The Longest Round: NovImmune’s Eight-Year Series B

Several biotechs have kept a private financing round open for several years and extended beyond $100 million, but Swiss antibody firm NovImmune is taking the concept farther than anyone.

Giant rounds of biotech financing caught Valuation Watch's attention more than a year ago. (See (Also see "Super-Sized Life Science Investments, Healthy Returns?" - Scrip, 20 Dec, 2012.).) Only three months into 2014, we can add a couple more biotechs to the $100-million-round club.

Juno Therapeutics Inc. launched in December with a $120 million Series A commitment then added cash from Venrock and Bezos Expeditions to top $145 million. (See (Also see "Juno Launches With Competing Immunotherapy Programs" - Scrip, 19 Dec, 2013.).) [See Deal] Then in February, one of the largest private biotech rounds ever was announced, but with a twist. Swiss antibody developer NovImmune SA said it had added on, once again, to its Series B round. [See Deal]

Remarkably, the round has been open now for at least eight years – the first tranche of CHF 58 million ($46 million at the time) was announced in 2006. The round now stands at CHF 200.5 million; the latest tranche, of CHF 60 million ($67 million), was led by life science specialists Rosetta Capital Ltd. of London, a new investor. NovImmune CEO Jack Barbut says he doesn't know if this will be the last tranche.

Why keep extending a round, which means keeping the same terms such as liquidation preferences for whoever provides the next tranche of cash? One reason is the relative lack of venture investors, generally. It's hard to find "new money" – investors who will build or lead a new round at a higher valuation. Or, as with NovImmune, the existing investors want to bring in new investors, and have the leverage to charge more per share but keep the terms the same.

Extending a round could mean management faces more dilution, says veteran biotech attorney Alan Mendelson, a partner at Latham & Watkins. "Dilution is discussed a lot," he says. "I like to say to CEOs that cash is more important than your mother. Get the cash and move on." Stock options can help smooth ruffled feathers, Mendelson says.

However, as a Swiss company, NovImmune is governed by a regulation that requires all common shareholders to have the same rights as preferred shareholders. Common holders can generally exercise their pro rata rights with any capital increase within their share class, or across share classes if, for example, the increase occurs only among preferred holders, according to Swiss securities attorney Ralf Rosenow, a partner at Blum&Grob in Zurich. And normally all shares issued in a specific round and within the same share class have to have the same terms, with some exceptions, he says.

Barbut says NovImmune's long round "makes the share structure very easy" to "comply with Swiss statutes, which are very stringent on equal treatment for all shareholders."

It's the largest biopharma venture round with at least one extension raised in the past decade, according to Informa's Strategic Transactions. We found 59 private companies whose extended rounds reached at least $50 million, and nine have topped $100 million. (See Exhibit 1.)

Exhibit 1

On And On: Biotech's Largest Extended Rounds

Company	Round	Total Raised ($M)	Fate (ROI*)
NovImmune	Series B	228	Still private
Pacific Biosciences of California	Series E	188	IPO, 2010 (0.85)
Symphogen	Undisclosed	185	Still private
OncoMed Pharmaceuticals	Series B	169	IPO, 2013 (5.2)
Juno Therapeutics	Series A	145	Still private
Portola Pharmaceuticals	Series C	130	IPO, 2013 (3.1)
TauRx Pharmaceuticals	Undisclosed	112	Still private
Tesaro	Series B	101	IPO, 2012 (5.0)
Sangart	Series F	100	Out of business

*Return on investment measured as an average for all private investors. Based on current market cap (as of March 10, 2014) divided by cash raised privately.

Strategic Transactions

Four of those companies have since gone public, with all but one providing solid return on investment for their bloc of private investors. One (Sangart Inc.) was shut down by its main investor, as first reported by Fierce Biotech. Symphogen AS, whose round when first disclosed was the largest ever for a European biotech, and has since grown larger, is in no hurry to go public, as CEO Kirsten Drejer, PhD, told START-UP last year. (See (Also see "Ahead Of The Mix: Symphogen Leads The Way To Antibody Combinations" - Scrip, 21 Feb, 2013.).)

Barbut says his investors expect "some sort of liquidity event" too, but in the nearer term he says 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's biggest deal to date is the out-licensing of an anti-IL17 antibody to Genentech in 2010, no financials disclosed. [See Deal] The candidate completed Phase I in 2013.