Finance Watch: Alternative Funding Sources Crucial Even Amidst A Biopharma VC Boom

Private Company Edition: Investments by CIRM, the GHIT fund and the European Investment Bank back early-stage science and treatments for neglected diseases. Also, Versant Ventures raises $700m in two funds. In VC deals, Akero raised $70m, Impel NeuroPharma brought in $67.5m.

The California Institute of Regenerative Medicine (CIRM), which uses $3bn worth of state bond revenue to provide grants and loans for the development of stem cell therapies, approved a $6.2m funding award for Angiocrine Bioscience Inc. on Dec. 13, marking the 50^th clinical trial supported by CIRM.

San Diego-based Angiocrine, a privately held cell therapy firm, is one many companies globally that continue to pursue alternative funding sources despite record-breaking levels of venture capital investment occurring in the biopharmaceutical industry. (Also see "Finance Watch: VC Tally Hits $14.5bn For 2018, Beating 2017 With A Quarter Left To Go" - Scrip, 16 Oct, 2018.) CIRM, the Global Health Innovative Technology (GHIT) Fund and the European Investment Bank (EIB) are among those alternative sources of capital providing substantial funding for both private and public drug developers.

Angiocrine's technology platform revolves around its genetically engineered endothelial cells. The company's newly funded clinical trial will test the cells as a means for alleviating symptoms or accelerating recovery from toxic side effects experienced by patients with lymphoma and other cancers of the blood or lymph system who are undergoing chemotherapy.

CIRM is getting to the end of its $3bn pool of capital, which California voters approved in a 2004 ballot initiative, and is working to get another measure on the November 2020 ballot that would ask voters to authorize another $5bn in bond sales to keep the state agency going. (Also see "CIRM asks patients how to spend last $800m for stem cell therapies" - Scrip, 16 Jul, 2015.)

Meanwhile, in Japan, the Tokyo-based GHIT Fund announced on Dec. 13 that it has provided JPY520m ($4.6m) to four different partnerships developing drugs and vaccines to treat malaria, tuberculosis, dengue and leishmaniasis. The GHIT Fund is a public-private partnership between the Japanese government, pharmaceutical companies, the Bill & Melinda Gates Foundation, the Wellcome Trust and the United Nations Development Program to invest in treatments for neglected diseases.

Among the newly funded GHIT-backed programs, Gaithersburg, Md.-based VLP Therapeutics and its partners – Nagasaki University, the Japan National Institute of Infectious Diseases, Johns Hopkins University Bloomberg School of Public Health and Latham BioPharm Group – received JPY442.2m ($3.9m) for a novel tetravalent dengue virus-like particle vaccine. The grant will fund manufacturing and other preparations for a future clinical trial.

Fujifilm and the TB Drug Development Alliance received JPY11m ($96,950) from the GHIT Fund to screen for tuberculosis drug candidates.

The GHIT Fund has invested about JPY14.1bn ($124m) to date in 77 global product development partnerships to date. Ongoing GHIT-supported programs include 23 discovery projects, 13 preclinical projects and eight clinical trials underway in low- and middle-income countries.

EIB One Of Many Government Funders In Europe

The EIB has made even bigger commitments to biopharma companies, proving to be a significant backer of European drug developers, including F2G Biotech GMBH of Austria, which revealed a €24m ($27.3m) loan last month. This followed an Oct. 30 announcement by Newron Pharmaceuticals SPA of Luxembourg and Milan that it received an EIB loan commitment of up to €40m ($45.2m). (Also see "Finance Watch: Not Everyone Can Go Public, But Biopharma IPOs Are Using Multiple Markets" - Scrip, 15 Nov, 2018.)

Other EIB loans announced this year include: €40m for France's Nanobiotix SA, of which the company has received a €16m first tranche, it said in October; €20m for BiondVax Pharmaceuticals Ltd. of Jerusalem, which received the final €8m disbursement in October; and a €30m loan that Copenhagen-based Bavarian Nordic AS revealed in August.

The French vaccines developer Valneva SE received an EIB loan commitment for up to €25m in July 2016, of which it has claimed €10m to date, but the company said in September that it extended the drawn-down term for its loan facility so that it may access the remaining debt through July 2019; the firm may draw down up to €10m by the end of this year.

The EIB is one of several important government-backed sources of capital in Europe across biopharma and all other venture capital-backed industries, given the amount of money that comes from government-owned VC firms (GVCs) or privately-owned VC firms with government entities as limited partners (GLPs).

Researchers at Emlyon Business School in Lyon, France reported recently that of 55,000 venture capital investments in 25 countries between 1997 and 2015, 42.2% had government support – 12.5% from GVCs and 29.7% from GLPs. The researchers noted, however, that GLPs had the most impact on improving European companies' access to capital.

Versant Closes US, Canadian Funds Totaling $700m

Versant Ventures said on Dec. 17 that it raised $700m for two new venture capital funds that will back biopharma companies, including the $600m global fund Versant Venture Capital VII and the $100m Versant Voyageurs I, which will invest in Canadian start-ups.

The VC firm said its seventh global fund will be invested in at least 20 companies in the US, Canada and Europe with more than half of the cash going to start-ups originating from Versant's drug discovery engines, such as the messenger RNA specialist Gotham Therapeutics Corp., which came out of stealth mode in October with a $54m Series A round. Versant also co-led a £29M Series B round for UK-based Enterprise Therapeutics Ltd. in April to fund drug development in respiratory diseases involving a buildup of mucus in the lungs. (Also see "Enterprise Therapeutics Raises £29M To Advance Respiratory Assets" - Scrip, 12 Apr, 2018.)

The Voyageurs fund will support five to eight start-ups in Canada, where Brad Bolzon, Versant managing director and chair of the firm's investment committee, said VC and start-up infrastructure has not grown at the same pace as its "top-tier scientific infrastructure."

Venture Capital Deals: NASH, Neuroscience And More

Venture capital investment in biopharma continues at a brisk pace as 2018 draws to a close even though the two main avenues for VC funders to exit their holdings have run into traffic jams. Moderna Inc.

The pace of mergers and acquisitions has not been as brisk as anticipated this year in the wake of tax reform that significantly reduced big pharma tax rates, which was expected to free up cash for research and development as well as M&A. (Also see "Why The M&A Boom Many Expected In 2018 Didn’t Happen" - Scrip, 14 Dec, 2018.)

And while initial public offerings in the US have been robust in 2018, returns on biopharma IPOs are falling at an even faster rate than the general stock market has declined in recent months. (Also see "US Biopharma IPOs Surge, Data For 2018 So Far" - Scrip, 29 Nov, 2018.) Even so, one of the industry's biggest unicorns – Moderna Inc. – launched the biggest biopharma IPOs ever in the US, raising $604m in its Dec. 6 stock market debut.

Regardless of M&A activity and IPO slowdowns, venture capital investors know there will always be interest from big pharma buyers and additional investors when novel science translates into promising drug candidates. Among the latest batch of companies raising VC funds:

• San Diego-based ViaCyte Inc. closed an $80m Series D round led by Bain Capital Life Sciences with additional backing by TPG and RA Capital Management and existing investors, including Sanderling Ventures and various individuals. The CIRM-backed company said on Nov. 29 that the funding, which will be distributed in two tranches, will support the ongoing development of its stem cell-derived islet replacement therapies, which it says could provide a functional cure for patients with type 1 diabetes and be an important therapy for insulin-dependent type 2 diabetes patients. ViaCyte has raised $100m in 2018, including the Series D, $10m from WL Gore & Associates Inc., and $10m from its new partner CRISPR Therapeutics AG. (Also see "Venture Funding Deals: Atreca Raises $125m To Advance Solid Tumor Candidate" - Scrip, 12 Oct, 2018.) and (Also see "Deal Watch: Takeda Teams With Molecular Templates On Anti-CD38 Approach To Multiple Myeloma" - Scrip, 20 Sep, 2018.)

• Akero Therapeutics Inc. said on Dec. 12 that it raised a $70m Series B round to fund its development of new treatments for non-alcoholic steatohepatitis (NASH) and other metabolic diseases. Janus Henderson Investors led the round with participation from new investors Redmile Group, Boxer Capital of Tavistock Group, Cormorant Asset Management, BVF Partners, Rock Springs Capital and LifeSci Venture Partners, plus existing investors Apple Tree Partners, Atlas Venture, venBio Partners and Versant Ventures. The company announced its $65m Series A round barely six months ago, launching with a Phase II-ready, long-acting novel fibroblast growth factor 21 (FGF21) analog licensed from Amgen Inc.  (Also see "Akero Thinks It Will Produce A Next-Wave Therapy For NASH With Former Amgen Compound" - Scrip, 25 Jun, 2018.)

• Seattle-based Impel Neuropharma Inc., which raised a $36m Series C round at the end of 2016, said on Dec. 6 that it closed a $67.5m Series D co-led by KKR and Northwest Venture Partners with participation from prior backers Vivo Capital, 5AM Ventures and venBio Partners. (Also see "VC Roundup: Flagship’s New Fund Designed To Raise Its Stake In Startups" - Scrip, 22 Dec, 2016.) The company is developing treatments for central nervous system (CNS) disorders administered with its Precision Olfactory Delivery (POD) device. It will use the new funding to accelerate clinical development of INP104 in Phase III for acute migraine, INP103 in Phase II for the reversal of OFF episodes in Parkinson's disease and INP105 in Phase I for acute agitation in bipolar disorder and schizophrenia.

• Aprea Therapeutics in Boston and Stockholm revealed a €50m ($56.8m) Series C round on Nov. 30 to fund its ongoing discovery and development of novel anticancer drugs that reactivate the tumor-suppressor protein p53. Lead small molecule candidate APR-246 is in Phase Ib/II for the treatment of myelodysplastic syndromes (MDS) and acute myeloid leukemia. The Series C round was led by Redmile Group with participation from new investor Rock Springs Capital and prior backers 5AM Ventures, Versant Ventures, Healthcap, Sectoral Asset Management and Karolinska Development AB. The funding will allow for initiation of a Phase III trial for APR-246 in MDS. Aprea closed a $51m Series B round in March 2016. (Also see "Aprea Banks $51m Series B To Tackle 'Holy Grail' Of Oncology" - Scrip, 9 Mar, 2016.)

• Buffalo-based immuno-oncology firm Tactiva Therapeutics said on Dec. 3 that it raised a $35m Series A round to fund its development of adoptive T-cell therapies. (Also see "Tactiva Plans Cancer Trials For Next-Generation Cell Therapy" - Scrip, 9 Aug, 2017.) Panacea Ventures led the round, which had additional backing from Vi Ventures and Efung Capital. The company intends to launch clinical trials for T-cell therapies developed with its dual enhanced adoptive cell therapy (DEACT) platform in the treatment of multiple myeloma and solid tumors.

• Lumira Ventures and Domain Associates led a $25m Series A round for Atlanta's Antios Therapeutics Inc., which will be used for the development of lead drug candidate ATI-2173 for the treatment of hepatitis B and potentially hepatitis D. The round also was supported by CAM Capital, Delos Capital, Quantum Vista Capital, Fonds de solidarité FTQ and Georgia Research Alliance Venture Fund. The company's founders come from two pioneers in the development of antiviral therapies for hepatitis C – the Gilead Sciences Inc. acquisition Pharmasset Inc. and the Merck & Co. Inc.-acquired Idenix Pharmaceuticals Inc. (Also see "Pharmasset soars on $11B offer, but Gilead investors disturbed" - Scrip, 21 Nov, 2011.) and (Also see "Merck in $3.85bn Idenix buy to bolster hep C outlook" - Scrip, 9 Jun, 2014.) Antios believes that ATI-2173, with a novel – yet undisclosed – mechanism of action, could be a backbone in future one-pill, once-daily curative hepatitis B treatment regimens.

• Cambridge, Mass.-based Rheostat Therapeutics brought in $23m from a slew of biopharma corporate venture capital funds for its Series A round announced on Nov. 26. The round was co-led by Merck's MRLV and AbbVie Ventures with participation from Amgen Ventures as well as Alexandria Venture Investments and Mayo Clinic. The company is developing novel drugs that modulate mitophagy and autophagy to restore cellular balance and treat neurodegenerative diseases. SV Health Investors and the Dementia Discovery Fund incubated and provided seed funding for Rheostat. (Also see "Finance Watch: Dementia Discovery Fund Exceeds Fundraising Goal By $150m" - Scrip, 25 Jun, 2018.)

• Also headquartered in Cambridge, immunotherapy developer Checkmate Pharmaceuticals Inc. said on Dec. 12 that it raised $22m from lead investor Decheng Capital with additional backing from existing investors Sofinnova, venBio and F-Prime. The company is leveraging its expertise in CpG oligonucleotides for the discovery and development of treatments that boost the efficacy of existing immunotherapies, such as lead candidate CMP-001, which is designed for the intratumoral activation of TLR9 and has been able to reverse resistance to PD-1 inhibitors in some patients. Checkmate launched in 2015 with a $20m Series A. (Also see "FINANCE ROUNDUP: Global Blood Doubles Post-IPO, GlobeImmune Considers Options, VC Deals Surge" - Scrip, 14 Aug, 2015.) It then raised a $27m Series B round in 2017. (Also see "Finance Watch: Summer Slowdown Begins Ahead Of BIO, But Two IPOs Launched" - Scrip, 19 Jun, 2017.) The company also announced alongside its recent financing that President and CEO Arthur Krieg has moved into the newly created Chief Scientific Officer role and Barry Labinger was hired as the new president and CEO; he previously held the same roles at Biothera Pharmaceuticals Inc.

• New York-based Kallyope Inc., which is developing therapies targeting the gut-brain axis, said on Dec. 5 that it added $21m to its $66m Series B round announced earlier this year, bringing the total to $87m. (Also see "Venture Funding Deals: Celularity Launches With $250m; Generation Bio Grabs $100m Series B" - Scrip, 5 Mar, 2018.) The company has raised $131m since its launch in 2015 with a $44m Series A round. (Also see "Startups Stand Out As 13 Biotechs Raise More Than $409m" - Scrip, 18 Dec, 2015.) The Series B expansion was led by the Bill & Melinda Gates Foundation with support from Kallyope's prior investors. The company's initial development programs are in metabolic, CNS and gastrointestinal disorders.

• Versant Ventures launched Black Diamond Therapeutics – the first company to launch from the VC firm's discovery engine Ridgeline in Basel, Switzerland – with $20m in Series A capital announced on Dec. 11. Black Diamond's platform is targeting allosteric mutant oncogenes. The company is in the middle of pulling together additional financing from other investors, which is expected to be announced in 2019. It intends to take its first two drug candidates into the clinic within the next 24 months. Initial discovery and development programs are targeting groups of EGFR and HER2 allosteric mutants.

• Palo Alto, Calif.-based Spring Discovery Inc. said in a blog post written by CEO Ben Kamens on Dec. 11 that it has raised $18m in Series A funding in a round led by First Round and General Catalyst with participation from Longevity Fund, Felicis, Caffeinated Capital and other prior investors alongside new investors Zhen Fund, Susa, Village Global, SciFi and others. The firm is combining biology, machine learning and lab automation to accelerate to discover therapies for aging.

• XyloCor Therapeutics Inc. launched on Dec. 6 with a $17m Series A round led by Sofinnova Ventures and Life Science Partners to fund the development of gene therapies, including lead candidate XC001 for treatment-resistant angina, which will go into clinical trials in 2019. The Philadelphia-based company's second program is XC002, which is in the discovery stage examining the regeneration of cardiac tissue in patients who've had a heart attack.

• Another Philadelphia company, Aro Biotherapeutics, said it has brought in $13m in start-up financing to develop Centyrin protein therapeutics discovered in the lab of Karyn O'Neil at Janssen Pharmaceutical Cos., a subsidiary of Johnson & Johnson. O'Neil and Janssen veteran Sue Dillion are Aro's co-founders. Dillon, former global therapeutic area head in immunology at Janssen, is the new firm's CEO and O'Neil is its chief scientific officer. Aro's first Centyrin candidate is in late-stage lead optimization stage with the aim of treating non-small cell lung cancer.