February: A Slow Month for Life Sciences Dealmaking

by: The Burrill Report

by Marie Daghlian

This week was a setback for many pre-revenue start-up biotech companies. California biotech Anthera Pharmaceuticals, which expected to go public on Tuesday, pulled back, delaying its planned offering due to a weak IPO market where many companies have had to reduce their offering price to get the deal done. Anthera had planned to raise $69 million by offering 4.6 million shares at a price range of $13 to $15. The California biotech company has three compounds in clinical trials and expects no revenue for several years as it gets ready to launch a phase 3 trial of its lead anti-inflammatory drug candidate. Anthera is backed by VantagePoint Venture Partners, Sofinnova Ventures, and hedge-fund firm Caxton Associates.

South San Francisco-based Fluidigm had planned to go public this year but say they expect to postpone it in the face of a weak outlook for IPOs, Bloomberg reported. Fluidigm is a revenue-generating equipment maker. Ironwood Pharmaceuticals (NASDAQ:IRWD), the first life sciences company to IPO this year, priced at $11.25 — 25 percent below its expected range — and was trading about 11 percent above its IPO price at the end of February.
Some biotech companies in the IPO queue were not deterred, however, and two of them — AVEO Pharmaceuticals and Trius Therapeutics set the terms of their offerings. AVEO, which is developing novel cancer therapeutics and planning a late-stage trial for its lead candidate, announced plans to raise $98 million by offering 7 million shares at a price range of $13 to $15. AVEO’s backers include by MPM Capital, Highland Capital Partners, Venrock, and Prospect Venture Partners.
Trius said it plans to sell 6 million shares to investors at a price range of $12 to $14 to raise as much as $84 million. The San Diego-based developer of novel antibiotics scheduled its IPO the week of March 15, according to a calendar from Renaissance Capital. The company is backed by Sofinnova Ventures, InterWest Partners, Versant Ventures, Prism Venture Partners, and Kleiner Perkins Caufield & Byers.
There were two venture financings of note — one for a medical device company and one for a biofuels company. Pulmonx, a Redwood City, California-based interventional pulmonology company, closed a $31.6 million round of equity financing led by new investors HealthCap, based in Stockholm, Sweden, and Kleiner Perkins Caufield & Byers. Existing investors DeNovo Ventures, Latterell Venture Partners, MedVenture Associates, Montreux Equity Partners, and POSCO BioVentures also participated in the financing.
Pulmonx will use this capital to support the international commercial launch of its recently approved emphysema products which have been cleared for sale in Europe and other major international markets.
Canadian biofuels company Enerkem makes cellulosic ethanol from various kinds of waste. The company closed a $50.9 million round of financing from existing investors Rho Ventures, Braemar Energy Ventures, and BDR Capital, as well as new investors Waste Management and Cycle Capital. Waste Management is one of North America’s largest waste and environmental services companies. Waste Management stated that its investment in Enerkem will help it meet its sustainability goals of doubling its renewable energy production and tripling the amount of recyclables processed by 2020.
Enerkem will use a portion of the new funds, along with a $50 million U.S. Department of Energy grant announced in December, to begin construction of a planned waste-to-biofuels plant in Pontotoc, Mississipi, which will serve as the company’s U.S. ethanol industry debut. The new facility will be Enerkem’s second ethanol production plant. The company began operations in January 2009 at its commercial-scale syngas-to-ethanol / methanol plant in Westbury, Quebec.
Although most of the deal buzz this week centered on Thermo Fisher’s (NYSE:TMO) bid to buy Millipore (MIL) for $6 billion [see Fitzhugh story], which it reportedly sweetened by the end of the week, there was one interesting deal of note—the pharmaceutical partnership among Eli Lilly (NYSE:LLY) , Merck (NYSE:MRK), and Pfizer (NYSE:PFE) to form an independent, not-for-profit company, the Asian Cancer Research Group, to accelerate research and ultimately improve treatment for patients affected with the most commonly-diagnosed cancers in Asia.
The new company is another example of a growing trend in pre-competitive collaboration among the big pharmaceutical companies to combine their resources and expertise to rapidly increase knowledge of disease and disease processes. Initially, the venture will focus on lung and gastric cancers, two of the most common forms of cancer in Asia. Over the next two years, Lilly, Merck and Pfizer have committed to creating an extensive pharmacogenomic cancer database. Lilly will be responsible for ultimately providing the data to the research public through an open-source concept managed by Lilly’s Singapore research site. All three pharmas will each provide technical and intellectual expertise.
Cephalon (NASDAQ:CEPH) exercised its option to acquire Ception Therapeutics for at least $250 million following receipt of positive data from a mid-stage clinical study using Ception’s lead compound reslizumab to treat adults with eosinophilic asthma, a severe form with persistent inflammation of the airways. According to their agreement, Cephalon will purchase all of the outstanding capital stock of Ception for $250 million, subject to adjustment for any third party debt held by Ception. Ception shareholders could also receive additional payments related to clinical and regulatory milestones.
After its blow last week when Johnson & Johnson (NYSE:JNJ) handed back its rights to antibiotic ceftobiprole, Swiss biotech Basilea Pharmaceutica (OTC:BPMUF) announced a global partnership with Japanese pharmaceutical powerhouse Astellas (OTCPK:ALPMY) for its antifungal agent isavuconazole in late-stage clinical development for the treatment of life-threatening invasive fungal infections on a worldwide basis, including an option for Japan. Astellas will pay Basilea an upfront payment of $70 million and up to $443 million in additional payments on achievement of pre-specified development and sales milestones. Basilea will also be entitled to double-digit tiered royalties on sales. Astellas has exclusive rights to commercialize isavuconazole but Basilea retained an option to co-promote the product in the United States, Canada, major European countries and the People's Republic of China. The companies will jointly participate in the development of isavuconazole with Astellas taking the lead.
North Carolina biotech Viamet Pharmaceuticals entered into a licensing option agreement with the Novartis (NYSE:NVS) Option Fund. Under terms of their agreement, Viamet will utilize its proprietary technology to discover and develop novel metalloenzyme inhibitors against a specific metalloenzyme of high interest to Novartis. The agreement includes an upfront fee and potential milestones totaling over $200 million as well as product royalties.
Regulus Therapeutics entered into a new collaboration with GlaxoSmithKline (NYSE:GSK) to develop and commercialize microRNA therapeutics targeting microRNA-122 in all fields with hepatitis C viral infection as the lead indication. Under the terms of the new collaboration, Regulus will receive additional upfront and early-stage milestone payments with the potential to earn more than $150 million in miR-122-related combined payments, and tiered royalties up to double digits on worldwide sales of products.
The companies signed their first collaboration agreement in April 2008 to develop microRNA targets in inflammation and gave GSK the option to license product candidates at four different microRNA targets in a deal potentially worth over $600 million to Regulus. This collaboration is ongoing and Regulus plans to identify a clinical development candidate in the second half of 2010 and file an IND application in 2011.

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