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Friday, February 21, 2014

Financings of the Fortnight And the Neverending Venture Round

Somewhere out there, perhaps, is the end of NovImmune's Series B round.
More than a year ago, our friends at START-UP examined the fates of biotechs that had reeled in huge private financing rounds. Giant biotech venture rounds are back with a buzz in 2014 thanks to Juno Therapeutics, which launched in December with a $120 million Series A commitment. Last month it added on with cash from Venrock and Bezos Expeditions, aka Amazon.com chief Jeff Bezos' private money stash.

But in raw coinage, Juno's A round doesn't hold a candle to what NovImmune has raised in its Series B. Novi-who? It's a Swiss antibody developer founded 16 years ago that in 2006 first notched CHF 58 million ($46 million at the time) for its Series B. Eight years and three extensions later, the Series B now stands at CHF 200.5 million, most recently boosted by a CHF 60 million ($67 million) tranche announced February 18 and led by London life science specialists Rosetta Capital, whose partner Jonathan Hepple is joining the NovImmune board.

That makes NovImmune's Series B the largest biopharma venture round with at least one extension raised in the past decade, according to our Strategic Transactions database. FOTF reached CEO Jack Barbut via email, and he said NovImmune has kept the round open this long to create fairness for all shareholders. "This makes the share structure very easy," Barbut wrote. "For employees, common stock options (sweat equity), and for investors, preferred shares, all [have] the same liquidation rights and thus comply with Swiss statutes, which are very stringent on equal treatment for ALL shareholders." 

CEO since 2000, Barbut said when the Series B started, he didn't expect it to carry on this long. He doesn't know if this recent tranche will be the last.

We went back a decade into our Strategic Transactions database to see what kind of precedent there might be for NovImmune. We found 59 private companies whose extended rounds reached at least $50 million. Here are the handful, other than NovImmune, that topped $100 million:


Four of those companies have since gone public and one (Sangart) has gone under, shut down by its main investor, as first reported by Fierce Biotech. Meanwhile, Symphogen is in no hurry to go public, as its CEO told Start-Up in this feature last year.

NovImmune is not only top of the charts for money raised, but it also has no peer in the length of time of the round. None of the companies with blockbuster rounds took more than two years to secure their extensions. A few smaller rounds took longer. For example, Theraclone Sciences began raising its Series B in 2007 as Spaltudaq (we applaud the name change) and brought the total to $50 million about a year ago. Endocyte took five years to raise a nearly $80 million Series C before going public in 2011. And Alvine Pharmaceuticals spent more than four years building its Series A and is now waiting to find out if AbbVie will exercise an option to buy its lead Phase II program in celiac disease or the entire company outright. (If AbbVie does, it would be one of the very few corporate investors to buy out one of its portfolio companies.)

NovImmune's Barbut said his investors expect "some sort of liquidity event" too, of course, but in the nearer term he said the company is focused on finding a partner for NI-0101, its anti-TLR4 monoclonal antibody that has entered Phase I. It would also like to advance its NI-0501 program, an anti-interferon gamma antibody, and commercialize it solo. NI-0501 has orphan status in the US and EU in hemophagocytic lymphohistiocytosis, a deadly pediatric autoimmune disease, and has completed a Phase I study.

NovImmune doesn't seem to have cushioned its cash with a lot of non-dilutive funding. Its biggest deal to date is the outlicensing of an anti-IL17 antibody to Genentech in 2010, no financials disclosed. The candidate completed Phase I in 2013.

So we've got an orphan disease-focused biologics company with multiple, wholly owned clinical assets, a partnership with one top-tier biopharma, and the kind of cash runway that seems to attract more investment these days from the public markets. The IPO market has welcomed every stripe of biotech, from still-preclinical platforms to heavily capitalized specialty plays, in the past year, so NovImmune seems like an inevitable "ask." If its cards are well played -- keep in mind several banks are in NovImmune's investor pool -- an IPO could provide a nice bump for those who didn't have to ride the traditional valuation escalator (or be forced off of it) through later rounds.

We offer a bump, too -- a fist bump to Maureen Riordan, who did much of the work behind the scenes for this column. Without her this week, there would be no...


Melinta Therapeutics: Known as Rib-X Pharmaceuticals until last fall, antibiotic developer Melinta hasraised a $70 million Series 3 round led by existing investor Vatera Healthcare Partners. New investors included Falcon Flight, an affiliate of the Santo Domingo Group, and undisclosed backers. As Rib-X, the firm raised more traditionally named A, B and C rounds last decade. But a failed IPO try in 2011, and a set of new investors led by Vatera, have led to a housecleaning. In November 2012, the company disclosed a $67.5 million "Series 2" funding led by Vatera. Last fall, it unveiled its new name and new executive team, led by CEO Mary Szela. The Series 3 cash will help fund its Phase III study of antibiotic delafloxacin, a differentiated flouroquinolone in testing as an oral, single-dose therapy for uncomplicated gonorrhea. Melinta is aiming for an NDA filing in late 2014. In addition, the money will finance a two-trial Phase III program of delafloxacin in acute bacterial skin and skin structure infections, as well as lead-candidate selection from the firm’s RX-04 discovery program seeking to address serious and life-threatening Gram-negative infections via targeting of novel binding site on the bacterial ribosome. – Joseph Haas

Argos Therapeutics: Immunotherapy is hot, right? Well, yes and no. While the likes of Juno can command above and beyond $100 million in a single financing, cancer and infectious disease immunotherapy play Argos raised a mere $45 million in its February 7 IPO, its second try at launching onto the public markets. And that’s only after it had to dramatically cut the price to $8 a share from a $14 mid-point of its proposed range. It also had to increase the dilution, selling 5.6 million shares rather than the 4.3 million it had proposed. Existing investors bought 1.4 million shares of the IPO, or roughly a fourth of the deal. No word yet if the underwriters will exercise the overallotment, but the share price has largely treaded water since the offering. Argos investors can take some solace knowing the bargain-priced IPOs of 2013 ended up as top performers of the year. What's discounted now might have legs later, as Argos is one of many biotechs with notable clinical milestones in reach this year, as START-UP explored in January. Argos might see a boost later this year when it reports Phase IIb data for AGS-004 for treatment interruption in HIV/AIDS patients, although data due in 2016 -- Phase III survival data in renal cell carcinoma -- is more likely to be game-changing for Argos. The firm also expects this year to start two Phase II HIV eradication studies, one in adults and another in pediatric patients. Argos aims in these trials are ambitious – to eliminate the HIV virus or to reduce it to negligible levels. – Stacy Lawrence

Arrowhead Research: RNAi therapeutic developer Arrowhead said February 19 it grossed $104 million in a follow-on offering, selling 5.5 million shares at $18.95 a piece. Of the several public biotechs that sold $100 million-plus in stock this fortnight -- Ironwood Pharmaceuticals, Macrogenics, PTC Therapeutics and Puma Biotechnology were the others -- Arrowhead's inclusion would have been unthinkable this time last year, when it was bumping along in microcap land and had just a few million dollars in cash remaining. Arrowhead isn't strictly an RNAi developer; it has a peptide-drug conjugate in the clinic, too. But there's no doubt RNA interference, riding a revival of sorts highlighted by Alnylam Pharmaceuticals' giant deal last monthwith Sanofi/Genzyme, is driving the Arrowhead agenda. It's also worth noting that RA Capital, the hedge fund that helped propel the big Dicerna IPO, is also a key investor at Arrowhead as of last spring, having led a $35 million offering at $1.83 a share that recapped the company. With its stock now worth more than 10 times as much (it closed February 20 at $21.90) Arrowhead is pushing hard to get its lead RNAi compound, against Hepatitis B, into Phase II.  While RA, now a 9.9% owner, led a turnover in the company's cap table, it wasn't a bloodbath. Arrowhead's longtime CEO Chris Anzalone is still at the helm, and the board remains the same. – Alex Lash

Pronutria: Pronutria revealed February 13 a $12.5 million Series B round, with unnamed private investors participating alongside Flagship Ventures. CEO Robert Connelly told our colleagues at "The Pink Sheet" that Flagship provided less than half of the new round, while “business entities, individuals and family offices” supplied the remainder. Flagship created Pronutria within its VentureLabs program in 2011, quietly funding it with a $10.8 million Series A round over a two-year period before lifting the lid last October. Much of the Series B, which Connelly said is probably Pronutria's final venture round, will be used for clinical trials on two muscle-protecting candidates that preserve strength in frail, elderly people with sarcopenia, the loss of muscle mass that can occur during periods of hospitalization. The candidates, PN-107 and PN-365, are formulations of the amino acid leucine delivered as small “shot”-sized beverages similar to bottled energy products found on supermarket shelves. The specific pharmacokinetics and efficacy of each candidate, and the effects of their specific balances of amino acids, will be compared with each other in the trials. The company is still deciding on a regulatory pathway for each one, including possibly developing them as nutritional supplements, medical foods or pharmaceutical products, each of which has its own requirements. Initial clinical trials, now underway, are scheduled for completion by mid-year; Connelly said the company also is mulling parallel development of drug and non-drug formulations of similar product candidates. Further down the line, Pronutria is aiming for products addressing the metabolic, gastrointestinal, immune and renal disease areas, as well as beneficial products for patients with rare diseases and those going through chemotherapy. Whatever drug products Pronutria develops will reside in a separate business unit, which will help ease eventual sales or spin-outs. – Paul Bonanos

Best of the Rest (Highlights of Other Activity This Fortnight): Endocrine disease-focused Versartis raised $55M in Series E financing, and concurrently filed for an IPO…to support the launch of opioid dependence drug Bunavail in the second half of this year, BioDelivery Sciences grossed $60M in a registered direct offering…PTC Therapeutics publicly sold $126M in a FOPO to complete Phase III development and gain regulatory approval of ataluren in Duchenne muscular dystrophy and cystic fibrosis caused by nonsense mutations, in the wake of last month’s EMA/CHMP negative opinion on that candidate’s MAA…Concert Pharma priced its IPO at $14, the top end of its range, to net $78 million...three Israeli biotechs – Galmed, Bio Blast, and MediWound – are all hedging their bets and trying to float on Nasdaq…and PDL BioPharma, which manages patents and royalty assets, completed a $261M convertible notes offering. – Amanda Micklus

Photo courtesy of Mike Mantin  on flickr, via a Creative Commons license. 

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