Financings of the Fortnight Enjoys An Early Noel

For many of us, Christmas (or Hanukkah) arrived early this year. Fans of the Philadelphia Phillies, for example, found a stocking full of Cliff Lee, giving the team a formidable rotation that apparently only the San Francisco Giants can beat consistently. Twitter pulled the ribbon off a $200 million gift box from VCs including blue-chip Valley firm Kleiner Perkins Caufield & Byers.

And across the pond in the UK, where the name Cliff Lee prompts about as much recognition as Ashley Cole’s does in the States, the British biotech sector got its early gift: a £140 million ($220 million) equity raise for Imperial Innovations Group plc, the tech transfer-focused firm closely tied to Imperial College London, foretelling dozens of new investments in academic spinouts.

Wrapped into Imperial Innovations' new funding is the news that it will focus increasingly on commercializing other institutions' research, while continuing to fund ICL spinouts. The firm will collaborate with Cambridge Enterprise, Oxford Spin-Out Equity Management, and UCL Business, the tech transfer groups associated with University College London and the Universities of Oxford and Cambridge. ICL-related investments will still account for the biggest share, with about 40% of the new funds slated for those spinouts; the firm and the university have an ongoing 15-year pipeline agreement that runs through 2020.

The deal will accelerate the firm's pace of investment to as much as £60 million annually from a current pace of £14-£15 million each year, according to CEO Susan Searle. Founded in 2006, Imperial Innovations has invested £47.9 million since its 2006 IPO. It plays a hands-on role in 31 of its 79 portfolio companies, often investing alongside traditional VCs. It reaped a £9.5 million cash exit from the £73 million sale in June of small-molecule drug discovery startup Respivert to J&J's Centocor Ortho Biotech division this year, and could gain as much as £16.1 million from a back-loaded payout from Wyeth's acquisition of obesity drug maker Thiakis.

Imperial Innovations' public placement, relatively rare in 2010, included a rights issue and three installments of convertible shares. J.P. Morgan Cazenove underwrote the issue.

Though VCs have shied from academic deals of late, even deriding them as "science projects" as they've shifted focus, it's been a strong season for investment in university research. On the Big Pharma side, Pfizer's headlong charge into academic dealmaking produced an $85 million commitment to UCSF this fall, one of several on-campus deals the company plans to make.

Whether you're the type to open presents on Christmas Eve or Christmas morning, Imperial Innovations isn't the only one who's already enjoying a gift this season. Since it stands to reason that Santa's sleigh travels from east to west, we'll first linger in Europe as we present...

ThromboGenics: The one-horse open sleigh has already made pitstops in several European countries, rewarding Belgium's ThromboGenics with the most loot. Planning to go it alone with the anticipated launch of microplasmin for retinal disorders, ThromboGenics raised €56 million (about $75 million) in a private investment in public equity financing announced Dec. 2. The deal was one of three PIPEs completed by European biopharmaceutical companies during recent weeks – in addition, Medivir AB raised SEK 280 million (about $41 million) Dec. 3 by selling 2.25 million class B shares of stock at a price of SEK 125 to more than 30 international institutional investors and certified investors in Sweden, while Bavarian Nordic A/S brought in DKK 205 million (about $36.8 million) Nov. 30 by selling 1.05 million shares at DKK 195 apiece. ThromboGenics’ private placement nearly doubled its cash on hand, reported as €59.1 million at the end of the third quarter. The company, which placed 2,944,523 new shares (about 9.9% of outstanding shares) to domestic and international buyers, including qualified U.S. institutional investors, set its price at €19, a 3% discount from the previous day’s closing price. Microplasmin has completed a pair of Phase III trials in varying retinal disorders, including focal vitreomacular adhesion, with a single injection resolving such adhesions in about 30% of patients. Regulatory filings in the U.S. and EU are anticipated in mid-2011. -- Joseph Haas

Sequenta: Geneva's Index Ventures is feeling jolly about diagnostics, and the allure of Sequenta's adaptive immune system response monitoring technology was like milk and cookies waiting for Santa. The California-based company raised $13 million on Dec. 8 in a Series B that also included prior investor Mohr Davidow Ventures, which supported Sequenta in its $2 million Series A. For Index, it's the second time it has backed Sequenta's management team; the same entrepreneurs founded SNP-discovery focused ParAllele Bioscience, which was acquired by Affymatrix in 2005. The firm also has a stake in microfuidics-based assay company SpinX, based in Switzerland. "We're getting into the diagnostics space more and more," enthused UK-based partner Francesco de Rubertis. "It's because of what's happening in pharma: the one-size-fits-all model very clearly is becoming problematic." While diagnostics has long provided the answer to this in theory, in practice, it's been a slower ride, and de Rubertis acknowledged that the best model hasn't yet been found. He added that Index is planning more European diagnostics investments, which will likely be earlier-stage deals. -- Melanie Senior

Catabasis: A lump of coal if you’re naughty, a stocking stuffer if you’re nice, and a second tranche of funding if you meet your milestone. Four VC firms dressed as Santa swooped down the chimney a couple of weeks early with $14.5 million in fresh cash for Catabasis, a diabetes and inflammation startup on the rise whose name nonetheless refers to a descent or sinking. The new money builds on a $7.7 million installment of Series A capital revealed in April, but the round is a gift that’s supposed to keep on giving: The $22.2 million received so far could grow to $39.7 million if additional milestones are met, with SV Life Sciences, Clarus Ventures, MedImmune Ventures and Advanced Technology Ventures standing in for Kris Kringle. Catabasis, which is exploring the connection between inflammation and metabolic disease, expects next year to begin Phase I trials on a drug that combines Omega-3 compound DHA with a salicylate derivative that improves glucose homeostasis in type 2 diabetes patients. After all the cookies and milk, perhaps it's the perfect present for man, dressed all in fur. Nor was Catabasis the only one topping up--and we're not talking eggnog either. Since the last edition of Financings of the Fortnight, Santa's elves have visited Histogen, a San Diego regenerative medicine startup that added $5.35 million to complete its $10 million Series A round, and PhaseBio Pharmaceuticals, which took in the last $15 million of its $25 million Series B to support Phase I trials on the diabetes drug Glymera. -- PB

Geron: Finally, it won't be a blue Christmas for Geron, which netted $93.5 million in a follow-on public offering intended to shore up its balance sheet for multiple projects, including a new licensing deal with AngioChem. The cancer and degenerative disease specialist wasn't necessarily strapped -- it had $125.6 million in cash and short-term investments as of September 30. But Geron owed a $7.5 million upfront payment to AngioChem, and it's on the hook for all further development of the Phase II compound on which the deal centered, a taxane derivative that uses a peptide mechanism to cross the blood-brain barrier and treat brain metastases and glioblastoma. Geron will also conduct Phase II trials on a telomerase inhibitor, which blocks an enzyme thought to be crucial for cell stability and replication in breast and lung tumors, and early-stage clinical trials on a human embryonic stem cell treatment for spinal cord injuries. Geron priced about 17.4 million shares at $5 apiece to raise the first $87 million, while lead underwriters J.P. Morgan Securities and Lazard Capital Markets pursued a greenshoe option that accounted for the remainder. -- PB

image from Flickr user mchristianphotos used under a creative commons license

Financings of the Fortnight Checks in on the A-List

Our colleagues at Start-Up do a little thing every year they call The A-List, in which they slice, dice, julienne and slow-cook the year's biopharma and med-tech Series A venture rounds as a way to gauge the health and direction of the industry. If the annual A-List is a three-course meal, consider this post a snack to tide you over.

Four months into 2010, we take a step back and ask: "How are biotechs faring as they try to tap into crucial early-stage funding?"

Not so great, according to Elsevier's verison of the Magic 8-Ball, the Strategic Transactions database. Early-stage biotechs raised $163 million via 15 A rounds through April 30, with the average financing pulling in $10.9 million. (If a deal was tranched -- and many were -- we only count the tranche raised, not previous or future tranches included in the same round. For example, Flexion Therapeutics raised $9 million from Pfizer as part of a much larger A round, but only the Pfizer money was announced this year.)

At this pace, biotechs will raise $652 million in Series A money in 2010. In 2009, the figure was $842 million, and in 2008 it was $709 million. Filter out the massive $145 million A round pulled in last year by Clovis Oncology, and 2009 is still ahead of this year's pace. Paces can change, of course, and last month was one of the busiest for Series As in the past two years.

And that must mean momentum, except that... sigh... it doesn't. So far in May we've seen just one biotech Series A, the low-key Swedish cardiovascular play Cardoz (more on them later).

One trend carrying over from last year is the involvement of corporate venture investors. Last year, about 20% of all venture deals included corporate cash, and 40% of the top-dollar Series As had at least one corporate investor. This year, three deals have had a corporate element. Pfizer leads the Series A corporate pack so far with the aforementioned $9 million funneled into Flexion.

It's early to make grand prognostications on four months worth of data. Still, the numbers are worth monitoring as an indicator of VC health. It boils down to this: Will venture capital rebound to previous norms as the economic wheel turns to the good, or will we emerge from the cave of the global recession squinting at a fundamentally changed landscape in which traditional VC is no longer the dominant source of funding for early-stage R&D? There's a case to be made we've been headed that way for a while, even before the financial crisis. We're curious to see how 2010 eventually fits into the grander of scheme of things. Meanwhile, life goes on, and life requires cash, not to mention long walks, fresh air, and feta cheese. What else can you not live without? How about...

Ikaria & NuPathe: A funny thing happened on the way to this year's IPO window. Ten biotech issues that registered last year have gone public this year, ranging in size from Ironwood’s $203 million take in February to Australia’s CBio, which garnered a tiny $6.2 million. But until the past fortnight, no biopharma had filed an S-1 in 2010 -- how's that for enthusiasm? That is, not until Ikaria, which filed its S-1 on May 13, and NuPathe on May 14. Neither has set terms, though Ikaria used the rather ambitious placeholder of $200 million, while NuPathe went for the more typical $86 million. Haircuts have been the rule not the exception in this year’s IPO market, so don't be surprised if they are extra cautious as their bankers gauge the market. One positive for both companies: their assets are in late-stage clinical trials. Ikaria’s Lucassin is entering Phase III in hepatorenal syndrome, and NuPathe already has advanced its migraine drug, Zelrix, through Phase III and hopes to win approval and launch by 2012. Also of note: Whether Ikaria goes public or not, it will distribute a $130 million dividend to 12 company officials this quarter, payable from a new $250 million loan. Ikaria says the payout is a one-time deal. Prospective investors should also note that Ikaria's top investor New Mountain Partners will continue to run the show post-IPO, controlling as many as three board seats. -- Joseph Haas

Cardoz: After a boffo April for early-stage funding, only one biotech reeled in a Series A round this past fortnight. Spotlight, then, on Cardoz, a low-profile Swedish startup working on repositioned drugs. It doesn't have a Web site, so its investors announced a SEK 100 million round (about US $13 million), which Cardoz will receive in two tranches that aren't tied to milestones, Cardoz CEO Carl-Johan Dalsgaard told IVB. The funding comes from a European syndicate led by Dutch firm Forbion Capital Partners. YSIOS Capital Partners of Spain and Sweden's HealthCap, where Cardoz was incubated and Dalsgaard is a partner, also joined. Its lead compound, the origins of which Dalsgaard declined to reveal, is already in the clinic, and the cash will help push it through Phase II to treat abdominal aortic aneurysms. Cardoz also has a preclinical program to develop novel inhibitors of leukotriene A4 hydrolase. -- A.L.

Sequenom: Look who's back. In April 2009 the diagnostic firm Sequenom admitted employees mishandled data from its Trisomy 21 Down syndrome test, resulting in the dismissal of CEO Harry Stylli, among others, federal investigations, and accusations of insider trading. But new management has recouped enough investor confidence to boost the stock -- if not quell skepticism in other corners -- and raise $51.6 million in a private placement announced on May 12. It was much-needed cash, as Sequenom reported only $30 million in the bank at the end of the first quarter. There's a caveat to the comeback: Sequenom sold the 12.4 million shares at $4.15 each, a 23 percent discount to the previous day's close. On its May 6 earnings call the new management team detailed a clinical development plan using outside data and also, for the first time, clarified that the Trisomy 21 test will be DNA-based (it is now being run on Illumina’s sequencing platform). Whether a Trisomy 21 diagnostic gets to market -- as a laboratory developed test (LDT) by the end of 2011, to be followed by a PMA application for regulatory approval by the end of 2012 -- remains a question, but the company is at last giving details. That, plus the significant discount to its stock price, certainly helped complete the financing. -- Mark Ratner

NeuroTherapeutics Pharma: The B-list needs some attention, too. This Chicago-area startup said May 20 it pulled in a $43 million Series B, notable not just for its size but for its participants, which include corporate funders GlaxoSmithKline and Pfizer. NTP's lead molecule, NTP-2014, has potential applications across numerous diseases, including epilepsy, pain and other CNS indications, according to the company. The drug is still in preclinical development with an IND filing planned for later this year and trials planned in pain and epilepsy. As noted in our intro, corporate funders played an ever-larger venture role last year. We also take note of the presence of GSK's SR One fund. This is the first SR One deal we've heard of since the big re-org, or should we say, the latest big re-org, with ex-Sirtris chief Christoph Westphal taking the reins as he also tries to launch a separate fund that reportedly has cash from GSK. Meanwhile, it's Pfizer's second venture deal this year. NTP officials told "The Pink Sheet" they did not give away any rights, such as right of first refusal or options, in order to secure the financing. NTP chairman Heath Lukatch, a partner at Novo Ventures, said the Series B cash should see the firm through three years and three "robust" Phase IIa trials in pain and epilepsy. -- Jessica Merrill

Photo courtesy of flickr user cheesy42.