Finance Watch: $50m Doubles Magenta's Funding To Improve Stem Cell Transplants

In VC deals, Magenta raised $50m, licensed a Novartis asset and engaged an important partner. Seven public companies revealed financial transactions totaling $947.4m, including Achaogen's $20.5m from the Gates Foundation. Also, OncoMed, Regulus and Depomed provided restructuring updates.

Magenta Therapeutics Inc. has doubled its money in less than six months to nearly $100m to fund the development of therapies that may improve the results of stem cell transplants and make the curative treatments a viable option for more patients.

Cambridge, Mass.-based Magenta closed a $50m Series B venture capital round in early May after it completed a $48.5m Series A round in mid-November. The latest VC round was announced alongside a license agreement giving the company rights to a clinical-stage program from Novartis AG (more details on that transaction and the compound can be found in Deal Watch). Magenta also revealed a partnership with Be The Match BioTherapies, a subsidiary of the National Marrow Donor Program (NMDP)/Be The Match that focuses on autologous and allogeneic cellular therapies.

GV (formerly Google Ventures) led the Series B round with participation from existing investors Atlas Venture, Third Rock Ventures, Partners Innovation Fund and Access Industries. New investors Casdin Capital and other crossover investors supported the round and Be The Match BioTherapies pitched in some cash as well.

Magenta will use the funds to continue its development of programs designed to prepare patients for stem cell transplants, to improve the harvesting of stem cells from patients and donors, and to increase stem cell expansion. The ultimate goal is to broaden the use of curative stem cell transplants beyond hematological malignancies to additional cancers as well as blood disorders and autoimmune diseases.

"Expanding stem cells prior to transplant has been a holy grail for the field, because we know that the more cells you transplant the better the outcome," Magenta Co-Founder, President and CEO Jason Gardner said in an interview.

The licensed Novartis asset MGTA-456 (formerly HSC835) is being developed as a means for expanding the number of umbilical cord blood cells ex vivo before transplanting the cells into patients. That should make the treatments more effective and could make the transplants viable in more diseases.

Gardner was reluctant to describe the Phase II-ready MGTA-456 as Magenta's lead product candidate just because the asset already is in clinical development, telling Scrip that, "We call all of our programs lead programs, because we love them all. We’re excited about our antibody program as well."

Magenta and Be The Match Biotherapies will look for programs in Magenta's platform that the partners could develop together. The small biotech will have access to Be The Match resources, including its cell therapy delivery platform, industry relationships, clinical trial design and management, and patient outcomes data derived from the NDMP database.

"We have had a lot of interest incoming from potential partner companies and investors. We decided to raise additional capital to advance all of our compounds," Gardner said. "We want to amplify the platform and build the company."

He was reluctant to get into specifics about exactly how Magenta will use its Series A and B cash, including when Phase II clinical trials for MGTA-456 or Phase I trials for the company's preclinical antibodies will begin. Gardner said more details will be disclosed later this year, including "a slightly different direction clinically" for MGTA-456, "which we're excited about."

Magenta had about 20 employees when it closed the Series A round in November and the company employs 26 people now. No further fundraising or collaborations are planned in the near term, but with nearly $100m in funding, Magenta isn't under pressure – yet – to seek cash or partners.

Gardner wrote a deep-dive account of the company's strategy to date in a blog post.

Other recent large VC financings include:

• Paris-based Vivet Therapeutics announced a €37.5m ($40.7m) Series A round on May 4 led by Novartis Venture Fund and Columbus Venture Partners with additional backing from Roche Venture Fund, HealthCap, Kurma Partners and Ysios Capital. Vivet will use the proceeds to develop gene therapies for rare, inherited metabolic diseases, including Wilson disease, progressive familial intrahepatic cholestasis type 2 (PFIC2), PFIC type 3 (PFIC3) and citrullinemia type 1. The company plans to begin its first clinical trial by the end of 2018 to test VTX801 in Wilson disease. (Also see "Corporate VCs Wade In With Funds To Pursue Gene Therapy For Wilson Disease" - Scrip, 4 May, 2017.)
• OptiNose Inc. of Yardley, Penn., said on May 9 that it closed a $37m Series D round to prepare for the US launch of OPN-375, an inhaled version of fluticasone propionate for nasal polyps and chronic sinusitis, in the first half of 2018. The company submitted a new drug application (NDA) to the US FDA for approval to treat nasal polyps in November and the agency set a September 2017 user fee date. Fidelity Management and Research Co. led the Series D round with participation from Avista Capital Partners, Entrepreneurs Fund and other prior investors. OptiNose's Breath-Powered drug delivery device platform is used in Otsuka Pharmaceutical Co. Ltd.'s migraine therapy Onzetra Xsail (sumatriptan), which was licensed by Avanir Pharmaceuticals Inc. in 2013. (Also see "Avanir pays OptiNose $20m for NDA-ready migraine drug-device" - Scrip, 3 Jul, 2013.)
• ImCheck Therapeutics SAS closed a €20m ($25.9m) Series A round led by Boehringer Ingelheim Venture Fund (BIVF), Kurma Partners and Idinvest with additional backing by Gimv and LSP. Marseilles, France-based ImCheck said on May 2 that the venture capital will fund development of immunomodulatory antibodies that act on both adaptive and innate immunity for the treatment of cancer and autoimmune diseases. The company plans to take its first therapeutic candidates into the clinic by 2019.
• Pacific Palisades, Calif.-based Aadi Bioscience Inc. said on May 8 that it completed a $23m Series A round led by Hermed Capital with participation from Celgene Corp., Vivo Capital, Decheng Capital, the Helsinn Investment Fund and Star Summit Ventures. Aadi is developing treatments for diseases driven by mTOR activation, including ABI-009, a targeted albumin-bound mTOR inhibitor, which is being tested in a 30- to 35-patient Phase II registrational trial for the treatment of advanced perivascular epithelioid cell tumors. Other planned studies include Phase I trials in pulmonary hypertension and pediatric cancers and a Phase II trial in bladder cancer.

Public Companies: Achaogen Gets Up To $10.5m Gates Grant, $10m In Equity

While seven public companies raised $947.4m from follow-on, debt and other offerings, Achaogen Inc.'s recent cash infusion is notable, because the $20.5m investment came from the Bill & Melinda Gates Foundation, a multibillion-dollar philanthropic organization with a big focus on global health initiatives. The Gates Foundation provided up to $10.5m in grant funding and invested $10m in equity to fund development of monoclonal antibodies against gram-negative bacteria for the treatment of neonatal sepsis in developing countries. The company reported positive Phase III results for its lead antibacterial development program in December with plans to seek regulatory approvals in 2017. (Also see "Plazomicin’s US Debut Pencilled In For 2018, Achaogen Now Searching For Ex-US Partner" - Scrip, 15 Dec, 2016.)

South San Francisco-based Achaogen will use its Gates Foundation funding to discover monoclonal antibodies targeting Acinetobacter baumannii, which the company already is targeting in its internal bactericidal antibody program. If successful, Achaogen is eligible for additional grant funding for other antibody discovery and development efforts. The foundation's equity investment is meant to accelerate development of the company's discovery platform with a focus on novel solutions for the prevention and treatment of infections, including those that disproportionately impact the poor.

The Gates Foundation also recently led a $45.5m Series D venture capital round for Arsanis Inc. with additional funding for the development of monoclonal antibodies to treat Staphylococcus aureus sepsis in newborns. Arsanis already has an antibody in development for S. aureus pneumonia. (Also see "Finance Watch: OncoMed Cuts Costs To Conserve Capital While Public, Private Peers Raise Cash" - Scrip, 1 May, 2017.)

The other recent public company financings totaling more than $900m include:

• Menlo Park, Calif.-based Dermira Inc. priced an offering of convertible senior notes with an aggregate principal amount of $250m and a 3% interest rate on May 10. The notes, which will mature on May 15, 2022, are convertible at a rate of 28.2079 shares per $1,000 in notes purchased, which values the company's stock at $35.45 per share – a 34.2% premium to the company's May 10 closing price. The proceeds will be used as working capital and for various expenses. Dermira is expected to report Phase III results for its acne drug olumacostat glasaretil (DRM01) during the first half of 2018. (Also see "Acne Pipeline Yields Three Disappointments, One Win So Far In 2017" - Scrip, 13 Apr, 2017.)
• AMAG Pharmaceuticals Inc. priced 3.25% convertible senior notes due in 2022 with an aggregate principal amount of $300m on March 5. The notes, which will mature on June 1, 2022, will be convertible at a rate of 36.5464 shares per $1,000 in purchased principal amount, valuing shares at $27.36 each, which was a 37.5% premium to AMAG's closing price of $19.90 on May 4. The net proceeds, before any overallotments, will be $291m, which will be used to repay $320.8m in debt.
• Immunomedics Inc., which is in the process of a significant reorganization to quell investor concerns about its operations, grossed $125m from a private placement of Series A-1 convertible preferred stock sold to unnamed institutional investors. In addition to ending its partnership with Seattle Genetics Inc. for development of sacituzumab govitecan (IMMU-132), Immunomedics said it will speed up plans to submit a biologic license application (BLA) to the FDA in the fourth quarter of 2017 or first quarter of 2018 for the triple-negative breast cancer therapy; hire a contract research organization to conduct a confirmatory Phase III trial starting later this year; execute a manufacturing plan for the antibody-drug conjugate; and seek regional development partners for ex-US markets. (Also see "Deal Watch: Seattle Genetics' Controversial Collaboration With Immunomedics Topples" - Scrip, 5 May, 2017.) The company also will replace President and CEO Cynthia Sullivan with Chief Financial Officer Michael Garone on an interim basis; Founder, Chief Scientific Officer and Chief Patent Officer David Goldenberg will step down as well. Immunomedics has settled litigation with several of its top investors regarding their concerns about the company's management.
• Emeryville, Calif.-based Adamas Pharmaceuticals Inc. signed a $100m royalty-backed note agreement with HealthCare Royalty Partners (HCR) tied to ADS-5102 (amantadine) for the treatment of levodopa-induced dyskinesia in people with Parkinson's disease. Adamas will receive $35m up front and $65m upon FDA approval of ADS-5102 and receipt of an orphan drug designation; an NDA is on file with an Aug. 24 user fee date. (Also see "Adamas Readies NDA After Positive Phase III" - Scrip, 23 Dec, 2015.) Adamas will use the proceeds of its royalty deal with HCR to fund commercialization of its drug and to advance other development programs. The royalty-backed notes mature in December 2026 and come with an initial 11% interest rate with payments due to HCR every quarter based on a 12.5% royalty from ADS-5102 US sales and up to $15m annually from Adamas' royalties on US net sales of Allergan PLC's Alzheimer's drug Namzaric (memantine and donepezil). Adamas may prepay 200% of the $100m principal amount to avoid quarterly payments altogether.
• Ignyta Inc. sold 12.5m shares at $6.15 each on May 4 to gross $76.9m, which will support clinical development and pre-commercialization activities for the kinase inhibitor entrectinib that's in a pivotal Phase II trial for central nervous system cancers, to pay for preclinical and clinical development of RET inhibitor RXDX-105 and the TAM inhibitor RXDX-106 for various cancers, and for other programs and expenses. (Also see "AACR: Three Promising Anticancers From Loxo Oncology, Ignyta And BeiGene" - Scrip, 18 Apr, 2016.)
• Cytokinetics Inc. priced 5.26m shares at $14.25 each on May 8 for $75m in gross proceeds to fund research and development, commercial preparations and other expenses. The company has drugs in development for skeletal muscle diseases with Astellas Pharma Inc. (Also see "Astellas Targets ALS In Expansion Of Cytokinetics Alliance" - Scrip, 28 Jul, 2016.) Its collaboration with Amgen Inc. includes cardiac muscle diseases, including the Phase III asset omecamtiv mecarbil for chronic heart failure. (Also see "Amgen, Cytokinetics Checked With Payers Before Taking Omecamtiv Into Phase III" - Scrip, 2 Sep, 2016.)

Restructuring Update: OncoMed Cuts Losses On Demcizumab, Moves On

Having had a rough year so far, OncoMed Pharmaceuticals Inc. is falling back on the breadth of its pipeline as it handles another trial failure for demcizumab and shelves the anti-DLL4 (Delta-Like Ligand 4) compound – adding to recent woes that led to layoffs in April. (Also see "Finance Watch: OncoMed Cuts Costs To Conserve Capital While Public, Private Peers Raise Cash" - Scrip, 1 May, 2017.) “OncoMed has always been a company that tries to protect against unforeseen risk by building a broad pipeline with diversified sources of capital,” CEO Paul Hastings told the firm's May 8 earnings call.

Last month, demcizumab failed to show benefit in metastatic pancreatic cancer in the YOSEMITE trial. (Also see "OncoMed Absorbs Double Dose Of Bad News With Trial Failure, Two Options Declined" - Scrip, 10 Apr, 2017.) During the first-quarter earnings call, the company announced it also failed in the DENALI trial in first-line, non-squamous non-small cell lung cancer (NSCLC) – a trial that became a casualty to "the evolving treatment landscape in NSCLC."

OncoMed deserves credit for getting out quickly and not belaboring the issue, however, according to Jefferies analyst Maury Raycroft. The company's "willingness to move on rather than search for post-hoc trends is encouraging,” Raycroft wrote on May 8.

He is bullish about their anti-TIGIT program, now in the clinic, which could trigger a $35m milestone from Celgene Corp. OncoMed could also see $38m in opt-in fees for its anti-RSPO3 rosmantuzumab and $25m for navicixizumab, an anti-DLL4/VEGF5 bispecific antibody.

Hastings also noted that the company is beginning to evaluate potential partnering opportunities for its Wnt pathway and immuno-oncology agents. “We continue to believe their earlier-stage programs … are differentiated and could be best-in-class,” Raycroft opined.

In other restructuring news:

• Newark, Calif.-based Depomed Inc. revealed "a set of strategic initiatives aimed at positioning the company for future growth" in its May 9 first quarter earnings report. The company cut its administrative staff by 30 people (20%) and realigned its sales force, but said the changes won't reduce the commercial team's overall head count. The group marketing pain drugs, including the long-acting opioid Nucynta (tapentadol) for chronic pain, was increased from 190 to 258 sales representatives earlier this year and that will not be changed, but the 20-person oncology sales team will be eliminated and reallocated to the neurology sales team, which will increase from 40 to 60 reps to focus on the marketing of Gralise (gabapentin) for postherpetic neuralgia and the acute migraine headache drug Cambia (diclofenac potassium). Sales decreased year-over-year for Nucynta and Gralise during the first quarter, but increased for Cambia; total revenue decreased from $104.78m to $90.45m. Depomed reduced its full-year 2017 revenue guidance from $490m-$520m to $405m-$425m. CEO Arthur Higgins, who joined the company at the end of March following the resignation of Depomed's prior CEO and a settlement with shareholders, blamed the reduced revenue on declines in opioid sales generally and "a highly disruptive sales force realignment" that was instituted in February. (Also see "Depomed CEO, Two Board Members Out In Settlement With Investor" - Scrip, 28 Mar, 2017.)
• Regulus Therapeutics Inc. in San Diego, which develops drugs that target microRNAs, said in its May 4 first quarter earnings report that it instituted an immediate 30% workforce reduction, bringing its head count to 65 employees. The layoffs will generate $6m in annual savings; the company had $57.5m in cash as of March 31. President and CEO Paul Grint also resigned and was replaced by Regulus' Chief Commercial Officer Joseph "Jay" Hagan. The company was looking to reduce hepatitis C treatment down to a four-week regimen, but its lead product candidate RG-101 was put on a clinical hold in January. (Also see "Acne Pipeline Yields Three Disappointments, One Win So Far In 2017" - Scrip, 13 Apr, 2017.)