Friday, January 29, 2010

FOTF Has More Celtics than a Boston Garden Reunion

Boy that Celtic private equity outfit did a lot of deals over the past few weeks. Kolltan, Inspiration, Cantab, Polytherics ... But of course there’s not one, not two, but three Celtic private equity funds. Yes, OK: FOTF will break it down for you.

Once upon a time (around 2004) Stephen Evans-Freke and John Mayo started a private equity group called Celtic Pharma Management (the fund was Celtic Pharma I Holdings). They planned to raise $1 billion to pursue an asset-focused acquisition model (but did acquire companies as well). The fund aspirations were later downsized to $500 million, then again to $250 million. The final fund was $250 million but split into equity/debt.

Evans-Freke and Mayo later went their separate ways, but not before CPM/CPIH (we’ll call it “Pharma One”) made some asset/company investments and acquisitions: Inspiration, Xenova, Idea, etc. Pharma One is the source of some of the recent deal activity (more below).

Evans-Freke (and others) then formed Celtic Therapeutics Management in 2007. We'll call them Therapeutics; that fund has a similar model to Pharma One in that it wants to focus on acquiring assets and then selling them on. How big is this fund? Their web site says it’s a successor to the previous fund with the same strategy but “on a larger scale,” so probably bigger than $250 million. These guys attracted some ex-Pharma hitters like Pfizer’s Peter Corr (now the other General Partner with Evans-Freke).

Meanwhile Mayo (and others) formed Celtic Pharma II Holdings (we’ll call that one “Pharma Two”). Pharma Two has a different strategy, and that is to acquire full or majority ownership in companies. It’s important to note that Pharma One and Pharma Two have completely different ownership structures. Pharma Two is actually owned by a fund-of-funds outfit called Beehive Capital, which holds funds in different sectors (life sci, art, cleantech, communications). We understand the fund is smaller than Pharma One but hasn’t necessarily stopped fundraising.

To make things complicated: Pharma One has a web site that suggests it might still be investing (it isn’t); Pharma Two and Therapeutics use the same logo/font/style (but are not really related); and Pharma One and Pharma Two have the same web site (but have different management and different ownerships—the latter isn’t particularly unusual as any investor’s subsequent funds may have different LPs). See, not so difficult!

On to the deals: Pharma One got the exit from Inspiration, when Ipsen stepped in with its creative deal. Therapeutics was the investor in Kolltan (see below—Therapeutics was also the recipient of the investment from PPD last fall). Pharma Two was the investor/acquirer of Cantab, announced this week (see below). But here there’s an extra-special wrinkle: Pharma One got the exit from Cantab, in a round-about way.

All of which brings us to …

Cantab Biopharmaceuticals: Now there’s a name we hadn’t heard in a while. That Cantab? No, not the Cambridge, Mass. bar where Little Joe Cook and the Thrillers used to entertain with favorites like “Sexy Lady from the Beauty Shop.” We’re talking about the Cambridge, UK biotech that after a rocky dozen years or so was acquired by Xenova in 2001. In 2005, Celtic (Pharma One version) bought Xenova, mainly to access that company’s nicotine vaccine. Pharma One held the ex-Cantab assets, largely around biologics manufacturing processes and IP, but apparently didn’t do much with them (they only wanted the pipeline) and it evolved into a small service business. But Celtic Pharma Two saw some potential, and instead of shutting the operation down, bought Cantab from Pharma One. Earlier this week, Pharma Two announced it was effectively relaunching Cantab as a company, and would fund it with roughly £5 million over the next three years to pursue a strategy it calls “biosuperiors” (we might call them bio-betters or even FOBs, but we admit their term has a certain zing). The next day, Pharma Two said it did a deal with a biotech called PolyTherics to access the latter’s site-specific pegylation technology, which Celtic partner Stephen Parker tells us will be applied to create a long-acting Factor VII.--CM

Kolltan Pharmaceuticals: In a transaction reuniting principals previously involved in Sugen and the development of oncology drug Sutent, Kolltan Pharmaceuticals closed a $10 million Series B on Jan. 20. Celtic *Therapeutics* led the round and Tichenor Ventures also pitched in (See our coverage from “The Pink Sheet” DAILY). The deal is structured as $8.5 million in Series B convertible preferred stock plus a $1.5 million product development option that can be converted into additional Series B stock. Notably the financing doesn’t involve any of Kolltan’s Series A backers. It also appears to represent a shift in strategy away from Celtic Therapeutics asset funding mandate. But Stephen Evans-Freke, managing general partner at Celtic, former biopharma banker and former Sugen founder says the deal isn’t much of a strategic departure. “If you look at our track record, going back to Celtic Pharma, we actually often do a bit of equity as part of or to pave the way for a product development transaction,” he told us. “This is a little earlier-stage than most of them, but that’s because we’re acutely familiar with the technology platform, the science area and the relatively low risks associated with what Kolltan is doing.” And given that familiarity and the past relationships, the transaction begins to look a little less like a departure for Kolltan, a biotech devoted to inhibiting receptor tyrosine kinases (RTK). The company said going into its Series A (backed by private entities like Purdue Pharma and the Pritzker/Vlock families and honored on this year’s Start-Up “A-List”) that it wanted to be in business with family institutions or institutions that are like family.—Joseph Haas

Amag Pharmaceuticals: Although the offering had not closed as Financings of the Fortnight “went to press,” Amag is expected to raise $174 million or more through a follow-on public offering announced Jan. 19. Initially planning to sell 3 million shares, the Lexington, Mass.-based biotech increased its offering to 3.6 million shares at a price of $48.25 per share. The company, which announced better than expected fourth-quarter 2009 sales of its chronic kidney disease drug Feraheme at the J.P. Morgan Healthcare Conference earlier this month, also is granting the underwriters an over-allotment option of 540,000 shares. According to an 8-K filed Jan. 20, underwriters will be able to purchase shares at a discounted price of $46.08 per share. Presumably, Amag will use the funds to further its marketing efforts for its intravenous iron drug in the CKD non-dialysis patient space. The company also is targeting small and mid-sized dialysis centers but does not expect to win a competition against older, lower-priced rivals like Forest’s Ferllecit and Luitpold’s Venofer among the larger providers, like Fresenius and DaVita, because forthcoming CMS bundling reimbursement rules for dialysis will encourage providers to use the cheapest therapeutic option.--JH

Elevation Pharmaceuticals: In 2009, only three companies working in the pulmonary drug delivery space raised venture funding--a total of $25 million out of the $768 million pulled in by all types of drug delivery players, according to Elsevier’s Strategic Transactions database. But 2010 has gotten off to a promising start with Elevation Pharmaceuticals’ $30 million tranched Series A financing, completed on January 21. Canaan Partners, TPG Growth, Care Capital (each of which contributes a new board member), and Mesa Verde Venture Partners were part of the investor syndicate. Elevation says the money will support lead candidate EP101--a long-acting, reformulated bronchodilator delivered via Pari Pharma’s eFlow nebulizer--through mid-stage trials. The drug delivery start-up was founded in 2008 by three individuals who hail from biotech companies—all within the respiratory realm—that have more or less achieved a validating deal or some kind of exit. Chairman Cam Garner, a veteran in both the pharma and device world (and not a stranger to reformulations of existing drugs via other recently established companies like Meritage Pharma and Evoke Pharma), headed up Dura Pharmaceuticals, which was sold to Elan in 2000 for $1.7 billion; president and CEO Bill Gerhart held the same positions at Mpex Pharmaceuticals (which is developing inhaled antibiotics and has a Big Pharma partner in GSK); and SVP/CMO Ahmet Tutuncu, MD, PhD, came from Verus (also co-founded by Garner), a company that divested its assets and now only seems to exist via its relationship with AstraZeneca, which paid $30 million up front and has promised $280 million in earn-outs related to Verus’ pediatric asthma business (though there is the small matter of a lawsuit there).—Amanda Micklus

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