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

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

Pluripotent. Liposomal. Adiposis. Gallipot.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Ajax Vascular

Allergen Research

Editas Medicine

electroCore

GeneCentric Diagnostics

Juno Therapeutics

Middle Peak Medical

PharmAkea Therapeutics

Spark Therapeutics

Syros Pharmaceuticals

Vivex Biomedical

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

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

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

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

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

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

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

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

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 Spreads Some Cheer

Well, that flew by. Unlike the little elf in the video above (and if you don't know Nick Lowe, 'tis the season to make your acquaintance), no one in biotech has had time to wait around this year, it seems. The calendar has been marked by several trends that we and our colleagues have followed closely, but none as important as the rush to jump through the IPO window.

It’s fitting, then, that we kick off our final 2013 column with a chat about initial public offerings. TetraLogic went through some contortions to go public this fortnight (see blurb below), but it was more a stumble than a sprint for what was likely the sector's final IPO of the year. Activity hit its peak this spring and summer, then fell off sharply in the fall as the federal government bumbled its way into a shutdown and a botched launch of the “Obamacare” insurance exchanges. We’re not implying causality, mind you, although the shutdown did absolutely nothing positive for the economy. More likely, the sheer volume of IPOs (38 through October 31) skimmed the cream off the pot.

Can the pipeline reload for 2014? Public investors will return after the ball drops looking for late-stage, near-commercial (or near-approval) companies, of course, but we saw in 2013 a certain appetite for higher risk bets like bluebird bio and OncoMed Pharmaceuticals, whose paths to the public markets we chronicled recently in Start-Up.

And the prospect pool for biotech should be stronger than it’s been for several years. This is a bit counter-intuitive, so bear with us. The MoneyTree report, a collaboration between PricewaterhouseCoopers and the National Venture Capital Association, said recently that through September 30, the 541 publicized biotech and device venture deals comprised the lowest nine-month total since 2005. And only 104 life science companies raised first-time venture capital, the worst showing since 1996.

So what’s all this about a strong pool of prospects? By our near-final count, life science Series A fundings have already topped 2012’s count, both in deal flow and dollars committed. Note the difference: MoneyTree counts first-time venture raises; we count Series A’s, but not seed rounds, because we feel it’s a better gauge of companies with real promise. (See Bruce Booth’s description this week of Atlas Venture’s seed-funding program for a glimpse of the fragility of seed-stage biomedical companies.)

Landing Series A cash is obviously no guarantee of permanence, but the gatekeepers are ever more vigilant. For cutting-edge science, groups like Atlas, Flagship Ventures and Third Rock Ventures spend a year or more hammering on an idea, forcing it through iterations, proving its worth, before committing serious dollars. And if the ideas aren’t truly novel, there are other de-risking strategies; many Series As these days are for programs spun out of other companies, run by trusted management teams, or both.

In other words, there’s still plenty of risk in a Series A investment, but perhaps not as much as you’d think. And by our count, Series As particularly on the biopharma side are doing well. OK, maybe the $120 million A round for Juno Therapeutics has skewed the dollar figures just a wee bit, but the deal flow is still on track for well more than 100 financings in 2013, on top of the 100 or so in 2012. We’ll have the final count and a deeper dive into the Series A class of 2013 in the upcoming Start-Up, right around the time the JP Morgan conference is in full swing.

What do you think? Do the 200-plus companies that have had their Series A stockings stuffed in the past couple years represent a healthy pipeline? Since the Great Recession faded, the investors who've had cash to make bets with have insisted there's been no better time. In 2014, we should start to see if they're right.

Meanwhile, there's no better time for you to spend a few days unplugged from your screens, relaxing with friends and family. May your holidays be safe and warm, and here's your first present: A delicious, sustainable, locally sourced, gift-wrapped edition of...

Atara Biotherapeutics: With news of Atara’s new $38.5 million Series B round also comes news of its $20 million Series A, quietly completed in March. The Brisbane, Calif.-based company was established in fall 2012 via a partnership between Amgen and venture stalwart Kleiner Perkins Caufield & Byers, and endowed with a portfolio of six former Amgen assets, all in the transforming growth factor (TGF)-beta family of compounds. First-time backers in the new round included Amgen Ventures, Celgene Corp., and crossover fund EcoR1; they joined Series A investors Alexandria Venture Investments, DAG Ventures and Domain Associates, as well as KPCB. The Series B remains open, and Atara CEO Isaac Ciechanover told “The Pink Sheet” DAILY it hopes to bring in a final investor within 90 days. The corporate venture units’ investments were “purely financial,” he said; Amgen itself holds equity but did not invest cash during the Series A. Atara is an umbrella company that operates three “sister company” subsidiaries named for Christopher Columbus’s three ships used in 1492. Its most advanced drug, PINTA745, is a myostatin inhibitor already in Phase II for a muscle-wasting disorder found in end-stage renal disease patients; it’s housed in Pinta Biotherapeutics. The company also hopes to submit an IND for activin inhibitor STM434, one of Santa Maria Biotherapeutics’ three compounds, and begin trials in ovarian cancer during 2014; farther along will be Nina Biotherapeutics’ antibody NINA842 for cancer cachexia, which Ciechanover said is about 18 months from the clinic. – Paul Bonanos

Crescendo Biologics: The UK firm has raised £17.5 million ($28 million) in a Series A financing to pursue development of its variable heavy-chain antibody fragments as therapeutics. The round was led by new investor Imperial Innovations Group, and included for the first time Astellas Venture Management. Sofinnova Partners (the European group) also participated in the round after providing seed funding to Crescendo, which was formed in 2009. The funds are expected not only to support development of the platform technology but also proof-of-concept clinical studies of its antibody fragments, applied topically in psoriasis. The firm will also pursue studies in oncology. Crescendo makes its fragments by first eliminating antibody production involving genes located in three chromosomal regions in mice, and then adding DNA-containing genes for the human antibody heavy chain. Marianne Brüggemann and colleagues at the Babraham Institute in Cambridge, UK, pioneers of the first wave of transgenic technology exploited by Medarex and Regeneron Pharmaceuticals, were involved in this work, Crescendo CEO Mike Romanos told “The Pink Sheet” DAILY. Psoriasis has been selected as the first target for Crescendo’s fragments as they can be formulated into creams and penetrate into the relevant region of the skin following topical application, Romanos said. Although systemic monoclonal antibodies have had a tremendous impact on severe psoriasis, milder cases are poorly served with current therapies, and a non-immunosuppressive treatment should be useful, Romanos said. The first fragment should enter clinical trials at the end of 2015 in psoriasis, and if successful, the work could be expanded to include atopic dermatitis and other inflammatory dermatological disorders. – John Davis

Acucela: The Seattle biotech filed on December 17 to raise up to $125 million in an IPO on the Tokyo Stock Exchange’s Mother’s Market. The company has a partnership with Otsuka under a 2008 deal for lead compound, emixustat, which is in Phase IIb/III testing to treat dry age-related macular degeneration (AMD). Acucela started the trial in the first quarter of 2013 and expects that if 12-month study results warrant, it will submit to FDA and EMA for approval. There is no FDA-approved treatment for dry AMD. If you’re not familiar, biotech offerings on the Mother’s Market are for the most part relatively small, and like the London Stock Exchange’s AIM market, often raise tiny subsequent offerings. They typically suffer from chronic low liquidity and languish with little investor attention as small caps. Retail investors, and their whims, are a big factor on the Mother’s Market, which specializes in high growth and emerging stocks. That combination makes it very volatile. This year, some biotechs have proven hugely popular. For example, peptide therapeutic company Peptidream, which isn’t in the clinic yet but has several discovery partnerships, conducted a $68 million IPO on the Mother’s Market in June and is now worth about $1.6 billion. Acucela founder, President and CEO Ryo Kubota is a Japanese ophthalmologist who has trained, practiced and taught in both the US and Japan. In addition to its Seattle headquarters, the biotech also has a Tokyo office. – Stacy Lawrence

TetraLogic: The Phase II cancer company closed on December 12 with what was likely the final IPO of the year, but that was only after it had slashed its price in half to $7 per share from a range of $13 to $15. Even with the discount, its shares have remained flat in early trading. That’s with existing investors Amgen and Pfizer as well as company executives agreeing to purchase most of the shares offered at IPO. Not just some, but most: That’s a first in our IPO experience. Was this a venture round or an IPO? Insiders bought a whopping 4.6 million shares of 7.2 million sold.  (TetraLogic hasn’t yet fared as well as another recent discount IPO: Relypsa, which priced in November and is now up 137%.) Overall the biotech IPO class of 2013 is holding its own. The 44 IPOs this year are up 41% as a group with more winners than losers. Only about one-quarter of them have lost ground or are flat from their IPO prices. That’s better than coin-toss odds – and that’s saying something in biotech. TetraLogic hopes to gain some traction with its small molecule mimics of Second Mitochondrial Activator of Caspases technology (SMAC-mimetics). Its lead program is birinapant, which is in Phase I and Phase II testing in hematological malignancies and multiple solid tumors. The biotech plans to start a randomized Phase II trial for birinapant and azacitidine versus azacitidine alone to treat myelodysplastic syndromes in the first half of 2014. – S.L.

Best of the Rest (Highlights of Other Activity This Fortnight): In the second Xention spin-off following Provesica three years ago, Ario Pharma completed a $3M Series A round to pursue TRPV1 antagonists in chronic cough…in its second secondary offering in the last few months, Xoma netted $54M to pay for development of Phase III gevokizumab for non-infectious uveitis and its preclinical XMet program of insulin activators and sensitizers…days before announcing its acquisitions of CNS spec pharma NuPathe, Endo raised $700M in a 5.75% convertible notes sale…and Versant Ventures pledged investments in Canadian life sciences start-ups. – Amanda Micklus

2013 M&A of the Year Nominee: The Ibrutinib Royalty

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™.

Royalty deals have long been the provenance of more conservative private-equity vehicles. Then came... The Ibrutinib Royalty, soon to be a major motion picture starring Matt Damon.

But seriously, it was odd not just to see two venture firms join the royalty deal but also to hear how much each was putting up. Aisling Capital and Clarus Ventures said in August they had paid $48.5 million for a tiny slice of sales royalties from ibrutinib, a cancer drug that hadn't been approved yet.

It's approved now; the FDA granted accelerated approval for mantle cell lymphoma (MCL) to its sponsor Pharmacyclics in November, and it goes by the name Imbruvica. (The Imbruvica Approval, starring Daniel Craig as Richard Pazdur!)

Please, would you pay attention, 007: The PDUFA date for a much larger indication, chronic lymphocytic leukemia, comes in late February 2014. Ibrutinib could be a best-seller. If it isn't, Aisling and Clarus will have trouble recouping their cash. Certainly it’s a less risky investment than they and their brethren are accustomed to. But even if ibrutinib can garner multi-billion dollar sales at its peak, will it bring venture-like returns to Clarus and Aisling?

Here’s some math: in an interview in “The Pink Sheet” DAILY, Royalty Pharma officials pegged the royalty stream in the mid-single digits as a percentage of total ibrutinib sales. We don’t know the exact number, so let’s call it 5%. Clarus and Aisling have each bought 10% of that stream; let’s call it 0.5% of total sales apiece. Under that scenario, it will require nearly $10 billion in ibrutinib sales for each firm to recapture its investment; more than $19 billion to double it, and $29 billion to capture a “venture-like” 3x return.

Even by optimistic projections – this summer, Barclays Capital estimated peak annual sales between $2 billion and $3.6 billion, while others have gone higher – it will take ibrutinib years to reach those figures. Venture firms like Aisling and Clarus investing from the tail ends of their funds need extremely patient limited partners to wait years, but the ibrutinib scenario could play out – and pay out – in two different ways.

First, the VCs will have a steady stream of returns to pass through to LPs as soon as sales begin. Such near-term returns, however incremental, would be far less likely if the VCs had spread the $50 million among a few earlier-stage biotech companies or other investments.

Second, now that ibrutinib is approved, the value of the royalty stream will probably jump. Other investors, including other royalty funds, don’t take pre-commercial risks the way Aisling, Clarus, and Royalty Pharma, the lead investor in the deal, did. With those risks all but eliminated, perhaps Clarus and Aisling could flip their royalty rights to new buyers. Aisling’s Dennis Purcell and Clarus’ Nick Simon acknowledged as much earlier this year, before the drug's approval.

The firms joined Royalty Pharma, the 800-pound gorilla of royalty funds, to buy the ibrutinib royalty rights from Quest Diagnostics for $485 million, a deal first announced in mid-July without disclosure of the VCs’ names or financial details.  (Quest obtained the rights in 2011 when it bought Celera Corp. for its diagnostics business.)

Royalty funds – firms that pay up-front cash to scientists, institutions, biotechs, and pharmas for royalty rights that they collect over time – don’t typically risk regulatory failure on top of commercial uncertainty. But Royalty Pharma has been more creative of late, even making an acquisition play for Elan Corp PLC that was ultimately unsuccessful.

Meanwhile, Clarus and Aisling have looked for deals that emphasize shorter timelines to potential returns as they invest from the tail ends of their current funds. In July, an Aisling-backed start-up, Loxo Oncology, in-licensed an undisclosed preclinical oncology candidate from Array BioPharma, with trials to start in 2014.  Clarus has invested in a series of clinical development companies – mini-CROs, of a type – that run late-stage trials of drugs owned by Pfizer and other big drugmakers, with milestone and royalty payments on offer if the drugs succeed.

It’s all part of a scramble within life sciences venture to woo back limited partners turned off by poor returns the past decade. The 2013 IPO boom might help bolster venture returns, but with the fickle window, life science VCs aren’t likely to abandon the pursuit of deals that shorten the time to exit and shore up lower risk, lower reward returns.

flickr image courtesy Deb Roby, creative commons