Astellas-affiliated Agensys. Seattle Genetics will fund 50% of the future development costs of ASG-15ME, a potential ADC therapy for bladder and lung cancer for which an IND has been submitted to FDA. - JAH

ADC Therapeutics/VivaMab: Swiss-based ADC Therapeutics is adding to its preclinical pipeline of around 10 antibody-drug conjugates by licensing a novel internalizing antibody, VM101, from BioAtla LLC's therapeutic division, VivaMab LLC. The antibody conjugated with a cytotoxic warhead has already shown in vivo efficacy against models of intractable hematological cancers, the companies reported June 24. ADC Therapeutics plans to start pre-IND development of the antibody-drug conjugate immediately for the treatment of a hematological cancer, with San Diego-based VivaMab providing development support and receiving undisclosed milestones and royalties. The antibody binds to antigens on the surface of tumor cells, is internalized and then releases the cytotoxic pyrrolobenzodiazepine payload. The Swiss firm say it intends to move multiple drugs into the clinic over the next three years. Upon successful proof of concept, it will seek to license the antibody-drug conjugates to pharmaceutical companies. - JD

Immunocore/Genentech: Genentech has become the first major partner of the privately held UK biotech Immunocore, which is developing a new class of bispecific therapeutic proteins called ImmTACs. The companies have entered into a research collaboration and licensing agreement for the discovery and development of multiple novel cancer agents, with Immunocore receiving an initation fee of $10-20 million for each program, the companies announced June 27. Immunocore will also receive more than $300 million in development and commercial milestones for each target program, and tiered royalties. The company's lead product, IMCgp100, which is in a Phase I/II clinical trial in patients with late-stage melanoma, is  not part of the deal. ImmTACs consist of high-affinity T-cell receptors linked to an antibody fragment, anti-CD3, which activates the immune system. T-cell receptors can recognize intracellular changes tha occur during cancer or viral infections, and ImmTACs are expected to target and destroy cancer cells without affecting healthy cells. - JD

Tesaro/Myriad Genetics: Tesaro, a three-year-old company focusing on cancer and moving at lightning speed, will use Myriad Genetic's BRCA1 and BRCA2 mutation tests to screen patients for enrollment in Phase III trials for one of its lead drugs, niraparib. The drug, a PARP inhibitor, which Tesaro in-licensed from Merck in 2012, is geared to patients with BRCA1 & 2 mutations who have breast or ovarian cancers. Myriad is the only company offering an FDA-approved version of this test, so the alternative would be to go to laboratories offering home grown versions, but the latter may not be as robust, a downside for inclusion in pivotal trials. Both studies will be initiated in mid-to-late 2013. Tesaro told Robyn Karnauskas, an analyst with Deutsche Bank, that its PARP inhibitor program is its most de-risked development strategy, based on very specific input from EMA and FDA. Women with germline BRCA 1 or 2 mutations have increased risk of developing high-grade ovarian and breast cancers, which are particularly sensitive to PARP inhibitors. Management further believes that the drug may be effective in other indications. - Wendy Diller

Nicox SA/Immco Diagnostics: Nicox, a French ophthalmics company, has entered into an exclusive agreement with Buffalo, NY-based Immco Diagnostics to promote a proprietary laboratory test targeted at early detection and diagnosis of Sjoegren's syndrome, an autoimmune disease that destroys the ability to produce tears and saliva. Under the terms of the deal, Nicox will detail the test to ophthalmologists in North America, to whom patients with the syndrome often present because dry eye is a symptom. Immco will be responsible for processing the test and all regulatory activites and reimbursement. Nicox will receive a majority of revenues generated from the ophthalmologists and has a nine-month option to exercise ex-U.S. commercial rights to the test as well. The disease destroys the exocrine glands that produce saliva and tears. Current diagnostic techniques for Sjoegren's syndrome are only moderately effective and detect disease only at advanced stages. The new test aims to diagnose the disease at earlier stages, when it is more treatable. Dry eye is a primary symptom of the disease, which is chronic, and the test is aimed at helping early diagnosis and more efficient management of it; rheumatologists are also involved in treatment. The test was approved in the U.S. in 2013, with a commercial launch expected in the second half of the year - WD

Photo credit: Wikimedia Commons

Once You Start Up Financings of the Fortnight, It'll Never Stop

Your faithful FOTF correspondent is in San Diego this week for the CalBIO conference, specifically to wax journalistic on a panel trying to look into the future – 2030! -- and opine sagely upon what we see. Some call this prediction; others call this pulling objects out of one’s nether regions, which thankfully doesn't require the Jagger-like calisthenics seen at the start of this week's video flashback.

What we can predict with near certainty is that the upcoming issue of Start-Up, arriving soon in print or electronic edition according to your subscription preference, will be full of timely topics. We’ll go inside Third Rock Ventures, which has raised more than $1 billion since 2007 to invest solely in early stage biotech. And not just invest; Third Rock creates many of its own companies, then puts its own partners into temporary executive roles in those companies once they launch.

Is it working? Hard to say yes, definitively, until they start truly reaping what they’ve sown. (Only two exits so far.) But Third Rock has a 28% stake in one of the companies in the IPO queue, bluebird bio, and a 24% stake in Agios Pharmaceuticals, which filed its S-1 a few days ago. More might be coming this year. LPs have enthusiastically bought into the Third Rock promise, that's for sure. But that’s not to say the group hasn’t hit snags or that there aren't adjustments to make. (You'll have to read Start-Up to find out what those are.)

Third Rock’s not the only VC growing their own. Flagship Ventures has been at it twice as long, in fact, and about five years ago – right around the time Third Rock rolled into town – it decided to put a brand on its in-house start-up brewery: VentureLabs. They’ve been busy lately, with big – dare we say “Third Rock-like”? – Series A rounds to launch two high-concept start-ups, Moderna Therapeutics and Syros Pharmaceuticals. The new Start-Up will also look at the early days of Moderna, and how the Flagship/VentureLabs folks helped push what was at first an advancement in the induced pluripotency of stem cells toward a new therapeutic modality that, despite many question marks, almost immediately attracted a major Pharma partnership and nearly a quarter of a billion dollars guaranteed.

If bluebird or Agios goes public, it will be Third Rock’s first IPO, but Flagship’s been around the block many times. In the current window, it’s already notched two IPOs since the start of 2012 – Receptos and Tetraphase Pharmaceuticals – and it owns 16% of Agios. Others have ushered even more biotechs public in the same time frame: As we note in the next Start-Up, New Enterprise Associates and funds associated with Fidelity top the charts with five IPOs apiece.

But as our colleague Stacy Lawrence reports, there’s been no rush to exit: Among all major shareholders (those with 5% stakes or higher)  that went through IPOs in 2012, less than one third have reduced their holdings. Thirty of 43 have held tight or increased their shares, often in the IPO as part of an agreement to get the deal done.

Just published in "The Pink Sheet" DAILY, Stacy also talks to several VCs about what seems to be a reinvigorated IPO appetite for early-stage biotechs – a good sign indeed for the likes of Third Rock and Flagship. And what of the growing number of early-stage biotechs with corporate investors providing the backbone of support? Once quite rare, we’re now seeing new companies out of the gate mainly backed by corporates, such as Protagonist Therapeutics, whose JJDC-led Series B we describe below. Another, ArmaGen Technologies, caught our attention when it made Start-Up’s 2012 A-List for its intriguing receptor-mediated technology that draws therapeutics through the blood brain barrier, and for its unusual Series A syndicate: Four corporate investors splitting evenly a $17 million round. Our colleague Paul Bonanos was even more curious, and in the story he’s penned for -- you guessed it -- the new Start-Up, he noted this telling quote from one of ArmaGen’s backers: “When you take away the worry about losing your money, great opportunities arise.”

In essence, at least a couple of ArmaGen’s investors consider exposure to the company’s technology just as important, if not more, than their financial return. Outlooks like that among corporate investors should make for very interesting strategy discussions when it comes time to ready a company for sale or for a public debut. Then again, not all corporate VCs embrace strategic return more than financial return. (For a rather brusque counterpoint, see this story about Novartis Venture Funds and chief Reinhard Ambros' decision to drop its strategy-oriented option fund: "Strategic means you pay money for something intangible, and you waste money.")

If we don’t get to the blurbs soon, this column will go past the point of no return. So let’s sum up: If you like the topics of conversation here at FOTF, you should love Start-Up, perhaps even enough to subscribe. That ends our shameless plug; now back to our shameless prose, often referred to as...

Avaxia Biologics: The therapeutic antibody firm topped off its Series B round with an undisclosed amount of cash from the venture arm of AbbVie, bringing the round to $11.4 million. It’s a fascinating case for several reasons. First, Avaxia’s lead product, an oral TNF inhibitor currently in a Phase Ib study in irritable bowel syndrome patients, goes after the same target as AbbVie’s superblockbuster Humira (adilimumab). That might lead one to believe AbbVie wants a closer look at what could make a potential replacement for Humira. But that outcome would be a rare occurrence, indeed. According to our Strategic Transactions data, from 2006 to 2011 only two private companies backed by corporate venture funds were eventually bought by the funds’ parents: Avid Radiopharmaceuticals (bought by Eli Lilly) and Avidia (Amgen). AbbVie does not gain any rights to Avaxia’s lead, AVX-470, or other products, but it does take a board seat. Another reason this is one to watch is Avaxia’s antibodies. They’re not monoclonal, like Humira and so many other key biotech products. They’re polyclonal, essentially a gemisch of antibodies strained from cow’s milk, and therefore quite capable of surviving a trip into the gut. Avaxia comes along just as a few companies, led by Symphogen, are dipping a toe into the possibility of antibody combinations. But those combinations are made from monoclonals, not polyclonals. Other than serum products, it’s hard to find precedent to what Avaxia is aiming for. Just as notable is how far Avaxia has gotten with its platform, funded to this point by angel investors. Its A and B rounds, totaling nearly $10 million before the AbbVie add-on, were led by angel groups. – Lisa LaMotta and Alex Lash

Clovis Oncology: Clovis took advantage of a strong clinical data release with a public offering that brought in $240 million, the third largest secondary offering of the year behind Onyx Pharmaceuticals and Ariad Pharmaceuticals. The firm is the best performer from the biotech IPO class of 2011, with a 445% gain as of June 13, thanks in large part to a mighty ASCO bump – that is, data it presented at the recent American Society of Clinical Oncology conference that took Clovis’ share price from $36.56 to $74.59 in one weekend. The company reported Phase I/II efficacy data for its non-small cell lung cancer drug CO-1686 in patients with the T790M mutation, which confers resistance to current treatments. Clovis has done well with its strategy of in-licensing candidates and companion diagnostics; it brought in CO-1686 from Avila Therapeutics in 2010, then partnered with Roche to develop a test for the T790M mutation a year later.  Clovis’ recent run-up also benefited from positive initial data at ASCO for its drug rucaparib in ovarian cancer. Rucaparib is an oral poly (ADP-ribose) polymerase (PARP) inhibitor that Clovis licensed from Pfizer in 2011, and subsequently partnered with Foundation Medicine to create a companion test to find patients most likely to respond to the compound. -- A.L.

Protagonist Therapeutics: The peptide development firm said June 4 it has raised a $14 million Series B round, led by Johnson & Johnson Development Corp. JJDC joined Series A investors Lilly Ventures and Australian firm Starfish Ventures. Protagonist spun out of the University of Queensland’s Institute of Molecular Biosciences and, while headquartered in the San Francisco suburb of Menlo Park, Calif., it maintains discovery operations in the Queensland capital of Brisbane. It’s the latest example of early-stage biotechs drawing most or all of their venture funding from corporate-affiliated funds, which are helping fill the gap left by traditional venture moving their limited resources toward the later stages. Protagonist says it has developed a platform to identify disulfide rich peptides, a more stable version of a molecule that has limited therapeutic availability. Also called constrained or stapled peptides, the area is looking to Aileron Therapeutics, which recently completed the first clinical trial of a stapled peptide and answered some questions about the compound’s ability to remain stable in vivo and avoid safety concerns. The preclinical Protagonist has signed deals with Zealand Pharma and Ironwood Pharmaceuticals; one of the firm’s pursuits is the development of orally-active therapeutics for inflammatory bowel diseases. -- A.L.

Dermira: The firm developing treatments for acne and other skin disorders said June 11 it has raised a $35 million Series B financing to move into a Phase I/II trial its lead program, lemuteprofin, a photodynamic acne therapy, and two preclinical programs. Dermira’s Series A investors Canaan Partners, New Enterprise Associates and Bay City Capital all re-upped and were joined in the round by Maruho, a 100-year-old Japanese firm that specializes in dermatology and typically keeps a low deal profile. Dermira has now raised more than $70 million in venture funding; its $42 million A round helped it purchase Valocor Therapeutics, at the time the owner of lemuteprofin after its spinout from failed Canadian biotech QLT. -- A.L.

All The Rest: To fund work on Phase II AKB6548 for anemia associated with CKD, Akebia Therapeutics raised $41M in Series C financing…ResearchGate, which is developing a platform to share and search for scientific data online, closed a $35M Series C…Edge Therapeutics collected $18M in Series C funds to support Phase II of EG1962 in preventing delayed cerebral ischemia…Prism Pharma, which has a lead compound for fibrosis, completed a $15M Series C…GSK spin-off Autifony Therapeutics topped up its Series A with an additional £5.5M from Pfizer Venture Investments and International Biotechnology Trust…in addition to adding Janssen as a new partner, Second Genome completed a second tranche on its Series A, which now totals $11.5M…concurrent with a $2.3M grant from the Norwegian Research Council's BIA-Program, Targovax raised $1.4M in equity…Arcturus Therapeutics, focusing on RNAi for rare diseases, closed a $1.3M seed round…Baxter Ventures came in as a new backer for Ocular Therapeutix…ARCA biopharma publicly sold $20M in Series A convertible preferred shares…StemCells received the right to sell Lincoln Park Capital Fund up to $30M in common shares…Oncothyreon raised $10M in an RDO to fund up-front payment in Array BioPharma co-promote…an undisclosed health care fund bought $9.8M in Celsion’s common stock…BioTime grossed $9.1M through a PIPE…epigenetics company Epizyme grossed $77M in its IPO…PeptiDream floated on the Tokyo Stock Exchange, raising $52M…Israeli firm Kamada completed a $52M IPO in the US…Kadimastem, which commercializes pluripotent stem cell-derived products, raised $5.5M in an IPO on TASE…Heat Biologics, PTC Therapeutics, bluebird bio, and Esperion all set terms for their IPOs…stem cell producer Cellular Dynamics International and Agios Pharmaceuticals, which is targeting inborn errors of metabolism, filed for their IPOs…Array BioPharma offered $115M in convertible senior notes…and Anacor Pharmaceuticals received a $45M three-tranche loan facility from Hercules Technology. -- Amanda Micklus