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By Marie Daghlian

Though the pharmaceutical giant Merck (NYSE:MRK) raised $4.25 billion in a four-part bond issue to help finance its impending acquisition of Schering Plough (SGP), last week was fairly quiet for raising capital in the life sciences. Medical device companies continued to attract venture capital, with four companies closing mid- to late-stage rounds of funding. The one bit of excitement came from a potential billion-dollar alliance between GlaxosmithKline (NYSE:GSK) and Chroma Therapeutics.

GSK said it entered the deal with Oxford, U.K.-based Chroma to develop novel macrophage-targeted drugs using Chroma's proprietary esterase-sensitive motif technology. The technology adds amino acid esters to compounds, with the aim of targeting the compounds to specific cells in the inflammatory disease process. Chroma will undertake four discovery and development programs to identify small molecule therapeutics, including its macrophage-targeted HDAC inhibitor program for inflammatory disorders such as rheumatoid arthritis.

Although specific financing terms where not disclosed, the alliance could be worth up to $1 billion for Chroma. Separately, GSK participated in a $24.4-million Series D equity financing in the drug discovery and development company focused in the fields of oncology and inflammatory disorders.

Waltham, Massachusetts startup I-Therapeutix closed a $15-million Series C round led by Polaris Venture Partners, which also included investments from previous backers SV Life Sciences and Versant Ventures. The company has already received European market clearance for its hydrogel bandage to seal surgical wounds on the eye. It will use the funding to develop its hydrogel technology for drug delivery to the eye and move its first wound-sealing product I-zip toward commercialization in Europe and in the United States early next year, pending FDA approval. I-Therapeutix had raised $7.2 million in two previous financing rounds.

Spiracur also develops a medical device to help heal wounds that is based on technology from Stanford University’s Biodesign program. The Redwood City, California-based company has raised $20.3 million in Series B funding. Kleiner Perkins Caufield & Byers and New Leaf Venture Partners co-led the round, and were joined by return backer De Novo Ventures. Spiracur had raised $4 million in a previous round.

CoAxia, of Maple Grove, Minnesota, complete a $21.5-million Series D financing led by Sofinnova Partners, with participation from all previous major investors, including Affinity Capital Management, Baird Venture Partners, Canaan Ventures Partners, Johnson and Johnson Development Corporation, and Prism Ventureworks. CoAxia will use the financing to complete its SENTIS pivotal trial of its NeuroFlo catheter for acute ischemic stroke and submit results to the FDA. The company believes that its NeuroFlo technology has the potential to become integrated into the standard of care for stroke treatment, a market valued in excess of $1 billion. CoAxia has already received FDA approval for NeuroFlo via Humanitarian Device Exemption for the treatment of cerebral vasospasm.

SynCardia Systems, the Tuscon, Arizona manufacturer of an artificial heart, raised $10.3 million in its Series D round of funding led by Highway 12 Ventures. Proceeds from the financing will support the launch of two new drivers for powering the artificial heart, which it hopes will eventually lead to its use as a permanent replacement heart. Currently, SynCardia’s “Total Artificial Heart” is approved as a bridge to human heart transplant for patients dying from end-stage biventricular failure. There have been more than 800 implants of the Total Artificial Heart.

For one privately held vaccine maker, the federal government may have stepped in as a potential savior. Creditors of the company filed suit in federal court on June 22 to force Protein Sciences into bankruptcy liquidation. One day later, the Department of Health and Human Services awarded a contract to Protein Sciences of Meriden, Connecticut worth $35 million immediately and could be extended up to five years at a total cost of approximately $147 million. HHS awarded the contract to Protein Sciences to develop new and faster ways of making an influenza vaccine.

Most of the $11.7-million debt claimed in the petition is owed to Emergent BioSolutions, maker of an anthrax vaccine, which had advanced $10 million to the company pending an agreement to acquire its assets for $28 million last year. That deal never went through and Emergent sued Protein Sciences and its top executives for fraud and breach of agreements. Emergent BioSolutions gave up trying to acquire Protein Sciences in January and the companies agreed to terms for the loan repayment at the end of April. In the meantime, Protein Sciences has FDA fast track status for its vaccine, FluBlok, which is made just from a viral protein rather than the whole virus and is manufactured in genetically modified insect cells. One June 15, Protein Sciences announced that it had begun to manufacture 100,000 doses of the vaccine.

In the public markets, life science public financings are slowly re-emerging. Last week’s public offering by ImmunoGen was oversubscribed by 750,000 shares, netting the company and extra $5 million. This week, Halozyme Therapeutics took a similar route to ImmunoGen, pricing a public offering at an 11.6 percent discount relative to the average closing share price during the five trading days preceding the public offering. The company raised $40 million through the sale of more than 6 million new shares of its common stock. Halozyme is focused on developing and commercializing hyaluronidases targeting the extracellular matrix for endocrinology, oncology, and dermatology. The pricing ended up being more than a 13 percent discount to its closing price on the day before the offering. Shares of the San Diego, California company tumbled 14 percent after the offering, closing at $6.48.

Creativity in structuring seems to close the deal. For regenerative medicine company Cytori Therapeutics, it meant an equity agreement with Seaside 88, LP whereby Seaside committed to purchase up to 7.15 million Cytori common shares, in a series of closings every two weeks in the amount of 275,000 shares each for a total of up to 26 purchases. Cytori has the right to discontinue the agreement between the 13th and 14th closings, based on the Company’s assessment of its financing needs at that time. The financing will provide Cytori with its cash operating requirements through 2010, freeing management to focus on growing the business.

Merger and acquisition activity was light. The only deal of note was Laboratory Corporation of America Holdings (LabCorp) announcement of an agreement to acquire companion diagnostics company Monogram Biosciences in a cash tender offer for $4.55 per share for an implied total equity value of about $106.7 million, or a total enterprise value of approximately $155 million at March 31, 2009, including net indebtedness. The deal is expected to close in the third quarter of 2009.

The acquisition is aimed at strengthening LabCorp’s presence in personalized medicine. Monogram has a strong portfolio of molecular diagnostics in the HIV space. The company’s proprietary, clinically validated Trofile assay identifies patients who are eligible for the CCR5 class of HIV drugs and is the widely adopted companion diagnostic for Pfizer’s HIV drug Selzentry. Monogram also has a proprietary technology, VeraTag, which has been used to develop a sensitive means to assess HER-2 status in tissue samples and has significant potential as a tool to help guide therapy decisions in breast cancer patients. Based on the VeraTag platform, Monogram has multiple tests in development for measuring a variety of protein markers that may have clinical utility to help guide treatment decisions across a broad range of cancer drugs. The potential oncology pipeline associated with this technology is a natural extension of LabCorp’s existing oncology offerings for both clinical trials and commercial clients.

NeurogesX entered into an exclusive distribution, marketing, and license agreement with Astellas Pharma Europe, a subsidiary of Tokyo based Astellas Pharma, for the commercialization of Qutenza in the Europe, the Middle East, and Africa. Qutenza was approved by the European Commission in May as a cutaneous patch for the treatment of peripheral neuropathic pain in non-diabetic adults. The San Mateo, California-based company will receive $42 million for the commercialization rights and $5 million for a license option of NGX-1998, the next generation liquid formulation of Qutenza. NeurogesX is also eligible for additional sales-based milestone payments and additional option payments related to the liquid formulation totaling about $97 million and royalties.

Finally, pharmaceutical companies are staking their claims in generics. Sanofi-Aventis announced that it is cutting its research and development efforts while pursuing a strategy of a stronger emphasis on generics, marked by its recent acquisitions of Czech generic drug maker Zentiva and two generic drug companies in Latin America. Pfizer (NYSE:PFE) has recently signed deals with Indian generics players Aurobindo Pharma and Claris Lifesciences and just upped the offer to increase its stake in its Indian generics division Pfizer Ltd. GlaxoSmithKline recently signed a pact with Dr. Reddy’s Laboratories (NYSE:RDY). And Novartis (NYSE:NVS) paid $76 million to increase its stake in Novartis India to 76.4 percent from the previous level of 50.9 percent.

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Source: Pharma M&A: Big Bonds and Small Deals