Finance Watch: A Bountiful November Harvest For Venture-Backed Biopharma

Five funds raised more than $1bn to back biotech firms; Arcus leads recent VC rounds with $107m GV-backed Series C; Celgene, Valeant sell notes to retire debt; and Alnylam cashes in on investor goodwill.

Five big investments in health care and life science funds since the end of October delivered more than $1bn in new financing for companies developing biopharmaceuticals and related technology.

The new capital includes a $50m investment in the Dementia Discovery Fund that Microsoft founder and billionaire philanthropist Bill Gates announced on Nov. 13. (Also see "Gates Injects UK-US Dementia Discovery Fund With $50m And Fresh Purpose" - Scrip, 14 Nov, 2017.) Also, BioGeneration Ventures said on Oct. 31 that it closed an €82m ($96.7m) fund to seed new companies. (Also see "BioGeneration Ventures Leads Europe's Seed Investing With New Fund" - Scrip, 30 Oct, 2017.) However, nearly half of the new cash to back private life science and health care companies was raised by Frazier Healthcare Partners, which closed a $491m venture capital fund.

Frazier – a Menlo Park, Calif.-based firm focused primarily on companies developing therapeutics – said on Nov. 1 that two-thirds of Frazier Life Sciences IX LP will be invested in seed and Series A rounds, including venture capital for companies founded by the VC firm. Frazier's last life science fund closed two years ago with $262m. (Also see "FINANCE ROUNDUP: A New VC Fund, A $60m Collaboration Boost, And 14 Funding Rounds" - Scrip, 18 Nov, 2015.)

Successful exits that Frazier has made from its own creations include the sale of Calistoga Pharmaceuticals Inc., which was sold to Gilead Sciences Inc. for up to $600m in 2011. (Also see "Gilead's $375 million Calistoga buy signals shift into oncology and inflammation" - Scrip, 22 Feb, 2011.) Also, Incline Therapeutics Inc. was acquired by The Medicines Co. for $185m in 2012. (Also see "The Medicines Co boosts hospital presence with Incline purchase, Recothrom deal" - Scrip, 14 Dec, 2012.)

Other exits include the sales of Acerta Pharma BV to AstraZeneca PLC for $2.5bn up front in 2015, Tobira Therapeutics Inc. to Allergan PLC for up to $1.7bn in 2016, and PreCision Dermatology Inc. to Valeant Pharmaceuticals International Inc. for up to $500m in 2014. (Also see "AstraZeneca In Buy Now, Pay In Full Later Deal For Majority Acerta Stake " - Scrip, 17 Dec, 2015.), (Also see "Allergan’s Tab For Tobira’s NASH Cocktail With Akarna Chaser Tops $1.7bn" - Scrip, 21 Sep, 2016.) and (Also see "Aspirational Valeant makes $500m acquisition, eyes 'Top 5' spot" - Scrip, 4 Feb, 2014.) Frazier-funded AnaptysBio Inc. executed a $75m initial public offering earlier this year. (Also see "IPO Update: Three Biopharma Offerings In January Contrast With Last Year’s Slow Start" - Scrip, 6 Feb, 2017.)

On the East Coast, two other new VC funds launched in early November, including Aisling Capital's $280m for investments in therapeutics companies nearing the end of their clinical trial programs and preparing for regulatory submissions and commercial launches. Oncology, medical dermatology and women's health are among Aisling's areas of interest.

Partners HealthCare System in Boston announced the closing of its second VC fund on Nov. 8 – the $171.1m Partners Innovation Fund II. The fund is made up of $66.1m in capital from external sources and $105m from Partners HealthCare institutions, including $50m each from Brigham and Women's Hospital and [Massachusetts General Hospital]. External investors included Astellas Pharma Inc., Eli Lilly & Co., ShangPharma Corp. and Simcere Pharmaceutical Group.

Partners Innovation Fund I launched in 2008 with $35m to back innovations developed within the Partners HealthCare system. The second fund also will focus exclusively on companies launched with technology sourced from Partners institutions that are designed to address unmet needs and improve health care delivery, including therapeutics, diagnostics, medical devices and health care information technology.

Successes from Partners' first fund include CoStim Pharmaceuticals Inc., which Novartis AG bought in 2014, and the Roche-acquired Adheron Therapeutics Inc., which was sold for up to $580m. (Also see "Novartis buys CoStim as big pharmas boost their cancer immunotherapy arsenals" - Scrip, 17 Feb, 2014.) and (Also see "Roche Diversifies With $105m-Plus Adheron Buy" - Scrip, 9 Oct, 2015.) Partners portfolio company Editas Medicine Inc. went public in February 2016. (Also see "Can Editas, BeiGene Offerings Redeem US IPO Class Of 2015?" - Scrip, 4 Feb, 2016.)

Arcus Leads Recent VC Financings

The Hayward, Calif.-based cancer immunotherapy developer Arcus Biosciences Inc. said on Nov. 13 that it completed a $107m Series C round, which brings its fundraising total since 2015 to $227m, including a $49.7m Series A and a $70m Series B, which was revealed in Aug. 2016. (Also see "VC Roundup: Moderna Seeks Another Record-Breaking Raise; Arcus Emerges From Stealth Mode" - Scrip, 31 Aug, 2016.) The capital will help the company pursue its in-house immuno-oncology combination strategy.

Arcus started a Phase I clinical trial in healthy volunteers for its dual adenosine receptor antagonist AB928 and kicked off a Phase I trial in Australia for its PD-1 inhibitor AB122 in cancer patients in early November. Data are expected from the AB122 monotherapy study in 2018 to inform future combinations strategies with AB928 and other Arcus drug candidates.

The company plans to begin a Phase I/II trial for AB928 in combination with AB122 during the first half of 2018. Arcus also will use the newly raised VC cash to take at least two more immuno-oncology assets into the clinic, including the oral small molecule CD73 inhibitor AB680 and the TIGIT antibody AB154.

GV (formerly Google Ventures) led Arcus' Series C with participation from new investors Wellington Management Company LLP, EcoR1 Capital, BVF Partners LP, Decheng Capital, Hillhouse, Aisling and entities affiliated with Leerink Partners. Prior investors The Column Group, Foresite Capital, Invus Opportunities, DROIA, Celgene Corp. and Taiho Ventures also participated.

In other notable recent VC financings:

• South San Francisco-based Tricida Inc. announced on Nov. 8 that it closed a $57.5m Series D round, which comes little more than a year after its $55m Series C, bringing the total raised to date to $153.3m. (Also see "VC Roundup: Cleave Raises $37m To Maintain Phase I Momentum, Plus $233.5m In Recent Financings" - Scrip, 10 Aug, 2016.) The new round attracted first-time backers Wellington Management Company LLP, Venrock Healthcare Capital Partners and Cormorant Asset Management as well as existing investors OrbiMed, Longitude Capital, Sibling Capital Ventures, Limulus Venture Partners and Vivo Capital. The funding will allow Tricida to complete a pivotal Phase III trial for the oral drug TRC101 in the treatment of chronic metabolic acidosis in chronic kidney disease. Top-line results expected in the second half of 2018 will support submission of a new drug application (NDA) to the US FDA under the accelerated approval pathway.
• Inozyme Pharma Inc. in Cambridge, Mass., said on Nov. 15 that it closed a $49m Series A round to fund the development of medicines that treat rare diseases of calcification, which affect soft tissues and bone. Longitude Capital led the round with participation from New Enterprise Associates, Novo Ventures and Sanofi Ventures. The company, which launched in 2016 based on technology developed in the lab of Demetrios Braddock at Yale University, will use its venture capital to take its lead enzyme replacement therapy for Generalized Arterial Calcification of Infancy (GACI) and Autosomal Recessive Hypophosphatemic Rickets Type 2 (ARHR2) into the clinic.
• New investor Abingworth led a €42m ($49.3m) Series B round announced on Nov. 6 for the Swiss firm Nouscom AG, which is developing neoantigen-based cancer vaccines based on its Exovax technology platform. The round, which will support Phase I/II studies starting in 2018 for off-the-shelf vaccine NOUS-209, included 5AM Ventures – another new investor – and prior backers LSP and Versant Ventures. NOUS-209 will be developed as a therapeutic vaccine for cancers characterized by microsatellite instability and as a prophylactic vaccine for Lynch Syndrome carriers, who are at risk for developing colorectal, endometrial and gastric cancers. NOUS-100-PV, a personalized neoantigen based vaccine, also will enter the clinic in the second half of 2018. Nouscom's oncolytic virus developed with its Endovax platform is in the discovery phase. (Also see "NousCom Raises €42m For Novel Cancer Vaccines" - Scrip, 6 Nov, 2017.)
• Cambridge, Mass.-based ImmusanT Inc. will conduct a randomized Phase II clinical trial for Nexvax2, a therapeutic vaccine for celiac disease, with $40m from a Series C financing that the company revealed on Nov. 14. Nexvax2 will be studied as an adjunct to a gluten-free diet in patients with the human leukocyte antigen-DQ2.5 (HLA-DQ2.5) immune recognition gene, who will face a gluten challenge to establish proof of concept. ARCH Venture Partners led the Series C round, which also will fund ImmusanT's biomarker program and platform expansion, joining prior investor Vatera Healthcare Partners. The company launched with $20m in 2011. (Also see "ImmusanT start-up raises $20m to advance therapeutic vaccine for coeliac disease" - Scrip, 15 Dec, 2011.)
• Exonics Therapeutics Inc. said on Nov. 8 that it raised a $40m Series A round from The Column Group to fund its SingleCut CRISPR gene-editing platform for repairing mutations that cause Duchenne muscular dystrophy and other neuromuscular diseases. The Cambridge, Mass.-based company's lead development program is a one-time gene-editing therapy for Duchenne. CureDuchenne Ventures previously provided $5m in seed funding for Exonics. (Also see "Exonics Using CRISPR To Develop One-Time Treatment for Duchenne" - Pink Sheet, 27 Feb, 2017.)
• Shanghai-based EOC Pharma Group, which in-licenses cancer drug candidates for development in China, announced on Nov. 7 that it closed a $32m Series B round led by Taikang Investment through Shandong State-owned Taikang Industry Development Fund. The financing also was backed by Sequoia China, which led EOC's Series A, and H&Q Asia Pacific. The company has small molecule candidates for breast and gastric cancer entering Phase III registration studies in China in 2018. The company also has biologics in the areas of immuno-oncology and tumor metastasis in its pipeline and is looking to in-license additional assets for its portfolio.
• Cambridge, Mass.-based X4 Pharmaceuticals Inc. closed a $27m Series B round, the company said on Nov. 16, to fund ongoing development of CXCR4 inhibitors to improve immune cell trafficking as a means for treating cancer and rare diseases. X4 launched in 2015 with drug candidates licensed from Sanofi and a $37.5m Series A round. (Also see "Startups Stand Out As 13 Biotechs Raise More Than $409m" - Scrip, 18 Dec, 2015.) The Series B was backed by prior investor Cormorant Asset Management and various new and existing investors. It will fund a proof-of-concept study for the company's lead immuno-oncology candidate X4P-001-IO and a pivotal study for its lead rare disease candidate X4P-001-RD in WHIM syndrome, a primary immunodeficiency disease. (Also see "X4 Pharmaceuticals Inc." - Scrip, 8 Mar, 2016.)

Celgene Exchanges Debt For Debt; Alnylam Raises $675m

The largest of recent public company financings was Celgene's sale of senior unsecured noted at the beginning of November with a total aggregate principal amount of $3bn. The company sold $750m worth of notes due in 2023 with a 2.75% interest rate, $1bn in notes due in 2027 with a 3.45% interest rate and $1.25bn in notes due in 2047 with a 4.35% interest rate. The money raised will be used to repay notes maturing in August 2018 and related financial commitments with any cash left over allocated to general corporate purposes.

Valeant Pharmaceuticals also priced a sale of notes, but its debt is due to be repaid in 2025. The senior secured notes' total aggregate principal amount of $750m carries a 5.5% interest rate. Debt-plagued Valeant will use the proceeds and cash on hand to repay a portion of its outstanding Series F Tranche B Term Loan due in 2022. Valeant is focused on turning around its troubled businesses and recently said that its debt-reduction plan is ahead of schedule. (Also see "Valeant Sees Sunshine On Cloudy Day, But Dermatology Recovery Just Starting" - Scrip, 8 Aug, 2017.)

Meanwhile, Alnylam Pharmaceuticals Inc. capitalized on investor goodwill in the wake of Phase III data that support regulatory submissions for its RNA interference (RNAi) drug patisiran. (Also see "Interview: Alnylam President On Patisiran Lift-Off Plans" - Scrip, 6 Nov, 2017.) To fund patisiran and other late-stage RNAi research and development programs, Alnylam closed an offering of 6.44m shares on Nov. 16 at $125 each for $805m in gross proceeds. The cash will fund general corporate and R&D expenses as well as investments in manufacturing, quality, commercial and medical affairs for the maturing company.

Sage Therapeutics Inc. and others also raised significant dollars in recent weeks, including:

• Cambridge, Mass.-based Sage sold 4.06m shares at $85 each for $345m in gross proceeds in an offering that closed on Nov. 17. The company's stock soared on Nov. 9 after it reported positive Phase III results for brexanolone in postpartum depression and revealed plans to seeks regulatory approvals. (Also see "All Smiles At Sage As Phase III Postpartum Depression Data Are Positive" - Scrip, 9 Nov, 2017.)
• Puma Biotechnology Inc. in Los Angeles secured a term loan commitment for up to $100m from Silicon Valley Bank and Oxford Finance to fund general corporate purposes, including commercialization of Nerlynx (neratinib) as an adjuvant breast cancer therapy. (Also see "Puma May Face Marketing Hurdles Even If Neratinib Wins Final Approval" - Scrip, 31 May, 2017.)
• Recro Pharma Inc. of Malvern, Pa., secured a $100m credit facility from funds managed by the health care-focused investment firm Athyrium Capital Management LP, the company said on Nov. 20. The money will be used to refinance the company's outstanding debt, pay a $45m milestone fee to Alkermes PLC upon FDA approval of intravenous meloxicam, and for working capital. The loan bears an interest rate of LIBOR plus 9.75% and the funds will be delivered to Recro in three tranches – $60m at close, $20m when I.V. meloxicam is approved (potentially in May 2018) and $20m upon proof of commercial sales gains. The company also issued Athyrium warrants to purchase 348,664 shares of its stock at $8.60 per share. Recro reported updated Phase III results for IV meloxicam in the treatment of post-surgical pain in October. (Also see "Pipeline Watch: Topline Phase III Results For Tenapanor, Abemaciclib" - Scrip, 13 Oct, 2017.)
• San Diego-based Mirati Therapeutics Inc. closed an offering of 2.94m shares at $13 each and the sale of pre-funded warrants to buy 4.14m shares at $12.999 each for gross proceeds of $92m on Nov. 20. Mirati will use the net proceeds to fund clinical development of the oral kinase inhibitor sitravatinib and oral HDAC inhibitor mocetinostat, which both are in early- to mid-stage development for lung cancer; preclinical and clinical development of an oral KRAS inhibitor in lung and colorectal cancers; and other general expenses. While a new formulation of the MET and Axl inhibitor glesatinib improved tolerance in a Phase II study, the company said earlier in November that it is shifting its focus to other opportunities in its pipeline. (Also see "Pipeline Watch: Phase III Starts In MS, Hyperkalemia And Short Stature" - Scrip, 6 Jan, 2017.)
• Synergy Pharmaceuticals Inc.priced 21.7m shares, each accompanied by a warrant, at $2.58 per share on Nov. 13 for $56m in gross proceeds. The offering will fund general expenses, including the ongoing commercialization of Trulance (plecanatide) for chronic idiopathic constipation. Synergy closed a $300m debt financing in September that the company said would last into 2019. (Also see "Finance Watch: Lilly Cuts 3,500 Jobs Globally To Drive Growth" - Scrip, 7 Sep, 2017.)
• Acorda Therapeutics Inc. announced two royalty monetization agreements on Nov. 17 bringing in $53m total. The company sold Ampyra (dalfampradine) royalties it earns from Biogen to HealthCare Royalty partners for $40m. It also received $13m from H. Lundbeck AS to end its receipt of ex-US royalties from Selincro, an alcohol-dependence therapy marketed by Lundbeck in the EU under an agreement with the Finnish company Biotie Therapies Corp., which Acorda bought in 2016. The $363m Biotie purchase recently soured when the Ardsley, N.Y.-based company decided to end development of tozadenant for Parkinson's disease after deaths from sepsis in Phase II and III trials. (Also see "Acorda Decides Tozadenant Isn’t Salvageable, Moves Primary Focus To Inbrija" - Scrip, 20 Nov, 2017.)
• Voyager Therapeutics Inc. in Cambridge, Mass., closed an offering of 5.2m shares at $12 each on Nov. 10 for $58.4m in gross proceeds. Voyager raised the money despite saying at the end of October, after Sanofi returned its rights to the Parkinson's disease gene therapy candidate VY-AADC01, that the company had enough cash on hand to conduct a Phase II/III study. (Also see "Voyager Cheers End Of Sanofi Partnership In Parkinson's; Investors Less Confident" - Scrip, 31 Oct, 2017.)
• Ramsey, N.J.-based ADMA Biologics Inc. closed an offering of 19.5m shares priced at $2.15 each on Nov. 13 for $42m in gross proceeds. The money will fund the company's ongoing investments in manufacturing, quality assurance and resubmission of a biologic license application to the FDA for the intravenous immunoglobulin candidate RI-002, which the agency rejected early this year. (Also see "Keeping Track: US FDA Approves Emflaza And Parsabiv, Turns Down Opioid/Anti-Emetic Combo CL-108" - Pink Sheet, 12 Feb, 2017.)