Welcome to your Monday Biotech Deal Review for April 16, 2012. Highlights include deals by Bioniche, Valeant and Bunge and $5 million of equity financings. Read on to learn more. Read more of this post
We attended several sessions yesterday and learned about biofuels and bioproducts investment; bioingredients for food and nutrition; and strategies for profitable commercialization of renewable chemicals, among others.
In an exchange that points to the reasons over 1000 people now attend the conference, the moderator noted that few large chemical companies have invested in industrial biotech, and asked whether more will begin to do so, and whether early adopters will get a lasting advantage…
Peter Williams’ view was that other large chemical companies will move into industrial biotech and that early entrants won’t get a lasting advantage over well-funded followers. He expects a big focus on industrial biotech in China.
Brian Ames agrees that we are at the beginning of the adoption cycle and points to Dupont’s Danisco bid as a signal. He is confident that cost-driven decisions will continue to be key.
Balu Sarma agrees as well, and sees good news for young industrial biotechnology companies as he expects that large chemical companies will rely on partners to develop their own capabilities.
Fieke Sijbesma followed that comment noting that there has never been a major technological shift without the emergence of brand-new companies.
Everyone in the audience is trying to be, fund, or partner with the giants in waiting that are sure to emerge over the next 10 years in this industry. Stay tuned…
Industrial biotechnology received $1.48 billion in venture investment from 2004 to 2009, compared to $1.99 billion for biofuels and $17.48 billion for therapeutic biotech plays.
Up to 78% of industrial biotech ventures cite “operational income” as a funding source — an impressive number of revenue-generating companies.
Some notable joint ventures include Metabolix joining with Archer Daniels Midland to form Telles, a plastic biorefinery; Cargill and Dow partnering on Natureworks; and DuPont’s pending offer for Danisco.
My colleague Lucas Thacker and I will be providing coverage of the conference over the next few days, so stay tuned for posts and for tweets @crossborderbio or under #WCIBB and let us know if you’re at the conference…
FierceBiotech published the top 15 biotech VC deals of 2010 last week, measured by dollars invested. Since they noted an overall uptick in investments in 2010, it seemed like a worthwhile time to look back. Here’s what U.S. VC investment in biopharma and medical devices looked like from 2007 to 2010 (normalized to 2007 levels):
Not unexpectedly, a huge decline between 2007 and 2009, though not as big as the overall decline in VC investments. Here’s the really interesting part — the average amount invested (±1σ) among the top 15 deals each year:
Remarkably stable. Even during a period of steeply declining investment there will be standouts that generate real excitement, proving that as FierceBiotech said in 2008 ”[g]ood science will attract funding in any market.”
It’s not a surprise that good ideas always get some funding, but why do the top investees always attract the same amount? The price of admission to the top 15 between 2007 and 2010 has ranged only between $39 and $42 million.
It must be that (once a concept reaches a certain stage) the amount of money needed to really propel a life sciences company to success is constant — apparently an average of $50 – $60 million — and recognizing that, VCs will fund their best prospects to that level even at the expense of other investments. So the next time you’re contemplating a $10 million C round, keep in mind that you’re more than two standard deviations off the mean investment made when VCs really mean it. It’s an interesting idea the other way too: Pacific Biosciences, which IPO’d in the middle of its range at $16/share last October, was the top deal twice in four years (including the +2.4σ variant of $109m in 2010). It’s currently trading at $15.74, giving it a market cap of $831.43 million, just over double the reported $370 million of VC that it raised prior to the IPO.
Check out FierceBiotech’s list of the top VC investments from 2010, 2009, 2008 and 2007 and apply your own 20:20 hindsight to your heart’s content. Also, keep your fingers crossed that a 3% increase stops feeling like such a victory when we see the 2011 data.
But the basic Darwinian event — meiotic recombination and sexual reproduction throwing our alleles in a blender and the resulting offspring being tested in the crucible of life (the crucible of LavaLife?) — has until now remained intact.
No more. A recent post by Daniel MacArthur at the (always excellent) Genetic Future blog called “One more step towards the end of recessive diseases” discusses a technique to test prospective parents. This concept is not new — most Ashkenazi Jewish couples already undergo some pre-conception genetic testing for recessive disorders — but MacArthur describes a new technique to assess “the entire sequence of all genes known to be associated with Mendelian diseases.”
What is to be done with this screening information, though, and what do we do in the near future when we can cost-effectively sequence the entire genome at the cost of a routine diagnostic procedure?
Let me put it bluntly: I’ll bet you a million petri dishes that my kids* will not conceive their kids** naturally. Embryos’ genomes will be sequenced before they are implanted and parents will select — not naturally, but by rigorous computation of multivariate risks — which embryo will compete in the next generation.
MacArthur might take the other side of that bet, claiming that “it still seems fairly implausible that [In Vitro Fertilization] will become the default mode of reproduction in the near future.”
“nature has contrived a cheap, easy and enjoyable way to conceive a child; IVF is none of these things”
On the other hand:
“It seems possible that … an increasing number of parents will choose not to subject their children to the vicissitudes of natural conception and the risk of severe genetic disease”
One thing we all agree on is the incredibly powerful motivation parents feel to ensure that they have healthy children. MacArthur says “[p]arents, as a group, will simply do whatever it takes to increase the probability that their children will be born healthy” and Leroi backs that up with data showing a high rate of abortions of fetuses with medical problems, despite the stress and physical and emotional challenge of that decision.
The biosimilars market has also evolved in a couple of unexpected ways:
Teva decided not to wait for a distinct U.S. biosimilars pathway, and instead submitted a full BLA for Neupoval (which was accepted). Although Neupoval’s approval is now delayed, with the 12-year exclusivity period in the BCPI Act far exceeding similar periods in the EU and Canada, more companies may follow Teva’s approach instead of navigating the U.S. biosimilar regime.
At the JP Morgan conference last week, the CEO’s of Amgen and Biogen Idec, two companies that have been built on innovator biologics, both openly discussed their own plans to produce biosimilars. Although Amgen’s Sharer said the company “should participate in an intelligent way without disturbing the core business,” and was looking to Asian and Latin American markets, Biogen Idec’s Scangos said flatly that “[t]he next decade will be about access and cost as much as it is about innovation,” and that biosimilars are “a low risk way to generate substantial revenue.”
The Enviropig, developed in Guelph, Ontario, in 1999, produces phytase, an enzyme regular pigs lack, which helps it digest naturally occurring plant phosphorous in its feed more efficiently, which reduces feed costs and decreases the amount of phosphorus that winds up in pigs’ waste – making it less polluting. Recent coverage, from specialty (GenOmics video) to national to international (BBC video) highlights the animals’ great potential.
AquaBounty’s AcqAdvantage salmon, developed in Prince Edward Island, is even closer to approval. Although the FDA panel assigned to review the fish decided not to reach a conclusion this past Fall, they are still likely to be the first GM animal to be widely consumed by humans. The AcqAdvantage salmon grow much more quickly than their non-GM peers and are farmed under close scrutiny, thereby improving environmental impact and reducing costs and overfishing.
Nevertheless, much of Europe continues to resist growing or importing GM strains, and the U.S., traditionally a strong supported of GM crops, seems to be wavering:
With MJFF and Gates leading the way and with a continued shortage of traditional development and commercialization funding for the industry, expect to see lots more of these deals in Canada and internationally in the coming year.
“the right drug to the right patient at the right time,”
which I still don’t like as much as “Personalized Effectiveness” (my neologized mash-up), but seems to be sticking. We’re just going to call it “Personalized Medicine” for now and will continue to follow major developments. You can too, on this page.
MaRS CEO Ilse Treurnicht notes that China is now 2nd in publication of biomedical research articles globally, recently surpassed Japan, UK, Germany…Canada… Canadian expat Taylor Raborn asks: is their average publication of the same quality as those from Japan or Germany? Well, “quality” is hard to measure, of course. By citation rate, the answer is no. Nature has very cool data showing publication volume and citation rate http://bit.ly/gydYLk
IPO challenges for Anacor, Zealand, Zogenix… RT @FierceBiotech: Uphill climb gets even steeper for biotech IPOs. http://bit.ly/fQZSUg but pipeline not deterred… RT @SternIR: Looks like lots of IPOs post-JPM: Clarus and Tranzyme filed today; Acelrys last week.
The Ontario Bioscience Economic Strategy Team (OBEST)* is holding regional cluster meetings starting today that will be chaired by bioscience CEOs from across the province. OBEST launched its evergreen strategy to sustain and grow the province’s health-science industry last week with a meeting of the OBEST advisory committee, which is chaired by Dr. Daniel Billen from Amgen Canada, and includes C-level representatives from business, patient groups, government, academia, ag-biotech and Ontario’s biotech companies.
Innovative ideas are being sought from everyone with a stake in the industry via the regional cluster meetings, which will inform the Advisory Committee’s work.
A second advantage to the new look is that with a number of contributors active lately, including Jacob Cawker, Mark Curtis and Wayne Schnarr, the author’s name will now appear at the top of each post to give them the full credit they deserve.
More highlights of the new layout include news on the right that’s updated several times a day, plus top posts and trends on the left.
There are lots of collections of tips for startups that have excellent business advice on building your team, hitting product milestones and pitching to VCs; but not that many that give a corporate lawyer’s perspective. So here’s mine:*
You May be a Genius, but You Are Not a Lawyer
Your idea is brilliant and you have what it takes to be a CEO, but you are still not a lawyer (or an accountant).
Hire professionals and use them to help you figure out what you need and when.
This doesn’t have to be expensive. Figuring out priorities isn’t billable work – executing them is.
Even Though You’re Not a Lawyer, It’s Still Your Job to Read Everything
When it comes to your business the buck stops with you
You need to read and understand everything you sign
Your lawyers’ and accountants’ job includes explaining things you don’t understand
If You Don’t Incorporate, You’re Personally Liable
Unless you’ve incorporated (or formed an LP , LLP, S.a.r.l, etc.), you’re personally liable for everything done in the name of the company or by any of your partners
One you have a corporate entity, issue shares (or units, etc.) to yourself and your partners – they are the legal basis for corporate power
A Shareholders Agreement is Cheaper than a Lawsuit
Unless you’re the only founder, you need to align everyone’s expectations
Drafting a shareholders agreement will help you address key controversies in advance
Waiting until there’s a dispute is too late
Be Greedy With Your Equity
Once you have a shareholder, they are hard to get rid of
It’s tempting to use shares for compensation, advisory boards, etc.
Try to use non-dilutive cash or options instead
Make sure when you do issue equity that it doesn’t constrain your next steps
Pay Your Taxes
There are lots of taxes that apply at early stages
Payroll taxes, HST, VAT, sales taxes, etc.
You can be personally liable if your company doesn’t pay
Ignoring taxes only makes it worse
Protect Your IP
Get assignments from your inventors or institutions
Get signed development agreements before the work starts
Talk to an IP lawyer about appropriate patent filings and permissible disclosures
Separate your current job from your startup. If you use time, facilities or equipment that belong to your current employer, they could end up owning your new company’s IP.
An NDA May Ruin First Impressions
Don’t drive away potential partners or investors with premature or paranoid NDAs
Give potential investors and partners enough non-proprietary information to generate interest
If in doubt, run planned disclosures by your lawyers and existing investors
Be Honest With Your Customers
If you’re collecting personal information, you need to comply with privacy law
Talk to Your Investors
Let them know about progress and challenges
Give them advance notice of future financing rounds
* This is not legal advice (duh, it’s a blog), just my thoughts (not my firm’s – see previous) on how to use legal services efficiently when your business is new. I presented a version of these as part of Ogilvy’s How to Draft a Patent seminar at MaRS yesterday.
MaRS Innovation, the “integrated commercialization platform” responsible for commercializing inventions from 16 Toronto academic institutions, announced two deals last week. One spin-out and one out-license (pdf links).
The out-license: A sustained‐release form of nitric oxide (NO) from Prof. Ping Lee’s lab at U of T was out-licensed to San Diego-based Cardium Therapeutics (AMEX: CXM), which will pay undisclosed amounts for the technology. One form of consideration that is disclosed: a nice endorsement for MI from Cardium’s CEO, Christoper J. Reinhard, who said “MI brought great business understanding to the process. The team understood our needs quickly and they worked efficiently to get the deal done.”
The bottom line: These are two interesting and positive deals from MI, executed in pretty short order for a new organization, that deserve congratulations. We look forward to future MI deals that disclose more some detail on business terms and valuations.
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