Business and Science for BD & others
#61, July 2011
Biotechs raise much more money; VC cautiously increasing in seed stage
Biotech companies raised a total of $13.3 billion in the first half of 2011, up 64% from the first half of 2010. $4.6 billion was raised in initial and follow-on public offerings, with follow-on investing for product launches in companies such as Seattle Genetics and Exelixis. Alternative financings (PIPES, loans, etc) of public companies garnered $6.6 billion, with the BioWorld blog saying the new fundraising mechanism of choice is the wall-cross follow-on offering, in which companies market a deal privately for a few days and then sell the rest publicly. VCs invested $1.9 billion in healthcare during the second quarter, up 16% from a year ago. Most of the increase in VC dollars was driven was a handful of mid and late stage deals, but seed stage was up to 5% from 1% the prior quarter. http://bioworld.blogs.bioworld.com/2011/07/11/first-half-biotech-fundraising-what-you-need-to-know/ http://www.medcitynews.com/2011/07/healthcare-venture-capital-investment-hits-five-quarter-high/
NSCLC screening – reduced mortality by 20% but 95% false positives
Screening with low-dose spiral computed tomography (CT) reduced mortality from lung cancer by 20% in the high risk study population, smokers who are 55 to 74 years of age. But before we all sign up for the expensive procedure, note that the screening had 95% false positives, leading to excess biopsies and surgeries. http://www.medscape.com/viewarticle/745870?src=mpnews&spon=7
Comparing Pfizer and Lilly paths to growth
Pfizer is narrowing its focus on pharma. Animal health and nutrition are to be sold within the next two years. These moves mean that Pfizer will be more dependent on its drug pipeline to fuel growth. But, the percentage of revenues committed to R&D is smaller at Pfizer than at many companies and is expected to fall to 10-11% next year as R&D cuts take effect, a percentage comparable to Abbott, near the bottom of the big companies. The top ten companies average 18%. http://www.pharmalot.com/2011/05/why-pfizer-cant-shuffle-its-deck-evans-explains/ http://www.wptv.com/dpp/lifestyle/pets/Copy_of_pfizer-may-sell-animal-health,-nutrition-units-wfts1310912581060 http://www.pharmalot.com/2011/07/quote-of-the-day-pfizer-rd-not-in-a-good-position/
Lilly is investing heavily in R&D, possibly up to 25% of sales, a percentage at least comparable with Merck, Roche, and BMS. Lilly is also increasing its diversification with the purchase of the European animal health assets from Pfizer and J&J, and more emphasis on growing in Japan and emerging markets. Lilly continues to explore new business models, recently creating a critical care company with private investors, contributing Lilly preclinical compounds as well as the sepsis drug Xigris. Lilly also has set up Mirror Portfolios to invest in early stage research, receiving preferential access to molecules managed by the funds. Lilly also offers the investment funds the fee-for-service work by its CRO model Chorus. http://www.stocksgonewild.com/news-releases/201107459-eli-lilly-co-updates-its-patent-strategy/ http://thebigredbiotechblog.typepad.com/the-big-red-biotech-blog/2011/05/pharmtech-talk-eli-lillys-new-biotech-company-builds-on-alliance-strategy htmlhttp://blog.pharmtech.com/2011/05/24/eli-lilly%E2%80%99s-new-biotech-company-builds-on-alliance-strategy/
Investors getting returns in licensing deals
With the IPO market still not a viable route for most companies to provide cash to their exit-hungry VCs, licensing deals are being structured to provide “exits” for investors. Forma Therapeutics licensed a tumor metabolism program to Genentech, with an option for Genentech to buy the program outright and provide a cash payment to the VCs, while the VCs keep their equity in Forma and its other programs. Last year Knopp Neuroscience paid its investors a dividend in its license deal with Biogen Idec for a Phase II ALS drug. Index Venture and Atlas Ventures are structuring asset-based financings, so that a deal is an exit on an asset by asset basis. Similarly, Nimbus is staying as an LLC to return cash to its investors without a tax hit. The LLC holding company contains molecule-specific C-corp subsidiaries, so each time a drug candidate is licensed, it is effectively an acquisition, with separate IP and data packages. http://invivoblog.blogspot.com/2009/12/2009-exitsfinancings-doty-candidate.html http://4.bp.blogspot.com/-qu34KyT_H5Q/Tgu3sjbsvCI/AAAAAAAAAC4/r6kXhlhD8Nc/s1600/dealsweek.JPG>
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