2009's Top Sector for Venture Investment: Biotech

by: The Burrill Report


Although total dollars invested by venture capitalists was down significantly in 2008, marking the lowest level of dollar investment since 1997, the biotechnology sector fared better than most industry areas, according to a recently released MoneyTree report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters. Overall investments amounted to $17.7 billion, a 37 percent decline in terms of dollars and a 30 percent decline in terms of deal volume over 2008, according to the report. Investment in the biotech sector, however, declined only 19 percent in 2009 in both dollars and deals. The report also noted that biotechnology was the single largest investment sector for the year with $3.5 billion going into 406 deals, and the life sciences as a whole (including medical devices) accounting for more than one third of all venture capital dollars invested.
Biotech was also the number one sector for venture dollars in the fourth quarter of 2009, with more than $1 billion in capital invested. Strong venture investment has continued into the new year with several companies announcing major venture capital financings the week after the JPMorgan Healthcare Conference and one company pricing its initial public offering.
Ironwood Pharmaceuticals (NASDAQ:IRWD) may be the first biotech company to complete an IPO in 2010. The Cambridge, Massachusetts-based drug company with several preclinical programs and a late stage compound to treat irritable bowel syndrome set a price range of $14 to 16 a share for 16.7 million class A shares, which will raise $250 million. At the mid-point of its proposed range, the company would have a market value of $1.6 billion. While it still has no commercial products, it has booked $32 million in revenue in the past year through collaborative arrangements and service. The deal is expected to price during the first week of February and the company plans to list on the Nasdaq under the symbol IRWD.
GlobeImmune, another company rumored to be a strong candidate to go public, raised $17.5 million in a Series E preferred stock financing led by new investors Generali Financial Holding and BSI, with participation by existing investors. The Louisville, Colorado-based biotech is developing active immunotherapy products called Tarmogens for the treatment of cancer and infectious diseases and has three products in various stages of clinical development to treat cancer and hepatitis C.
Liquidia Technologies, a privately held North Carolina biotech developing particle-based vaccines and therapeutics, completed a $20 million Series C financing led by Canaan Partners and included Pappas Ventures and Morningside Venture Investments as new investors. Previous investors New Enterprise Associates and Firelake Capital also participated in the financing round. The funds will be used to accelerate Liquidia’s lead vaccine candidate through initial clinical evaluation and expand development of particle-based solutions for siRNA delivery and inhaled therapeutics.
San Diego biotech Elevation Pharmaceuticals closed a $30 million Series A financing from Canaan Partners, TPG Growth, Care Capital, and Mesa Verde Venture Partners. The company is focused on improving the standard of care for patients with respiratory diseases through the development of new aerosol therapies.

The capital will enable development of the company’s first candidate EP-101, a long-acting bronchodilator targeted at patients with chronic obstructive pulmonary disease through mid-stage clinical trials as well as begin development of a pipeline of product candidates targeted at underserved patient subpopulations with respiratory disease. Elevation has partnered with PARI Pharma for development of EP-101 in combination with an investigational eFlow Nebulizer system, a portable high efficiency nebulizer customized for delivery of Elevation drug candidates.
And Southborough, Massachusetts-based IkaSystems, a maker of software for healthcare payers, raised a combined $120 million from private equity fund Essex Woodlands Health Ventures and Providence Equity Partners, according to VentureWire. The company offers an integrated web-based technology platform for automating all the business processes involved in dealing with Medicare and Medicaid.
Life sciences dealmaking was light for the week. UK pharmaceutical company AstraZeneca (NYSE:AZN) and Danish diagnostic company Dako entered into a collaboration agreement to develop companion diagnostic tests for multiple AstraZeneca oncology projects, including biologics and small molecules, in various stages of discovery and development. The companies will work together to develop diagnostic tests to help physicians determine the most appropriate cancer treatment for patients. The companies did not disclose the financial terms of their deal.
French pharma Ipsen formed a strategic partnership with Inspiration Biopharmaceuticals to create a global hemophilia franchise around its late stage compound OBI-1, a recombinant porcine factor VIII product for the treatment of hemophilia A, and Inspiration’s lead compound rFIX, a new version of recombinant Factor IX, also in late stage clinical development for the acute and preventative treatment of bleeding in patients with hemophilia B.
Celtic Pharma, a private equity firm that has an equity interest in both Inspiration and the late stage compound, has exchanged both interests into a new class of preferred shares in Inspiration, constituting a significant equity interest in the new enterprise. Ipsen will provide up to $259 million of funding to Inspiration for the further development and commercialization of OBI-1 and Inspiration's hemophilia products. Ipsen will also acquire a 20 percent ownership stake in Inspiration for $85 million. Inspiration will exclusively sub-license worldwide rights to OBI-1, which is scheduled to begin a phase 3 trial this year, and Ipsen will make payments of up to $174 million to Inspiration upon the achievement of certain clinical and regulatory milestones. Upon certain triggering events, Ipsen would also have a defined path to acquire control of Inspiration.
Maryland biotech GenVec (NASDAQ:GNVC) entered into a research collaboration and license agreement with Novartis (NYSE:NVS) to discover and develop novel treatments for hearing loss and balance disorders using GenVec's adenovector technology. GenVec is licensing the worldwide rights to its preclinical hearing loss and balance disorders program to Novartis for an upfront payment of $5 million, a $2 million equity investment in GenVec by Novartis, and funding for a research program focused on developing additional adenovectors for hearing loss. If certain clinical, regulatory and sales milestones are met, GenVec is eligible to receive up to $213.6 million, including upfront and milestone payments, in addition to royalties on future sales.
Finally, DeCode Genetic’s assets were sold in bankruptcy court to Saga Investments, a consortium backed by Arch Venture Partners and Polaris Venture Partners, both previous investors in DeCode. They turned around and launched a newly financed private company DeCode Genetics Ehf, which will continue to offer its diagnostics and personal genomics tests, and contract services including genotyping, sequencing, and data analysis. Earl Collier, previously an executive vice president at Genzyme, will be the CEO of the newly formed company while its previous CEO, Kari Stefansson, will serve as executive chairman and president of research. The publicly traded DeCode, meanwhile, is changing its name to DGI Resolution and expects to be liquidated, subject to bankruptcy court approval. Any recovery for shareholders is highly unlikely, according to the company.
And Fremont, California-based molecular diagnostics company Vermillion (VRMLQ.PK) emerged from bankruptcy, less than 10 months after filing for Chapter 11 protection. The company said that its common stock has been fully restated. The company raised $43 million in a PIPE at the end of 2009.
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