Recent Financings of Private Companies (12/1999)

Each month, Start-Up presents a comprehensive review of young, private life science companies that have received venture funding during the month, including companies in the pharmaceutical, medical device, diagnostic and research instrumentation & reagent sectors.

Antigenics LLC

(New York, NY)

Just before it filed for its initial public offering, Antigenics, a biotech company developing immunotherapeutic vaccines, pulled in $39.2mm from private investors. (Nov.)

Upon completion of the IPO, the company's status changes from a limited liability company to a corporation, effecting a name change to Antigenics Inc.Oncophage, its lead product, is now in six different Phase II or Phase I/II trials for four types of cancers—the company expects the therapeutic to enter Phase III by the middle of next year. Additionally, Antigenics' drug development pipeline consists of treatments for infectious and autoimmune diseases including genital herpes, diabetes, and multiple sclerosis. Its technology involves the use of heat shock proteins, present in all bodily cells, which appear to bring on a strong immune response that potentially systemically targets and kills cancer or other diseased cells.

Cytos Biotechnology AG

(Zurich-Schlieren, Switzerland)

Swiss start-up Cytos Biotechnology AG(technology for engineering proteins, genes, and vaccines to treat infectious diseases) has raised $7.5mm ($CHF11mm) in a private placement subscribed to by Novartis Venture Fund, Global Life Sciences, and Credit Suisse Innoventure. (Oct.)

Founded in 1995, Cytos was spun off by the Institute of Biotechnologyat the Swiss Federal Institute of Technology in Zurich. The company's protein and vaccine technologies use serum-free and protein-free production processes; DELphi is a virus-based expression, screening, and production system which can reproduce proteins from a chosen tissue or cell type. Its AlphaVaccine places any antigen in a highly ordered configuration, which has shown to elicit a strong immunogenic response. It is applying the latter technology to the development of a vaccine against HIV and to two additional preclinical prototype vaccines; one for HIV and the other for allergy.

Dendreon Corp.

(Mountain View, CA)

Dendreon Corp.(stimulates immune response via dendritic cells) raised $10mm in a private placement of preferred stock to returning investors. Vulcan Ventures led the financing and was joined by HealthCare Investment Corp., New York Life Insurance, Sanderling Ventures, and Kummel Investments. (Oct.)

This was Dendreon's fourth round of financing; the company had expected the previous round ($11.7mm), two years ago, to serve as its mezzanine financing. At that time, it had just licensed Immune Response's patent estate in dendritic cell therapy to add to its in-house work in the area and had commenced human testing. Since then, Dendreon has completed Phase I/II trials in patients with advanced prostate cancer. Dendritic cells are an immune system component that can serve as a vehicle for activating the body's killer T cells to attack specific disease targets. The company harvests these cells from a patient's peripheral blood and activates them with disease-related antigens, then returns them to the patient.

Devgen NV

(Ghentz Zwijnaarde, Belgium)

Devgen(functional genomics company; uses the nematode worm C. elegans for drug and drug target discovery) raised $23.7mm (Euro23mm) in its second venture financing. This round included its original investors Abingworth and GIMV, plus new participants Advent, Biotech Fund Flanders, Life Sciences Partners, Rendex, KBC Bank and Insurance Group, ING Group, and Mercator Noordstar. (Oct.)

With the new funds, Devgen will continue its own lead development projects and pursue opportunities to out-license its platform technology. The company refers to its transparent experimental animal as a live test tube because of its aptness as a model system. Although C. elegans has real organ systems and over a hundred different cells types, it offers a short generation time (three-day life cycle) and can be produced in vast numbers and genetically manipulated as easily as a microorganism. Human genes can be inserted into the worm genome, functionally replacing the worm genes; then the nematode paradigm can be used to identify human molecular switches and the drugs that act on them.

DrugAbuse Sciences Inc.

(Menlo Park, CA)

DrugAbuse Sciences(pharmaceutical treatments for substance abuse) sold $22.4mm of preferred stock in a fourth financing, which it expects to serve as its pre-IPO mezzanine round. (Oct.)

The new money will fund the company's operations in the US and in France. The mix of European and US investors included 3i Group, ABN-AMRO, Auriga Ventures, CDC Innovation, Edmond de Rothschild Asset Management, Financiere de Brienne, Nomura International, Parnib Belgie NV, Partech International, and Societe Generale Asset Management. DrugAbuse Sciences commented that even after it had nearly doubled its original dollar target, the financing was oversubscribed at the closing. The company's lead drug candidate is Naltrel(slow-release naltrexone), in Phase II for treating alcohol dependence and addiction to opiates. The microencapsulated injectable product has to be administered only once a month, and is designed to improve patient compliance, compared to the approved tablet version, which has to be taken every day. Investment Banks/Advisors: 3i

Evax Technologies GMBH

(Martinsried, Germany)

Evax Technologies(vaccines) raised approximately $8.8mm (DM$16m) in its second round of financing. 3I Group, Bayer Innovation, Global Life Science Holding, Oxford BioScience Partners, and Technologieholding, all current shareholders, participated and Bayern Kapital and Technologie Beteiligungsgesellschaft contributed $2.2mm through silent partnerships. (Oct.)

Evax will use the funds to research a vaccine for Helicobacter pylori, a pathogen that causes peptic ulcers and gastric cancer, and a vaccine for otitis media, middle ear infection, using the company's bacterial ghost technology, which consists of genetically altered inactive pathogens that preserve their original structure, allowing a more protective immune response.

Pepgen Corp.

(Alameda, CA)

Pepgen(developing interferon-based drugs) raised gross proceeds of $3.8mm in a private placement. BioAsia Investments and Crown Advisors participated. (Oct.)

Pepgen's lead drug is interferon tau, an oral compound in Phase I trials for treating multiple sclerosis. The company says it has fewer side effects compared to interferons currently on the market, and since it has to be taken throughout the patient's life, the fact that it is orally available is a big advantage. The company has a second interferon drug in preclinical studies; it hopes to file an IND by the middle of next year. Calypte Biomedical(urine-based diagnostics) purchased a significant minority stake in the company in 1997; following this placement it now owns 41%.

Versicor Inc.

(Fremont, CA)

Versicor(anti-infectives) raised $40mm in a private placement led by Patricof & Co. Ventures. Patricof affiliates Apax Partners Europe and Apax France, along with Schroder Ventures, were all significant investors in this round. All of the company's existing investors also took part: HealthCare Ventures, New Enterprise Associates, Abingworth, Hambrecht & Quist Capital Management, SR One, Rho Management, and Sepracor, its former parent company. (Nov.)

Versicor was originally Sepracor's combinatorial chemistry unit, but in 1996 it changed focus to its current mission of developing antibiotics and antifungals, targeting especially the North American hospital market. In 1997 Sepracor cut its holdings to 22% through a private placement. In 1998 Versicor licensed North American rights to a semi-synthetic glycopeptide from Bioresearch Italia, and this year it licensed worldwide rights to an antifungal from Eli Lilly.

Conway Stuart Medical Inc.

(Sunnyvale, CA)

Conway Stuart(minimally invasive treatments for digestive tract disorders) has raised $14.5mm in a third private round led by US Trust Co., which was joined by Onset Ventures, US Venture Partners, and Travelers Insurance Co. (Oct.)

The company plans to use the proceeds to advance its Strettaprocedure, a minimally invasive gastroesophageal reflux disease (GERD) treatment expected to get 510(k) clearance by April 2000. About 14 million Americans suffer from GERD, a condition caused by the failure of the lower esophageal sphincter muscle (LES) to close properly, resulting in the backflow of acid from the stomach into the esophagus. The Stretta procedure uses a catheter that delivers radiofrequency energy to form lesions which irrigate and coagulate the LES area—offering an alternative to drug therapies and costly and invasive surgical procedures that currently make up the majority of the $14bn GERD treatment market.

Rita Medical Systems Inc.

(Mountain View, CA)

Rita Medical Systems, a start-up medical instrumentation company with a device used to treat cancerous tumors, brought in $7mm in a private financing to Patricof & Co. Ventures Inc. (Oct.)

The company's device, FDA-approved in 1997, was originally designed for use as an alternative to traditional surgery to shrink liver tumors. It is inserted with a catheter and uses radio frequency to kill cancer cells. Liver tumors are often inoperable otherwise because the surgery can cause excessive bleeding or requires removal of too much tissue. Rita Medical's system can also be used to shrink both benign and malignant tumors of the lung, kidney, prostate, and possibly breast. Last year, the company raised $13.5mm from Morgan Stanley Venture Partners; Delphi Ventures; Mohr, Davidow Ventures; Sequoia Capital; and BankAmerica Ventures. It was founded by Stuart Edwards, who also set up the public companies VidaMed Inc., and Somnus Medical Technologies Inc.

Sanarus Medical Inc.

(Pleasanton, CA)

Sanarus Medical(less-invasive surgical instruments for women's health applications) raised $1.8mm in a private placement. Technology Funding was the lead investor, and the Kaufmann Fund and Endocare, which recently licensed Sanarus rights to use its cryosurgical technology, also participated. (Nov.)

Funds will support trials of its NeoCurecryosurgical system, which Sanarus is developing for the treatment of benign uterine tumors and the interstitial ablation of breast cancer. Sanarus hopes to begin marketing the system next year.