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By Marie Daghlian

Otsuka Holdings, Japan’s number two drugmaker by revenue, has confirmed that it is planning to sell up to 94.5 million shares at about $29 (2,400 yen) each to raise $2.8 billion to fund its global expansion and drug development efforts. The diversified company plans to start trading on the Tokyo Stock Exchange on December 15 after setting the offer price on December 6. If completed, it will be the world’s biggest biopharmaceutical IPO to date, topping Merck KGaA’s (OTCPK:MKGAY) 1995 $1.7 billion offering, according to Thomson Reuters data.

Otsuka Pharmaceuticals is the largest of 145 subsidiaries and affiliates that make up Otsuka Holdings, an umbrella company formed two years ago. The pharma sells everything from prescription drugs to consumer products, ranking fifth among Japanese pharmaceuticals in terms of prescription drug sales. The estimated offer price would value Otsuka at more than 15 billion, ranking it on a par with Eisai, behind Takeda, Astellas, and Daiichi Sankyo.

Otsuka’s most recognizable drug, the schizophrenia drug Abilify, generated more than $4 billion in revenues in 2009. Three quarters of that revenue is generated in the United States where it is partnered with Bristol-Myers Squibb (NYSE:BMY) and has patent protection until early 2015. That patent is currently being challenged by Teva (NYSE:TEVA) and Apotex, with a decision expected shortly, according to analysts who expect Otsuka to beat the challenge.

Still, Otsuka’s R&D expenses grew 12 percent in 2009, spent mostly on drug development, and the company has lagged behind its peers in terms of seeking new products and revenue outside the company. Most of the money raised in the IPO will be used to beef up its R&D and used to expand all parts of its business globally.

Despite the opening of the IPO window, U.S. capital markets have had a chilly reception for most life sciences companies trying to go public. While they embraced DNA sequencing firm Pacific Biosciences (NASDAQ:PACB) when it went public two weeks ago, its competitor Complete Genomics (NASDAQ:GNOM) had to scale back its deal price more than 30 percent to go public. The company pared its price to $9 a share, down from its hoped for range of $12 to $14, to sell 6 million shares and raise $54 million. Unlike many of its peers whose business model is to sell their next-generation sequencers, Complete Genomics’ model involves offering sequencing services. All are racing to be the first to offer the $1,000 genome. [See story]

Venture-backed Ikaria, a New Jersey biotech with treatment for respiratory failure in newborns, also planned its debut this week. But after cutting the price of its offering by 38 percent and still not getting a good response, it decided to withdraw it. Unlike many life sciences companies in the IPO queue, Ikaria is profitable. However, the company’s profits slipped during the first three quarters of 2010 to $7 million, down from $15 million a year earlier.

Molecular diagnostics firm Rules-Based Medicine also pulled its initial public offering citing adverse market conditions, according to a recent regulatory filing. Cutanea Life Sciences, another biotech firm set to IPO this week, decided to postpone its IPO until market conditions improve.

Venture capital investing picked up steam after several quiet weeks. Personal genetics firm 23andMe raised $22 million to close a series C round from new investor Johnson & Johnson Development Corporation, and current investors that include New Enterprise Associates and Google Ventures.

San Diego startup Aires Pharmaceuticals completed a $20 million series B equity round led by MPM Capital, which includes existing investor ProQuest Investments. The company also granted Novartis an exclusive option to acquire the company following the successful completion of a phase 2 clinical study of Aironite, an inhaled nitric oxide prodrug, to treat pulmonary arterial hypertension. The agreement also includes a right to an exclusive worldwide license under pre-agreed conditions. The deal with Novartis could be worth as much as $250 million if all options are fully exercised and milestones successfully reached.

Syntaxin, a U.K. biotech developing novel drugs to control cell secretion, has raised $29.1 million in a series C financing from new investors Lundbeckfond Ventures, Ipsen and Seventure, which joined existing investors Abingworth, SROne, LSP, Johnson & Johnson Development Corporation and Quest. The money will be used to continue development of its technology platform, as well as progress its lead internal acromegaly program into clinical proof of concept studies.

Atlanta-based Arbor Pharmaceuticals completed a $34.8 million financing that included a $17.5 million investment in the form of series B preferred stock led by Signet Healthcare Partners, and the remainder in the form of a term loan provided by several of the investing parties. Participants in the financing included JW Asset Management, and Arch Healthcare Fund. Arbor is a specialty pharmaceutical primarily focused on the pediatric market that currently markets three products for various hearing conditions.

Finally, Eli Lilly (NYSE:LLY) will acquire Avid Radiopharmaceuticals, a Philadelphia-based diagnostics company that develops molecular imaging compounds, for up to $800 million. The acquisition of Avid also provides Lilly with a diagnostics development platform covering several disease areas, including Parkinson's disease and diabetes.

Lilly will pay $300 million upfront for Avid for an upfront payment of $300 million, and up to $500 million in additional payments contingent upon potential future regulatory and commercial milestones for florbetapir, a molecular imaging agent under investigation for detecting the presence of amyloid plaque in the brain. Avid recently submitted a marketing application for florbetapir to the U.S. food and Drug Administration.

DEALS FOR THE WEEK ENDING NOVEMBER, 12, 2010

Company Location Amount Raised (USD M) Principal Focus
Arbor Pharmaceuticals Atlanta, GA 34.8 Specialty pharma
23andMe Mountain View, CA 22.0 Genetic tests
Coronado Biosciences Seattle, WA 21.6 Cancer therapeutics
Aires Pharmaceuticals San Diego, CA 20.0 Pulmonary therapeutics
nContact Surgical Morrisville, NC 12.0 Medical devices
Ceregene San Diego, CA 11.5 Neurology therapeutics
Biodesix Broomfield, CO 7.1 Cancer diagnostics
Pathogenetix Woburn, MA 2.1 Diagnostics
Daktari Diagnostics Cambridge, MA 1.8 HIV diagnostics
Syntaxin Oxford, United Kingdom 29.1 Therapeutics
Delenex Therapeutics Zurich-Schlieren, Switzerland 14.0 Therapeutics
Hutchison MediPharma China 12.5 Cancer therapeutics
RedHill Biopharma Tel Aviv, Israel 10.0 Reformulated drugs
MTM Laboratories Heidelberg, Germany 9.7 Diagnostics
Biocrea Radebeul, Germany 6.6 CNS therapeutics
Sirigen United Kingdom 6.1 Imaging technology
Functional Neuromodulation Toronto, Ontario, Canada 0.6 Deep brain stimulation
Total Raised US 132.9
Total Raised Non-US 88.6
Grants and Contracts
Company Funding/Contracting Agency Amount Raised (USD M) Principal Focus
Grants
SureGene Kentucky SBIR Phase II Matching grant 0.4 Mental health treatments
Acadia Pharmaceuticals Michael J. Fox Foundation 0.3 Parkinson's therapeutics
Oligomerix National Institute on Aging SBIR 1.6 Alzheimer's disease
Contracts
Insight Genetics National Cancer Institute SBIR 0.2 Lung cancer diagnostic
Snowdon DoD Transformational Medical Technologies 8.2 Anti-biowarfare pathogens
Total Grants 10.7
PUBLIC FINANCINGS
Company Ticker Amount
Raised (USD M)
Financing Type
Complete Genomics GNOM 54.0 IPO
Neoprobe OTC:NEOP 3.2 PIPE-RDO
Adamis OTC:ADMP 10.0 PIPE
EpiCept EPCT 2.0 PIPE-RDO
Regenicin OTC:RGIN 0.5 PIPE
GeneNews (Canada) TSX:GEN 2.1 PIPE
Lorus Therapeutics (Canada) TSX:LOR 4.6 PIPE
Cadence Pharmaceuticals CADX 86.2 Follow on
Micromet MITI 72.3 Follow on
Exact Sciences EXAS 69.0 Follow on
Cerus CERS 21.0 Follow on
Stereotaxis STXS 14.6 Follow on
Mylan MYL 800.0 Debt
Biovest International OTC:BVTI 7.0 Debt
BiondVax Pharmaceuticals (Israel) TASE:BNDX 1.3 SEDA
TOTAL PUBLIC FINANCINGS-US 1,139.8
NON-US 8.0
M&A
Acquirer Target Deal Value
(USD M)
Focus
Eli Lilly Avid Radiopharmaceuticals 800.0 Tools/Technology
Mediwound (Israel) Polyheal (Israel) 200.0 Wound healing
Teva Pharmaceuticals (Israel) Mediwound (Israel) 163.0 Wound healing
Undisclosed OncoVista Innovative Therapies 83.0 Cancer
Vivus Deerfield Management 27.0 Genitourinary
Wilex (Germany) Heiderlberg Pharma (Germany) 26.8 Antibodies
Codexis Maxygen 20.0 Molecular Breeding
LFB Biotechnologies (France) GTC Biotherapeutics 18.3 Rare diseases
CardioNet Biotel 11.0 Medical devices
Vycor Medical NovaVision 0.9 Medical devices
Alliances
Company/Licensee Company/Licenser Deal Value
(USD M)
Focus
Novartis (Switzerland) Aires Pharmaceuticals 250.0 Cardiopulmonary treatment license option
Clovis Oncology Clavis Pharma (Norway) 205.0 Cancer therapeutic license
Teva Pharmaceuticals (Israel) Mediwound (Israel) 167.0 Wound care license
Roquette (France) Solazyme N/A Microalgae ingredients joint venture
UCB (Belgium) Plasticell (United Kingdom) N/A Stem cell research collaboration
Roche (Switzerland) Aposense (Israel) N/A Cancer diagnostics license
Ambrx Fabrus N/A Antibody discovery license
Pfizer Biovista N/A Repurposed drugs collaboration
Bunge SG Biofuels N/A Jatropha biofuels partnership
Firmenich (Switzerland) Amyris N/A Fragrance ingredient collaboration
Roche (Switzerland) CapitalBio (China) N/A Molecular diagnostics collaboration
Private/Public Partnerships
Company Institution Deal Value (USD M) Focus
Takeda Pharmaceutical (Japan) Sage Bionetworks 3.6 CNS collaboration
Agilent Harvard University N/A Biological engineering collaboration
Bayer Schering Pharma (Germany) Shanghai Institute of Pharmaceutical Industry's Pharmaceutical Engineering Research Center (China) N/A Drug delivery partnership
DiaMedica (Canada) The Sanford Project N/A Type 1 diabetes therapy collaboration
Source: Japan’s Otsuka Plans Largest Biotech IPO in the World