Financings of the Fortnight Puts It In Reverse

LinkedIn? Might as well be in a different universe. From where we sit, it's terribly difficult to go public, let alone do it with investors making the equivalent noise of all those kids who came to see the Beatles in 1964.

There's another way to go public, however. Perhaps you've heard that Radius Health this week merged into an acquisition shell created by life-science venture firm MPM Capital. The new Radius already reports to the SEC and plans to apply directly for a listing later this year, with a goal of transitioning to the Nasdaq by early 2012.

Our Pink Sheet colleagues covered it thoroughly, but the gist is that Radius, spurned by Novartis' decision not to option its anabolic bone-building treatment BA058, now has a financial runway to fund Phase III trials and eventually find a new dance partner. If approved, BA058 would compete directly with Lilly’s Forteo (teriparatide), the only currently approved drug that builds bone mass rather than slowing resorption.

Concurrent with the reverse merger, Radius has raised $91 million in an equity-and-debt Series C round. The first tranche consists of $22 million in equity funding and $6.25 million in debt and includes a doubling-down by MPM, which returned to invest above its pro-rata. MPM's Ansbert Gadicke told our Pinkish colleagues that prostate-cancer developer Cougar Biotechnology provided inspiration for the deal. Cougar reverse-merged into a shell company in 2006; three years later Johnson & Johnson scooped it, and its Phase III drug abiraterone, for nearly $1 billion.

How often does that happen? In the last ten years, never, at least not at that price. At least five others besides Cougar have gone on to reap M&A benefits; the next priciest we could find was Solexa, a genomics company that was acquired by Illumina in 2006 for $600 million in stock.

Of 75 reverse mergers we found in our database since 2001, at least 16 included a round of financing either at the time of the merger or nearly so. Cougar nabbed $47.5 million, for example. Not all are engineered as a way to reach the public markets, of course. (Merck/Schering-Plough was technically a reverse merger, which we had a bit of fun with.) The majority are historical footnotes, as you might expect from companies that can't manage the normal route of attracting public investors.

Then again, the "normal route" doesn't exist anymore for biotech companies. Regarding Radius, the biotech has enough going for it to keep old acquaintances interested; Novartis, through its MPM-managed fund, is a new investor, as is Ipsen, the European drug firm that sold Radius the rights to BA058 in the first place in 2005. Another backer is Nordic Bioscience, a contract research firm with deep expertise in osteoporosis drugs. It's taking equity as part of its CRO fee for BA058; talk about having skin (and bone) in the game.

Spin-outs, reverse mergers, incubators, follow-ons, and A, B or C rounds: Your best bet for boning up on all of them is...

BioCritica: Blockbuster gone bad Xigris (drotrecogin alfa), which was hailed as a new sepsis treatment upon approval in 2001, has a new home. After a decade of minimal sales dogged by serious side effects, owner Eli Lilly & Co. is spinning the drug out to BioCritica, a new firm in Indianapolis that will focus on critical-care medicines. Its backers are Care Capital and NovaQuest Capital, and it also received Indiana state funding and support. No financial details were disclosed, but the NovaQuest connection is interesting, seeing how the firm -- once the investment arm of CRO Quintiles Transnational -- was deeply involved in two of Lilly's Alzheimer's drugs, one of which, semagacestat, failed in late-stage trials. NovaQuest is now operating independently of Quintiles, and as this column reported last December, is raising its own fund. BioCritica, meanwhile, is led by CEO David Broecker, who most recently served at the helm of Cambridge, Mass. biotech Alkermes, but previously worked at Lilly in marketing and product planning. BioCritica will continue Lilly's work to find the best uses of the controversial treatment, which has serious bleeding side effects and questionable efficacy in the broad sepsis patient population, but it hasn't disclosed more detailed plans. Lilly already decided a biotech was best suited for the follow-up to Xigris, a compound Lilly out-licensed to Cardiome Pharma in 2007. -- Lisa LaMotta

GenKyoTex: Edmond de Rothschild Investment Funds led a CHF 18 million Series C for GenKyoTex, a Geneva-based biotech focused on developing small molecule inhibitors of NOX family NADPH oxidases, transmembrane proteins at the beginning of the oxidative stress pathway. New investors Vesalius Biocapital Partners and MH Healthcare Venture Management and existing backers Eclosion, SGAM’s Specialized European Fund for Therapeutic Innovation, and Fondation d’Aide Aux Enterprises chipped in as well. GenKyoTex was incubated at Eclosion, the Canton of Geneva based public-private partnership that helps participating entrepreneurs tap a mix of state, university, and industrial resources. GenKyoTex plans to use the new cash to develop its lead candidate GKT137831, currently on the cusp of going into the clinic, for the treatment of diabetic neuropathy, and to support its preclinical portfolio. GenKyoTex is betting that interfering with oxidative stress by inhibiting NOX will help reduce the formation of reactive oxygen species (ROS) that can contribute to cardiovascular, neurodegenerative and metabolic diseases, cancer, and other conditions. The funding is a coming-out party of sorts for GenKyoTex, which has its roots in a three-way academic collaboration between scientists in -- you guessed it -- Geneva, Kyoto, and Texas. Along with the financing the biotech simultaneously announced a spate of executive changes: Ursula Ney, former Antisoma COO, becomes CEO; Phillipe Wiesel, formerly a medical director at Serono, is CMO; and taking on the role of chairman is PregLem CEO Ernest Loumaye. -- Chris Morrison

SpringLeaf Therapeutics: Start-up SpringLeaf has added $15 million to its coffers through a May 12^th Series B venture roundto continue work on a disposable "patch pump" that allows at-home subcutaneous of intravenous biologics, and also to work on a drug , according to CEO Frank Bobe.The cash comes from return investors Flybridge Capital and North Bridge Venture as well as lead and new backer SR One, whose Brian Gallagher, joins the company’s board. (This is SR One’s first participation in a drug delivery-focused firm since Dicerna Pharmaceuticals’ $29 million August 2010 Series B.)MIT spin-off SpringLeaf was founded as Entra Pharmaceuticals in 2007 and two years later filed a patent application entitled “Skin-Patch Pump Comprising a Changing-Volume Electrochemical Actuator.” Gallagher says the firm's “patient-centric” approach will facilitate more cost-effective therapies and the technology overcomes formulation obstacles associated with delivering existing large-volume biotherapeutics, including highly viscous drugs. CEO Bobe declined to disclose any details on the drug SpringLeaf is working on, but he said preclinical results were encouraging. The biotech, which has now raised about $27 million including a December 2008 Series A round, hopes to initiate a clinical trial by the end of 2012.-- Maureen Riordan

ImmunoGen: Best known for its antibody-drug conjugate (ADC) work, ImmunoGen said May 20 it has raised $84 million before expenses in a follow-on offering, selling 7 million shares at $12 per share. The fundraising comes as ImmunoGen's stock has reached its highest levels since the early 2000s amid growing hopes that ADCs, which attach a strong cytotoxic agent to a therapeutic antibody for a more precise attack on cancer cells, are on the cusp of medical success after three decades of frustrating clinical progress. ImmunoGen is part of the optimism; it has contributed the cytotoxin and "linker" technology used in Genentech/Roche's T-DM1, considered the next iteration of Herceptin. Indeed, ImmunoGen's stock run-up is due in part to new top-line randomized Phase II T-DM1 data released in April that showed improvement in progression-free survival in first-line metastatic breast cancer patients. Good news about T-DM1 is more a boon to ImmunoGen's platform than its immediate finances, as the firm would only receive single-digit royalties from any commercial sales. The targeted antibody, aimed at HER-2 positive breast cancer, is also in non-randomized late-stage trials. Underwriters led by Jefferies & Co. have the option to buy up to 1.05 million more shares. -- Alex Lash

Many thanks to Paul Bonanos and Amanda Micklus, who contributed mightily to this week's introduction.

Photo courtesy of flickr user Rd. Vortex via Creative Commons license.

Financings of the Fortnight Covets Thy Neighbor's Bubble

The B-word is back, and it rhymes with "trouble." With 21 US IPOs in April alone, no wonder the barbarians are lined up at the gates, clamoring to get a piece.

There have been 31 initial filings this month, the most active month since 40 companies filed in August 2007, according to IPO watchers Renaissance Capital. Exciting, no? So how many of these newly minted or wannabe public companies are in our little corner of the world? Two IPOs, Tranzyme and Sagent Pharmaceuticals, and no new filings.

Let that sink in for a moment. It's Bubble 2.0, or 3.0, or 6.0, with little old ladies in Pasadena trying to grab a piece of Facebook on private secondary markets, and not a single biotech firm filed papers this month.

Now, there might be some moral high ground in keeping one's distance from ye olde irrational exuberance. A bubble is generally a bad thing, leading to Pets.com and far too much exposure of Angelo Mozilo's tanning-bed face. No wonder the other side is protesting too much. See how hard this tech VC argues that the current mania is anything but a bubble?

But to those on the bio side of the fence, the lush green grass of Mark Zuckerberg's backyard looks awfully tempting. At BayBio last week, when talk on a mid-stage funding panel got around to building strong biotech companies, Pfizer business-development executive Jim McLoughlin cautioned other panelists to think long-term and not create a bubble. (As if they could.) Versant Ventures managing director Camille Samuels jumped in: "Hey, I'll take a bubble!"

She said it with a laugh, but consider the VC's alternative these days: Waiting for guys like McLoughlin (and the committees behind them) to decide they like your portfolio firm's Phase II asset enough to offer a modest up-front payment and earn-outs or milestones.

European investment firm LSP Life Science Partners isn't waiting around for the private equity exit ramp to materialize. Not only is it launching a public-equity fund, it has floated the fund, dubbed LSP Life Sciences Fund, on Euronext Amsterdam.

The firm claims a 150% return on public investments, which it began making in 2008 on behalf of Dutch pension fund administrator APG Investments. Its new dedicated fund, for which it raised £30 to £35 million privately, follows in the footsteps of life-science VCs like Abingworth, MPM Capital, and OrbiMed Advisors who have begun straddling the fence in recent years. On the private side, LSP's fifty or so holdings have included Jerini, KuDOS, U3 Pharma and Movetis. The first three sold privately, while Movetis listed in late 2009 before Shire gobbled it up a few months later. Our "Pink Sheet" colleagues will have more on LSP soon, so we don't want to, ahem, burst their bubble. Instead, let's pop the cork on another bottle of...

Synta Pharmaceuticals: On April 15, cancer and inflammation drug discovery company Synta Pharmaceuticals raised $35.2 million in a registered direct offering, the second-highest grossing PIPE this year behind Arena Pharmaceuticals. Synta sold 7.2 million shares at $4.89, a 6% discount to the ten-day average. Company insiders bought about 22% with institutional investors scooping up the rest. After several ups and downs in its ten-year history, Synta is The Little Discovery Engine That Could, dusting itself off after each disappointment. And there have been several. The Shionogi BioResearch spin-off raised more than $200 million in venture financing before a failed IPO attempt in 2005. Less than two years later, and after another $40 million cash infusion, the company finally went public, selling shares at $10 a pop. Soon thereafter it secured its first Big Pharma partner when GSK acquired US co-promote rights to the biotech’s elesclomol, an apoptosis-inducing candidate that disrupts cancer cell energy metabolism. But Synta got a shock in March 2009 when Phase III trials in metastatic melanoma showed more deaths in the elescomol arm than with the standard-of-care arm, and the trial was shut down. GSK returned rights, but not before forking over $130 million. After the elesclomol failure, Synta has pinned its hopes on its lead compound the Hsp90 inhibitor ganetespib, which is unpartnered.* For the April 15 RD offering, Synta issued no warrants and did not use an underwriter. -- Amanda Micklus

Silence Therapeutics: The shingle Silence hung out to advertise a placement of 275 million shares, with hopes of grossing up to £5.5 million, is a sign of the times for the RNA interference crowd. Silence is the latest RNAi firm to find itself in financial or strategic difficulties, and if shareholders don't approve the new stock sale, announced April 25, the company says it will run out of cash by the end of the third quarter. Whether or not that transpires, Silence says it is shutting down its California office, a legacy from its December 2009 merger with Intradigm, and looking to replace CEO Phil Haworth. When Silence and Intradigm tied the knot, the firms hoped their combination would speed the development of delivery systems, a major obstacle in turning fragile short interfering RNAs into viable therapeutics that reach their intended targets. Investors such as Alta Partners and Frazier Healthcare also backed the merged entity with a £15 million financing priced at 23 pence a share. If that sounds bad, please note that the new placement is priced at 2 pence a share. No, that's not a typo. Momentum in RNAi has been on the wane for the past two years, then came big red flags last fall when two major partners of Alnylam Pharmaceuticals delivered bad news. First Novartis, a 13% owner of the biotech, passed on an expensive option to expand its collaboration, then Roche said it was dropping all RNAi-related work. More dark skies earlier this year came when delivery firm Tekmira Pharmaceuticals brought a lawsuit against Alnylam; and RXi, undergoing a management overhaul, bought a struggling company for its late-stage breast-cancer treatment and shifted its focus away from RNAi. To top it all off, Merck & Co.'s $1.1 billion purchase in 2006 of Sirna Therapeutics, once Alnylam's rival, has yielded nothing that Merck is willing to discuss publicly. Meanwhile, Silence is offering shareholders a chance to buy up to £1 million in shares before the placement. Those who participate in full will only be diluted 45% by the placement; otherwise dilution will be about 54%, the company said in its notice to shareholders. -- Alex Lash

Bluebird bio: When a VC at last week's Bay bio meeting was asked about the next big thing, he pointedly said it wouldn't be RNAi, which was reminiscent of gene therapy. (He didn't mean it as a compliment.) Bluebird bio begs to differ, having just raised a $30 million C round from new investor ARCH Venture Partners and others to pursue its gene therapy technology, called LentiPak, to treat rare diseases such as childhood cerebral adrenoleukodystrophy (CCALD) and beta-thalassemia/sickle-cell anemia. Formerly known as Genetix Pharmaceuticals, Bluebird aims to get lead program Lenti-D into a registrational Phase II/III trial for CCALD later this year. The firm says its technology, using lentiviruses instead of retroviruses as the viral vector, should provide better safety than the now-infamous gene trials of the previous decades. The LentiPak technology works this way: A patient's hematopoetic stem cells are extracted, exposed to a viral vector, then re-inserted into the patient, reconstituting his or her bone marrow. In addition to ARCH, the Series C is backed by returning investors Third Rock Ventures, TVM Capital, Forbion Capital Partners and Easton Capital Investment Group. Genzyme Ventures, which co-led last year's Series B, is not involved because of the ongoing merger with Sanofi-Aventis, Bluebird CEO Pat Leschly told "The Pink Sheet" DAILY. -- Joe Haas and A.L.

Circassia Holdings: Yes, Virginia, there are refreshing wellsprings of early-stage capital out there, and Circassia is fortunate to be in deep with one of them. The UK allergy vaccine developer said April 19 it has raised £60 million ($98 million), the second largest European venture round this year and one of the largest ever. It was led with a £15 million tranched commitment from Imperial Innovations Group, the tech transfer and investment arm of Imperial College, London, where Circassia's T-cell vaccine platform ToleroMune was developed. Imperial Innovations has exclusive rights to IP coming from the college, as well as access to technology from three other top UK schools. It recently said it has commitments from shareholders to contribute another £140 million ($220 million), nearly three times what the group has invested in start-ups. It's also one of the rare investment funds to go public itself, having raised £26 million in a 2006 listing on the AIM exchange. (Perhaps an inspiration for LSP?) Imperial has been a backer of Circassia since its founding in 2006, and the majority of the funds raised in this round will go towards financing phase III development programs for Circassia's cat and ragweed allergy therapies. Circassia also aims to use the funds to complete phase II testing of the company's house dust mite and grass allergy T-cell vaccines, and will advance the development programs for three additional allergy therapies and its psoriasis treatment, PAP-1, a selective Kv1.3 inhibitor, recently acquired from Airmid Inc. -- Faraz Kermani

Photo courtesy of flickrer Beige Alert under a Creative Commons license.

Melanie Senior contributed to this week's introduction.

*Due to an editing error a previous version of this column stated incorrectly that Synta's ganetespib compound was partnered. We regret the error.

Financings of the Fortnight Asks for a Moment of Silence

The Pacific gives, the Pacific takes away. There is no rhyme or reason. Life is short, strange, horrible and precious. Let's have a moment of silence and contemplation, and if you haven't helped Japan yet, please do what you can. This is one good place to start, and this is another.

Here on the other side of the Ring of Fire, where we see ourselves in the reflection across an ocean, it's been a difficult week to focus on the task at hand. But life is full of work that must be done. As our mother often told us, "If it was fun all the time, it would be called play." Boy, did we hate hearing that when we were 11 years old.

But this week, in our little corner of the biopharma world, Mom's admonition put us in mind of Exelixis, the San Francisco Bay Area firm whose discovery engine and small-molecule pipeline were once the envy of emerging biotechs everywhere.

But the firm seemed stalled for a couple years in the late stages of clinical testing, and 2010 became Exelixis' annus horribilis, if we could borrow a phrase from Her Majesty. It lost longtime CEO George Scangos to Biogen Idec, it laid off two-thirds of its 670 employees with plans for even more, a key partner for its lead compound XL-184 walked away from the program, and it shut down all R&D beyond XL-184, now known as cabozantinib.

But Exelixis, sleeves rolled up, upper lip stiff, found a silver lining at the end of the year. In November cabozantinib returned remarkable results in a small Phase II prostate cancer study. Of 20 men whose cancer had spread to the bone, 19 had their lesions shrink or disappear, an effect one investigator called "spectacular," though with the caveat that the mechanism of action remained mysterious.

And now with its drastically pared headcount, narrowed pipeline, and more interim data from the prostate study, Exelixis has enjoyed another surprising result: a stock price that rocketed from below $3 a share last summer to nearly $13 earlier this month, prompting the company to raise cash from a stock sale. And indeed it did, selling 17.25 million shares at $11 each to net $179 million. (It closed at $10.90 Thursday March 17.)

Under previous CEO Scangos, Exelixis was nimble in its fundraising, tapping what seemed like every possible source from asset financing to debt vehicles to grand-scale partnerships. That willingness continues; perhaps not surprising, as top management has remained fairly stable through the turmoil. New CEO Michael Morrissey has been a top scientist -- or the top scientist -- at the firm since 2000; longtime CFO Frank Karbe has stayed on, too.

There's a long way to go before cabozantinib proves worthy of approval in prostate cancer or any other indication, but the difficult work, not to mention the pain of letting hundreds of colleagues go, is paying off in at least one respect, as investors have voted their approval with their pocketbooks. That might be cold comfort to those laid off, or to current employees still pushing the rock up the hill toward product approval, but with the cash, Exelixis has more resources to keep fighting another week, another month, another year, and perhaps to bring a drug to market that helps patients do the same. In the end, isn't that what we all hope for?

Aerie Pharmaceuticals: North Carolina-based Aerie pulled in a $30 million Series B on March 7, with new investors Clarus Ventures and Sofinnova Ventures joining an existing syndicate that includes Alta Partners and TPG Biotech. Proceeds will fund continued development of Aerie’s glaucoma pipeline, with the lion’s share likely to support clinical trials of AR-12286, which is in the lead to become the first so-called rho-kinase inhibitor to market. These inhibitors directly modulate the trabecular meshwork, the spongy smooth-like tissue in the eye responsible for fluid outflow. Because of the new mechanism of action, it’s believed drugs such as AR-12286 can reduce intraocular eye pressures, either alone or used in combination with existing medicines. Aerie published positive top-line Phase IIb data in September 2010, building on an earlier 88-person study showing the compound was as good as Pfizer's standard-of-care Xalatan in reducing IOP, with mild to moderate eye redness observed in a minority of patients. With the genericization of Xalatan imminent, however, the commercial hurdles for next-generation glaucoma drugs have risen, and potential partners are cautious about paying too much for an asset without proof that it can dethrone a very good and cheap drug as a first-line agent. To build its case for AR-12286, Aerie is running additional Phase II trials and plans to initiate Phase III trials by year’s end. With its Series B cash, the company is certainly in a better negotiating position when it comes to partnering, with less pressure to do something near-term. It certainly helps that glaucoma clinical trials are shorter and less expensive than studies in cancer, diabetes or cardiovascular disease, allowing Aerie to keep the R&D burn low. -- Ellen Foster Licking

Nimbus Discovery: The Cambridge, Mass. firm emerged from stealth mode on March 10 with a seed funding of undisclosed size from Atlas Venture Partners and some guy named Gates. Bill, perhaps? Yeah, we think that was it. The name sounds vaguely familiar. Nimbus is using technology from computational drug design specialist Schrödinger, which holds an undisclosed material equity stake in the biotech. Schrödinger’s in silico WaterMap technology evaluates the energy of individual water molecules at a target’s binding site, and knowing that architecture makes lead optimization much more efficient, says Atlas partner Bruce Booth. Schrödinger’s fundamental business is software, not drug development, so the company worked with Atlas to build Nimbus, which has exclusive rights to use Schrödinger’s tools around 20 targets. What further sets Nimbus apart from traditional discovery ventures is its structure as an LLC holding company that acts as an umbrella over target- or molecule-specific C-corp subsidiaries. Each time a candidate is licensed, it will be in effect an acquisition of a company that includes just the IP and data surrounding that candidate. The structure, though more complex, is reminiscent of Index Venture’s PanGenetics, which also ran multiple companies (one of which, an anti-NGF antibody, was sold to Abbott Labs) under one management and investment structure. Spending less than $2 million, Nimbus has generated an inhibitor of IRAK4, an immunokinase target implicated in various cancers and inflammatory conditions, and lead scaffolds against other targets, Booth told our START-UP colleagues. You'll have to read the upcoming issue to find out more, which we highly recommend because you'll also find out about other biotechs, such as Adimab and Ablexis that are embracing the LLC model and diving deeper into the asset-financing pool. -- Chris Morrison

BioCryst Pharmaceuticals: BioCryst has sold $30 million in debt, using milestones and royalties from its flu medication Rapiacta (peramivir) to secure the notes. The deal, which closed March 9, is an interesting twist on the typical royalty play. BioCryst created a wholly-owned subsidiary, JPR Royalty Sub LLC, and assigned it future payments due from Shionogi & Co. on the sales of Rapiacta in Japan and Taiwan. BioCryst, which also has peramivir in Phase III in the US, is eligible to receive royalties between 10% and 20% on net sales of the drug under its 2007 licensing agreement with Shionogi. JPR issued $30 million in senior secured notes, due Dec. 1, 2020, and will pay out 14% interest annually derived from the drug's income. BioCryst netted $23 million from the transaction and will use the proceeds to develop other pipeline assets, such as BCX4208 in Phase II for gout. The deal differs from other recent royalty stream deals, in which companies such as NeurogesX and Dyax obtained funding from private-equity royalty investors in exchange for future potential earnings. BioCryst is on the hook for the repayments even if the milestones and royalties from Shionogi don't come through, and it said it's reserving $3 million to cover shortfalls. -- Joseph Haas and Maureen Riordan

Omthera Pharmaceuticals: Heading into a key Phase III trial for its omega-3 cardiovascular treatment, Omthera of Bedminster, NJ, said March 14 it has raised a $34 million Series B round led by new investor New Enterprise Associates. The company will use the cash for a just-initiated Phase III trial of Epanova, which proved superior GlaxoSmithKline's Lovaza, the only omega-3 prescription treatment on the market, in a recently completed trial. Omthera is positioning Epanova as a treatment for very high triglycerides (greater than 500 mg/DL). Omega-3 fatty acids exist naturally in algae and fish oil, but prescription versions vying to compete for a potentially huge market are not all the same, varying their formulations with different ratios of two types of Omega-3s, eicosapentaenoic acid (EPA) and docosahexaenoic acid (DHA). For example, Lovaza contains 46% EPA and 38% DHA, Epanova is 55% EPA and 20% DHA, and another entry, a Phase III compound from Amarin, is 96% EPA. The new round, which is not tranched, puts Omthera's total cash raised over two rounds to $40.4 million. NEA partner David Mott, the former CEO of MedImmune, will join the Omthera board, and existing investor Sofinnova Partners joined NEA for the B round. Omthera licensed worldwide rights to Epanova from Chrysalis Pharma. -- Alex Lash

Photo courtesy of flickr user OiMax under a creative commons license.

Adimab, Arsanis, and Platform Cloning -- a New Biotech Model?

Adimab, the yeast-based antibody discovery company that has amassed a strong portfolio of partnerships and skyrocketed to a north-of-$500m valuation, has always said it had no plans to do its own development work. If only the company could clone itself, perhaps it could venture down the development path without getting distracted from its discovery platform opportunity -- and the high multiples that can be extracted from a company that doesn't need a ton of development financing.

Enter the clone, Arsanis.

Arsanis is a biotech essentially seeded with Adimab's technology platform that will apply this yeast-based antibody discovery engine to developing drugs against infectious disease targets. The company will run research out of Vienna, Austria and plans to hire 20-25 employees in the next few months, according to founder and chief scientist Eszter Nagy, MD, PhD.

Adimab doesn't own Arsanis (though it stands to make money if Arsanis succeeds), but Adimab's investors do. The new company has raised about $10 million from SV Life Sciences, Orbimed, and Polaris, three Adimab backers. We've spoken to all those firms, to Adimab, and to Arsanis' Nagy, who hails most recently from Intercell. We'll have more on Adimab's strategy, the new company and the advantages of the model for its venture backers in a forthcoming issue of START-UP.

For now suffice it to say that Adimab has enabled a newco with its technology, helped put together a familiar syndicate to back it, and those investors can now put more money to work behind that Adimab platform. If Arsanis is successful we bet you'll see additional Adimab clones in other therapeutic spaces where Adimab's brand of faster/cheaper/better antibody discovery can yield "an unfair advantage," as one of Adimab/Arsanis' venture backers puts it.

How the company defines success remains to be seen. The $10 million should see the company all the way through to "compelling preclinical proof of concept" for a couple of antibody programs against unmet needs in infectious diseases, the players tell us, all within the next two years.

Nobody involved with Arsanis has suggested this strategy is new to biotech, but we haven't seen it work exactly like this before -- perhaps the closest comparator are the twin antibody firms Medarex and Genmab.

Meanwhile, Tillman Gerngross and Errik Anderson, Adimab's CEO and COO (founders and board members at Arsanis), have with their team transformed Adimab from a C-corp to an LLC, something we reported in December, and plan to expand the company's slate of discovery collaborations. The LLC transformation -- no easy feat according to all involved -- allows the biotech to return money from forthcoming collaborations to shareholders in a tax-efficient way.

It also dispels the notion, Gerngross says, that Adimab is for sale. "We're completely uninterested in short-term liquidity. We don't want what has happened in the past, where the company gets bought and then has a limited impact," he says. "We have a greater ambition."

Let It Snow, Let It Snow, I-P-O

Watch out. Here it comes. Unless half the United States turns into an Otter Pop in the next 48 hours, a dozen companies could join the public markets this week, and seven of them are health-care related, says Renaissance Capital. Three of them are biopharma firms: Pacira Pharmaceuticals, AcelRx Pharmaceuticals, and Endocyte.

With the crazy discounts companies were forced to endure to cross the magic IPO bridge in 2010, we're curious to see what the new calendar year brings. (Other than tons of snow and ice.) As this blogger noted in the current issue of The Pink Sheet, the aforementioned AcelRx and Pacira, plus one more company a bit farther behind, Supernus Pharmaceuticals, are all reformulation/delivery plays. Pacira and Supernus are spinouts with technology already incorporated into commercial products at the time of the spinout. All are five years old or less, a relatively fast turnaround for a venture exit. That is, if their venture backers can exit when their post-IPO lockup ends.

Of the 14 biopharmas to debut since the IPO window re-opened in late 2009, only five have stock prices above their original IPO price (as of Jan. 26). The biggest gainer is Aveo Pharmaceuticals, up 64% from its March 11 debut at $9.

But looks can be deceiving. Some IPOs debuted only after drastic haircuts. Take the case of Zogenix, which is up 25% from its IPO. But it wanted to sell 6 million shares in the $12 to $14 per share range; it ended up on November 22 selling 14 million shares at $4 each.

The discounts have had palpable effects. Trius Therapeutics delayed its debut a few months as it reworked its Phase III plans with the FDA. In August the antibiotic developer sold 10 million shares at $5 each, a big step down from the 6 million shares at $12 to $14 each it hoped to sell. The extra $25 million or so was supposed to pay for a second Phase III trial comparing its lead compound torezolid to Pfizer's standard-of-care for skin infections, Zyvox (linezolid), according to president and CEO Jeffrey Stein. But Trius had to settle for $50 million and one trial, and it will now look to sell some ex-US rights or do a secondary offering to raise cash for a second trial. All of which means the two trials will be roughly in series, not parallel, and the data FDA requires to get an antibiotic approved -- requirements the agency has been overhauling for more than two years -- will be that much farther out.

Enter the delivery hopefuls. AcelRx is testing an oral form of the powerful painkiller sufentanil that a post-surgical patient self-administers in tab form under the tongue, meant as an alternative to press-a-button IV drips. Pacira is also in pain, with a non-opioid analgesic formulated in its Depofoam technology. Supernus is applying extended-release technology it spun out from Shire in 2005 to schizophrenia drugs.

Reformulation is unlikely to rescue beleaguered biotech investors, but if this week's crop of companies have successful debuts it will surely embolden VCs who've shifted their portfolios in recent years away from the long, tough slog of drug discovery and development. Joining AcelRx, Pacira and Endocyte in the chute are two health services companies, a dental implant maker, and a joint replacement maker.

Speaking of long lead times, look no further than the one company we've not really discussed here: Endocyte has a platform for small molecule drug conjugates, and it's got a folate receptor agonist in Phase II against ovarian and lung cancer. It was founded in 1995 and raised its first venture round in 1996.

Image courtesy of the Weather Channel.

And the 2010 Financing/Exit DOTY Nominees Are ...

OK, IN VIVO blog readers, it's time to have your say. We've supplied the nominations but YOU will decide the winners. Once again we've created a special page so you can vote on all three categories in one place. Remember you much click on the "VOTE" button in each individual category--Alliance, M&A, and Exit/Financing--to record your choices.

CLICK HERE TO GO TO THE VOTING BOOTH.

Below, in no particular order, are the nominees for IVB's 2010 Financing/Exit Deal of the Year!

ABLEXIS: Ablexis, which is developing a next-generation antibody-discovery platform around its proprietary AlivaMab mice, was founded in December 2009 and raised a $12 million Series A from Third Rock and Pfizer Venture Investments in June 2010. The company's nomination is less for its Series A and more about the baked-in exit for investors provided by the biotech's five-member pharma consortium. Those companies have non-exclusively opted-in to receive Ablexis' mouse platform for an undisclosed seven-figure fee and will owe an undisclosed eight-figure sum upon delivery. That cash can then be distributed to Ablexis' investors. Read our full nomination post here.

INCLINE THERAPEUTICS: The story of Incline Therapeutics’ $43.5 million Series A funding begins with Johnson & Johnson's decision to close Alza and sell its Ionsys electronic fentanyl patch to this start-up, backed by Cadence Pharma and some of that company's investors. As part of the deal Cadence has structured a two-time option to acquire Incline should that patch perform between now and 2013. Thus, Incline's financing is a sign of the times, demonstrating that when VCs commit large amounts of capital, they’re willing to negotiate upfront for a speedy, healthy return. Read our full nomination post here.

IRONWOOD PHARMACEUTICALS: Ironwood's monster $203 million IPO didn't just provide temporary financial independence or give the company the biggest pre-money IPO valuation for a biotech in history. More importantly, it made real the company's unusual dual-class share structure, which concentrates decisions around change-of-control (and only change of control) in the hands of long-term, pre-IPO shareholders as a means of warding off hostile offers and unwanted activist shareholder involvement. If Ironwood is able to build a freestanding pharmaceutical company on the back of its promising IBS/constipation drug candidate linaclotide, the reason it will be able to remain independent was cemented into place with this offering. Read our full nomination post here.

CASTLIGHT: If ever a financing represents the new business and market opportunities now in play because of health care reform, surely it's the Castlight deal, a $60 million Series C inked in June. Castlight, founded in 2008 as Ventana Health Services, aims to solve one of the thornier wickets of health care delivery: the issue of pricing transparency for medical services. Castlight aims to illuminate the murky arena of health care pricing, creating an algorithm that allows users to search a database of providers to determine out-of-pocket costs for various procedures. Read our full nomination post here.

2010 Exit/Financing DOTY Nominee: Castlight

It's time for the IN VIVO Blog's Third Annual Deal of the Year! competition. This year we're presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (four or five in each category throughout December) 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™.

Castlight's $60 million June Series C wasn't the biggest venture round of 2010. (That honor belongs to Archimedes, which pulled in a stunning $100 million from new and existing investors in March). In fact according to Elsevier's magic eight ball (also known as Strategic Transactions), Castlight's financing -- certainly a large sum -- wasn't even enough to merit a top five ranking, inched out by the raises of European companies Immatics and AiCuris, and on the U.S. side by Relypsa, Cerenis, and Pearl Therapeutics. Why, then, does it merit your vote for IN VIVO's DOTY in the Exit/Financing class?

Call it a vote for the new world order.

You probably know that earlier this year Congress passed a small piece of legislation called the Patient Protection and Affordable Care Act. We at IVB thought about nominating health care reform for DOTY, but after a couple of years of running this competition, we knew better. HCR is too big, too vast, too encompassing a topic to capture the voting public's imagination. You, dear reader, want something more tangible that you can point to and say yes, here's a deal that embodies a larger trend at work.

And if ever a financing represents the new business and market opportunities now in play because of health care reform, surely it's the Castlight deal. Castlight, founded in 2008 as Ventana Health Services, aims to solve one of the thornier wickets of health care delivery: the issue of pricing transparency for medical services.

Downloadable smart phone apps such as TheFind can tell you whether Amazon or WalMart or Best Buy has the best price on the fancy new GPS system you want to buy your girl friend with the poor sense of direction. But it can't tell you where to get the best price on a colonoscopy or a dental cleaning or an MRI. And with the advent of high deductible health care plans and an ever larger percentage of costs being passed on to the consumer (er, patient), that's valuable information to have.

Castlight aims to illuminate this murky arena, creating an algorithm that allows users to search a database of providers to determine out-of-pocket costs for various procedures. Its business model is simple: the company aims to sign contracts on a monthly per-employee fee with businesses that self-insure or are encouraging their own employees to make smarter--i.e. more cost-conscious--health care choices. But it's easy to imagine the model could evolve over time to an open access system where pricing is based on a per-use fee and anyone can sign up to use it. To date, Castlight already has one customer: the grocery store giant, Safeway, which employs about 200,000 workers.

Castlight has plenty of competition too. Small start-ups such as Change: Healthcare, along with insurers such as Aetna, or even information service providers like Thomsen-Reuters, are getting into this game. Though Castlight is small compared to some of those established players, it boasts an impressive roster of founders and backers, which include not just traditional venture backers such as Maverick Capital, Oak Investment Parnters, and Venrock, but also the Wellcome Trust and the Cleveland Clinic.

It certainly helps that one of Castlight's founders, CEO Giovanni Colella, is no neophyte in the health care services arena. He sold his previous firm, Relay Health, which enables doctors to communicate with patients via secure web-based technology, to McKesson in 2006. An added bonus is surely the involvement of investor Alan Garber, a professor of medicine at Stanford who also happens to run that university's Center for Health Policy.

Analysts have long said the only way to rein in skyrocketing health care costs is to make patients understand what they are paying for and why. But for most of us health care is heavily subsidized by our employer. With some one else footing most of the bill, there ain't a huge incentive to ask the neurologist treating your headaches if an expensive MRI is must-have data that will change his or her treatment plan for you. If it's not, knowing the costs of the MRI versus a 10-pill prescription for generic sumatriptan become valuable data points that help guide decision making--especially if you have to pay a portion of the tab.

It's perhaps surprising that with the passage of health care reform, VCs aren't talking up the opportunities in actually delivery of care with greater enthusiasm. Conventional wisdom is such technology plays are risky--unlike drugs or devices, these tools can be commoditized and don't have the same intellectual property protections that limit the playing field.

But the IP protection enjoyed by drugs and devices is a red herring. Health care reform means comparative effectiveness will be the rule not the exception and that means biopharma and medtech companies face increasing competition not less as payers, physicians, and patients evaluate the costs and benefits of various therapeutic options. Already companies have pivoted, talking about differentiation and unmet need as being important drivers of innovation.

By that definition, doesn't the information Castlight provides represent innovation with a capital "I"?

And that's why Castlight deserves your vote for the exit/financing deal of the year. It's a vote for innovation -- maybe a different kind of innovation than you are used to --but innovation nonetheless.

Heceta Head Lighthouse courtesy of flickrer dezz, courtesy of a creative commons license.

2010 Exit/Financing DOTY Nominee: Ironwood Pharmaceuticals

It's time for the IN VIVO Blog's Third Annual Deal of the Year! competition. This year we're presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (four or five in each category throughout December) 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™.

The February 2010 public market debut of Ironwood Pharmaceuticals valued the company at greater than $1 billion pre-money. That had never happened before for a development-stage biotech.

Impressive? Oh, hell yes. Is that the reason we think you should vote for Ironwood's IPO as IVB's exit/financing of the year? Not so much.

Then Ironwood deserves a DOTY award for the $203 million it netted at the offering, right? After all that's the most money any biotech has pulled in since 2000, when Lion Bioscience, Tanox, Lexicon were filling their coffers via the public markets.

No, that's not the reason either. And we certainly aren't nominating Ironwood for any post-IPO performance metric: the company hasn't fared so badly, but it's basically treading water (there, Aveo Pharmaceuticals, up 56% from its March IPO price, out-performs the 2010 class).

The real reason for the nomination of Ironwood -- a company founded in 1998 as Microbia that finds itself, after several twists and turns, on the precipice of filing its first NDA -- is rooted in how the biotech structured its IPO in the first place to ensure the company's independence and allow it to focus on long-term strategy instead of short term financial gain.

The IPO didn't just provide temporary financial independence. More importantly, it made real the company's unusual dual-class share structure, which concentrates decisions around change-of-control (and only change of control) in the hands of long-term, pre-IPO shareholders as a means of warding off hostile offers and unwanted activist shareholder involvement.

That's right -- Ironwood wants to build a pharmaceutical company that can stay in business for the long haul. After a few false starts and clinical setbacks throughout the past decade, it seems to be onto a winner with its Phase III linaclotide compound for IBS and chronic constipation. Phase III studies have thus far been impressive. It has linaclotide partnerships with Forest, Almirall and Astellas in key geographic areas and cash to see it through to the finish line and then some. It has seasoned drug developers and the substrate to build a pipeline.

And now it has takeover insurance. Ironwood's IPO locked in a system that won't attract short-term shareholders looking for a quick M&A-infused bump. The company won't garner the potential takeout premium that its peers might enjoy because it simply isn't for sale any time soon, even if linaclotide – or the next drug down the bench – is approved.

The guarantee of independence is a rare commodity in biotech. And of course there's no real guarantee Ironwood won't be sold. But its dual class structure allows long-term holders to call the shots, its significant financial cushion was inflated by its IPO haul, and the promise of linaclotide in the near term suggests Ironwood's growth won't be stunted. And it hasn't had to surrender large swathes of geographic territory or pawn its pipeline to get there either, part of the compromises of big-sibling protection that is the closest thing we've seen to true independence. (Just look to Genentech to see just how that can turn out in the long run).

Ironwood thinks it can innovate its way to long-term biotech success. The innovation it has shown in shareholder structure, cemented in place by arguably the most successful biotech IPO ever, will give it a chance to do so.

And that's THE reason the biotech deserves this year's Roger for best Exit/Financing.

2010 Exit/Financing DOTY Nominee: Ablexis/Pharma Five

It's time for the IN VIVO Blog's Third Annual Deal of the Year! competition. This year we're presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (four or five in each category throughout December) 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™.


In the Exit/Financing category of this year's DOTY competition, there's no question Ablexis & the Pharma 5 (Pharma 5ive?) deserves your vote--and NOT because it hearkens back to a Motown dynasty. Hang on! Isn't Ablexis/Pharma 5 an alliance--with mysterious deal teams and even more mysterious participants? (Pfizer, being the only big drugmaker brave enough to link its name to the deal.)

Yes and yes. But, in truth, this alliance is also both a financing and an exit. Let me explain.

It's no secret the emphasis within the industry is on capital efficiency-- in other words , finding mechanisms to cut the burn rate while building enough value to move a company to that highly elusive "inflection point." For VC-backed companies that certainly means doing more with less, and making hard choices early-on. In some cases, it's led to what can only be called a heretical choice: eschewing drug development in favor of cutting platform-related deals. Ablexis (alongside Adimab) falls into this very select group.

The problem, of course, is the value of platform deals have been steadily falling since the heady days when Alnylam was inking RNAi deals with the likes of Roche and Novartis. That certainly makes it tough to build a viable revenue stream. But its an even bigger problem for venture-backed companies. Indeed, the absence of a healthy IPO market and the shift in deal making from acquisitions to alliances means providing investors with the opportunity of a near-term exit is nearly impossible for these so-called platform-only, no development (POND) cos.

Unless you manage to strike a deal that provides the said-exit. And that's exactly what Ablexis' non-exclusive tie-up with the fab unnamed pharmas provides.

Ablexis, which is developing a next-generation antibody-discovery platform around its proprietary AlivaMab mice, was founded in December 2009 and raised a $12 million Series A from Third Rock and--interestingly--Pfizer Venture Investments in June 2010. An evolution of the Abgenix strategy (take a look at the biotech's management and board), Ablexis aims to be a technology provider, making its souped-up mice available to all-comers, regardless of the specific antibody target of interest.

Regarding the consortium, recall participating drug makers had to pay an undisclosed and COMPLETELY NON-REFUNDABLE seven-figure fee just to get into the consortium. Furthermore, once Ablexis delivers the mice--an event on which CEO Larry Green declined to comment--each participating pharma co owes an additional eight-figure sum. Even if the upfront and milestone payments were $1 million and $10 million respectively, bare minimum the consortium deal should pull in $55 million for Ablexis.

And when it does, investors can head for the exit sign--if they want to. As Green said in an interview “the back-end obligatory payments by licensees provide a very attractive return for our investors.” In other words, Green and co aren't waiting for a traditional "exit" event to disburse investors' cash, but will return the money based on investors' relative ownership stakes. (In case you are wondering that's one reason Ablexis was structured as a limited liability company as opposed to a "C" corp. Had the biotech been a standard corporate, the cash distributions would have been taxed heavily.)

It's surely no accident Pfizer Venture Investments played a role in Ablexis' financing while Pfizer signed on to the consortium. Even before it pulled in the Series A money, the biotech was talking up the consortium idea in an effort to convince would-be investors that "platform" doesn't always mean years of investment until a value-creating event. Now Barbara Dalton's group and Third Rock stand to benefit for taking the plunge and having faith in Ablexis' management team.

There are additional reasons Ablexis deserves to win in the Exit/Financing category, including it's emphasis on sticking to what it knows (it's the platform, stupid) and its unwillingess to exclusively license the AlivaMab mice. But assuredly it deserves to win for linking its Series A to the consortium to the exit, and thereby solving a chicken-and-egg problem that has bedeviled entrepreneurs interested in starting privately-held platform outfits.

Image courtesy of flickrer lucianvenutian used with permission under a creative commons license.

Financings of the Fortnight Works on Its Stand-Up Routine

Did you hear the one about two VCs, two fund managers, and a banker who walk into a bar… or maybe onto a stage. No, wait, it gets better.

The biotech community could use a little comedy after the last couple years, and the final panel def jam at this week’s Bio Investor conference in San Francisco provided plenty. All the classic elements were there as host George Milstein, a longtime West Coast biotech banker, played the straight man to his ensemble cast of characters, er, panelists.

The context of the discussion was more sobering, what with three-quarters of the year behind us and the situation becoming clear: recession or not, it’s still pretty damn hard for biotechs and their investors to find cash.

First, VCs are still struggling to raise it. DowJones VentureSource reported this week that 2010 fundraising is on track to equal 2009, which represented a six-year low. Second, pharmas are unwilling to spend it. The upcoming October issue of IN VIVO has an excellent industry overview, but here’s a taste: overall licensing activity is down 20% from 2007, and within that option-based license deals are up. M&A volume is behind 2009’s pace so far, and what there is has skewed toward companies with marketed products and generics, bad news for those trying to carry the torch of emerging science and innovation, or better yet, fund it. Do we even have to mention the IPO market? Oh, OK. This year’s IPOs, such as they are, have been a terrible investment (median performance of -20%).

Cue the mirth. Milstein summarized the ho-hum landscape but soon, thankfully, went for the cheap laughs. A typical example: panelist David Sable of Special Situations Funds admitted he’d only been an investor for a few years; before that the trained ob-gyn said he “was doing pap smears.”

Milstein waited a perfect beat then countered, “So, how is this different?”

Later, Milstein asked panelists what they thought of Sanofi-Aventis’s hostile bid for Genzyme. Biotechnology Value Fund portfolio manager Matthew Perry produced a Magic 8-Ball that he said his colleague Oleg Nodleman got as swag from a Berkshire Hathaway retreat. Perry shook it, waited, and read the result: “Sweet deal!” (This reporter found Nodelman later and verified the 8-Ball indeed sported Warren Buffett and Charlie Munger’s cartoon faces.)

Public-side investor that he is, Perry proceeded to berate Genzyme for the temerity -- shocking! -- of putting money into R&D instead of shareholder dividends. Just because it brought one or two products to market, said Perry, doesn’t mean it'll bring more. Quit while you’re ahead and give the extra cash to me, seemed to be his message. It didn’t quite jibe with Perry’s lament a few minutes earlier that biotechs weren’t being allowed to grow and aspire to be the next Biogen Idec, Amgen or Genentech.

No matter: Perry was faithfully playing the role of the large, loose cannon. And why not? Every great comedy needs one: think John Goodman as Walter Sobchak in the Big Lebowski. Perry played it to the hilt, badmouthing a few more companies, or the investors who poured money into them, along the way. (Theravance, Xoma and Maxygen were three we counted.)

Milstein chose other sidekicks perfectly. New Leaf Ventures managing director Srini Akkaraju was the over-the-top gloomer who pretended he’d rather be anywhere else than talking biotech investing on a late Wednesday afternoon (“We should all be asking ourselves what we’re doing here”). Akkaraju was also glum about Big Pharma, whose cycles of merger and job-cutting were doing little to solve unmet medical needs. “They’re dealing with their problems in a MacGyver kind of way." (We love the idea of Pfizer being held together with used bubble gum, a pair of shoelaces, and a bottle of nail polish.)

Then again, said Akkaraju, investing in biotech is “completely irrational.” At one point, he called his own business “ludicrous” three times in one sentence, provoking nervous laughter. Sometimes the best comedy has the audience squirming in their seats.

The panel had serious moments, too. Sofinnova’s Jim Healy made the excellent point that the rise of contingency-based M&A is on a collision course with the time limits of venture funds. What happens, he asked, when the contingencies in deals pay out past the expiration date of the funds who hold the rights? (This will no doubt warm the heart of one of our colleagues whose favorite soapbox is the creation of a CVR exchange.)

And for all his boisterousness, Perry said something that sent chills up the spines of any biotech hoping to tap the public markets soon. “Most of our capital is in cash,” Perry said. “I’d love to find great early stage companies, but they’re all getting acquired.” Perry will pull the trigger when he sees fit. His firm earlier this year bought a 6.6% position in Swiss firm Addex Pharmaceuticals, which had recently been crushed by a Phase IIb failure of its lead mGluR5 modulator for migraine. As we noted in our previous column, BVF followed with a $20 million investment via combined registered direct and convertible debt, the latter of which was necessary to get around strict Swiss laws limiting size of public investment. The gymnastics were all the more impressive seeing how Addex did the deal without a financial advisor, as its CEO Tim Dyer said earlier at the conference.

Which just goes to show, you can laugh all the way to the bank and you don’t even need a banker. Thanks, we’re here all week. Whenever you’re in need of good material, look no further than….

Convergence Pharmaceuticals: The CNS exodus from GlaxoSmithKline has begun. GSK said in February it would end CNS research and sold its facility in fair Verona, Italy, where Aptuit now makes its scene. Two clinical assets and six earlier programs targeting ion channels in chronic pain are now in the hands of Convergence, backed with $35.4 million from a syndicate including Apposite Capital, New Leaf Ventures and SV Life Sciences. At first it seems odd that VCs are willing to fund development of assets whose mechanism is old hat. They also address a large, potentially primary care area like chronic pain and face huge clinical trials and high regulatory safety hurdles. But the Cambridge, UK firm says its assets, unlike most of the sodium- and calcium-channels out there or in development, are state-dependent. That is, they only inhibit neurons in the rapid-firing state that's associated with chronic pain. CEO Clive Dix, who helped steer PowderMed into Pfizer’s arms in 2006 for $300 million, takes over with a dozen ex-GSK employees in tow. GSK currently holds an 18% stake in the tranche of funds that Convergence has received to date, which SV's Bingham says is roughly half the full £22 million. Its stake will dilute as further funds are provided, but the Big Pharma will receive further equity if Convergence hits certain milestones. GSK has a board observer seat but no other strings attached. -- Melanie Senior

Agennix: SAP cofounder Dietmar Hopp strikes again. Through his investment company dievini Hopp BioTech holding, Hopp has ended up with 59% of German biotech Agennix following a €76 million ($104 million) PIPE financing that will allow Agennix to complete a Phase III trial of its lead oral compound, talactoferrin, in non-small cell lung cancer. Having previously held 29% of Agennix, dievini is applying to German financial regulators for an exemption to the rule that it must make an offer for all of the company’s shares if it owns more than 30% of them, but as of Oct. 1 hadn’t heard back from the Bundesanstalt fuer Finanzdienstleistungsaufsicht, also mercifully known as the BaFin. In the financing, 20.5 million new shares were offered at €3.81 per share; 29% were taken up by existing investors, and 71% by new investors in a private placement or by dievini. Agennix also has plans to develop talactoferrin for severe sepsis, and it has a multi-targeted kinase inhibitor in Phase I. Investor Hopp has supported the German biotech sector for a number of years; in recent weeks dievini also participated in a €54 million series C funding round for immatics biotechnologies, which is developing cancer vaccines and is based in Tubingen, Germany. -- John Davis

Tobira Therapeutics: On Sept. 29 the antiviral developer announced a $31.2 million Series B round that was led by Novo AS and included earlier backers Domain Associates, Frazier Healthcare Ventures, Montreux Equity Partners, and Canaan Partners. According to the Form D filing, the company has sold $14.2 million so far. The money will fund a Phase IIb trial of lead candidate TBR652 in CCR5-tropic, treatment-naïve HIV patients, slated to start mid-2011. Tobira launched in 2007 with exclusive global rights to the CCR5/CCR2 antagonist plus a follow-on HIV compound from Takeda Pharmaceutical. New Jersey-based Tobira believes TBR652 has advantages over Viiv Healthcare’s marketed CCR5 antagonist Selzentry (maraviroc) due to its anti-inflammatory properties through CCR2 antagonism, with the potential to be dosed only once daily and administered with other antiretrovirals. Tobira, which previously raised $31mm in Series A financing, was established by Domain partner Eckard Weber who has a reputation for starting up companies around one or two molecules rescued from the shelves of Japanese drug firms. In previous efforts -- NovaCardia and Conforma Therapeutics, for example -- his firms raised capital quickly and sold off the assets through acquisition or spin-off. -- Amanda Micklus

CytomX Therapeutics: Backed by angels in its infancy, antibody developer CytomX has turned to VCs for a tranched $30 million Series B round that will support a northbound move from Santa Barbara, Calif., to the San Francisco Bay Area. Third Rock Ventures provided the lion’s share of the round alongside Roche Venture Fund’s minority stake. Third Rock itself recently established an office in San Francisco, with new CytomX board member Charles Homcy anchoring the firm on the West Coast; Boston-based partner Neil Exter also took a seat. Both have roots at Millennium Pharmaceuticals, as does CytomX CEO Nancy Stagliano. Third Rock invested from its $378 million Fund I, closed in 2007, rather than its new $426 million Fund II. CytomX is developing modified antibodies, trademarked as Probodies, that ideally will affect diseased tissues while sparing healthy ones. They are designed to avoid unwanted reactions or to respond directly to proteases present in diseased tissue. The company intends to use the funds for a pair of oncology-related INDs, and will receive a portion of the funding in a second tranche based on milestones related to staffing, platform research, ongoing product development, and the relocation. -- Paul Bonanos

Photo courtesy of flickr user Sam Pullara.

Financings of the Fortnight Checks Out Big Rounds in the Big Apple

Even in good times it's not easy for a private biotech to take its lead compound to market all by itself. These dreary days, it's rarer than an empty cab in the Midtown rain. That's a New York reference, pal. It's PSA week, whaddya expect?

Despite all the distractions, like the perfect weather and giant slices of pizza everywhere, we couldn't help but notice when this fortnight brought us not one but two venture-backed firms whose investors are doubling down to get their protégés through Phase III.

Bully for them, we say, if they can get through registrational trials without a Big Pharma partner. At that point, Big Pharma partners hungry for near-market pipeline assets won't have a choice but to lavish riches upon them, right? Well....that's what we used to say about getting to a Phase II/proof of concept milestone. Now we're hearing things like this: "How do VCs fund all of these companies to Phase III, which seems to be the stage that Big Pharma is comfortable with?" That's what Quaker BioVentures founding partner Brenda Gavin told START-UP recently.

Let's not make too much fuss about two biotech fundings -- and we'll get to them in a moment -- but it's hard to ignore the larger context: Of the many biotech-focused venture funds running out of gas, not all are likely to re-up. So our first instinct was to wonder who's behind these whopping late-stage rounds that are designed to push a biotech's lead asset through Phase III. Are they the product of VCs rolling the dice one last time on portfolio companies that represent their best chance to get out with a bang?

So far, no. As you'll see below, one recipient of generous funds, Relypsa, tapped returning investors to help push its potassium-binding agent through Phase III. But the round was led by new investor OrbiMed Advisors, a firm flush with newly-raised cash. The second recipient profiled below, the German firm immatics biotechnologies (which we assume can now afford to buy some upper-case letters) turned to existing European investors for about half its new round. But one returning investor -- indeed, the one that remains its largest shareholder -- is dievini Hopp BioTech holding (again with the lower case!), which invests the cash of billionaire Dietmar Hopp, founder of software giant SAP and probably not among the biotech funds running out of gas.

An interesting side note: immatics CEO Paul Higham told our Pink Sheet colleagues that his efforts to raise cash from US investors earlier this year ran into reluctance to commit large sums, especially for a cancer immunotherapy based in Europe focused on renal cell carcinoma. (Those conversations took place before Dendreon's Provenge approval, Higham said.) Another interesting side note: Strategic Transactions tells us the three largest drug-related venture rounds so far this year are all European companies: Archimedes ($100 M), AiCuris ($75 M), and now immatics ($71 M).

Is there anything to the Eurocentric bent of these rounds? It's not as if optimism is brimming across the pond. A survey of VC attitudes released in June revealed just as much gloom in Europe as in the US, with hope for venture expansion pointed more toward emerging markets.
If you're keeping tabs, by the way, another recipient of funds earmarked for a late-stage push is Calistoga Pharmaceuticals, the Seattle firm working on isoform-selective PI3 kinase inhibitors. Its $40 million Series C round in June will fund a registrational program for its unpartnered lead CAL-101 and other clinical work, and the startup recently brought on board Pharmacia and PTC Therapeutics veteran Langdon Miller as executive VP of R&D to oversee the work, but CEO Carol Gallagher told us this week the money won't get them to NDA.

We all need a push every so often to get to our destinations. Which reminds us, the traffic outside our 44th St. hotel is a nightmare, so it's time to shut our laptops, duck into the subway, and get on board another installment of....

Relypsa: Doing its part to get a US biotech on the list of top fundraisers, Relypsa said September 13 investors had committed to a $70 million Series B round to help the firm push its potassium binder RLY-5016 into Phase III. Relypsa president Gerrit Klaerner said the firm can run the trial itself, with plans to reduce recruitment needs by incorporating Phase II data into the trial design. '5016 is a binding polymer that stays in the gastrointestinal tract and absorbs excess potassium, a potentially deadly condition. One application Klaerner would like to address is patients who would otherwise might have to avoid angiotensin-converting enzyme (ACE) inhibitors and angiotensin receptor blockers (ARBs) to lower blood pressure, as these drugs can have the side of effect of releasing potassium into the blood stream. An acute buildup of potassium is called hyperkalemia and can lead to arrythmia or cardiac arrest. OrbiMed Advisors led the round, but it also included investors who backed Relypsa's predecessor, Ilypsa, which Amgen bought in 2007 for $420 million for its lead compound, a phosphate binder for chronic kidney disease patients. To create Relypsa, Amgen spun out the rest of Ilypsa's assets to the same management team. -- A.L.

immatics biotechnologies: Developers of cancer immunotherapies have attracted renewed interest from investors and big pharma since the US approval of Dendreon’s Provenge in April. But German biotech immatics biotechnologies says it had plenty of investor interest from its own countrymen before Dendreon's success, leading to a Series C funding round of $71 million (€54 million). Immatics’ technology is markedly different from Dendreon’s, however, as it's based on administering the same combination of chemically synthesized, tumor-associated peptides to each patient with a particular cancer. The skill is in identifying antigenic peptides that actually induce a strong immune response, said immatics executives. The financing will fund a Phase III clinical trial of immatics’ lead therapeutic vaccine in renal cell carcinoma. Approximately half of immatics new funds came from existing investors including dievini Hopp Biotech holdings and Wellington Partners. New investors were venture capital funds advised by MIG Verwaltungs AG and AT Impf GmbH. The latter is owned by the Strüngmann brothers, who co-founded the German generics company Hexal, before selling it some years ago to the Swiss generics-and-original-research combo, Novartis. -- John Davis

Addex Pharmaceuticals: Addex raised CHF 20 million ($20 million) in a combined registered direct offering and debt transaction with Biotechnology Value Fund. Announced Sept. 15, the deal was structured as 593,567 new registered shares in Addex for CHF 6 million and the issuance of six-month mandatory convertible notes for CHF 14 million. The transaction was priced at $10.18 a share, a 12 percent premium over Addex’s volume weighted average share price during the five trading days prior to Sept. 14. Upon closing, BVF will own 9% of Addex’s outstanding shares, while the convertible notes will become 1,371,069 new shares on March 14, 2011, representing 17% of the firm’s outstanding shares. It comes a week after Addex landed a $900,000 grant from the Michael J. Fox Foundation to help finance a Phase II study of lead compound ADX48621 in Parkinson’s dyskinesia. Addex says the BVF cash infusion will give it runway into 2012 and help it advance several programs, including '621, while leaving it less vulnerable to another stock price decline should one of its programs disappoint. BVF was able to buy into the Swiss company at a bargain price because of last December’s failure of gastroesophageal reflux disorder and migraine candidate ADX11059, which resulted in Addex’s share price tumbling by about 75%. -- Joseph Haas

Anacor Pharmaceuticals: Just as it's pulled in a $15 million milestone from GlaxoSmithKline in connection with a 2007 option deal to develop an antibiotic based on its boron chemistry platform, Anacor has decided to try again for an initial public offering. On Sept. 10, the Palo Alto, Calif. biotech filed its S-1 with $86 million as its placeholder until it determines price range and share volume. In August 2007, Anacor filed to go public with a goal of raising up to $57.7 million then withdrew in December 2008 due to unfavorable market conditions, though it's worth noting it had plenty of time to make its issue before the financial tsunami struck. As part of the 2007 collaboration with GSK, the pharma committed to invest $10 million in a future private placement, which it did in January 2009. Schering-Plough also invested in that private placement as part of a 2007 licensing deal for a topical antifungal, but S-P isn't listed in the S-1 as one of Anacor’s principal stockholders. Anacor says it has raised $88 million in equity capital since its inception in 2002. In addition to advancing its pipeline of five clinical candidates, Anacor presumably will use the proceeds to cash out its equity investors, which include Rho Ventures (25.5%), Venrock Associates (16.1%), Care Capital (12.4%) and Aberdare Ventures (11.5%), along with GSK (14%). Anacor plans to begin a Phase III program for lead program AN2690 in onychomycosis in the fourth quarter of this year. -- J.H.

Photo courtesy flickr user Adrian8_8.