Global Biotech Financing Up in First Quarter

By Patricia Van Arnum - DCAT Editorial Director

April 8, 2014

Global and US venture-capital funding is up in the first quarter and the number of global and US IPOs increases year over year.

Financing into the global and US biotech sector is an important barometer of the health of that sector and is an indicator for contract development and manufacturing organizations, contract manufacturing organizations, and other suppliers providing contract services to emerging/small pharmaceutical/biopharmaceutical companies. An analysis of first-quarter results shows venture-capital funding up globally in the US comparative to the first quarter 2013 with gains of more than 20%. The number of initial public offerings (IPOs) is also up year over year both globally and in the US, both positive signs. 

IPOs on the rise
The number of IPOs increased on both a global and US basis in the first quarter of 2014 comparative to the first quarter of 2013 although the amount raised from these deals increased only nominally globally and declined in the US. In the first quarter of 2014, there were 41 IPOs on a global basis that raised $3 billion compared to only seven IPOs in the first quarter of 2013 that raised $2.9 billion, according to information from Burrill Media, a sister company of Burrill Equities, a financial services firm focused on the life-sciences industry (1). The amount raised in 2013 was principally due to one deal: the $2.6 billion raised by Pfizer's animal-health spinoff Zoetis. In the first quarter of 2014, there were 34 IPOs in the US that raised $2.3 billion compared to only six IPOs in the first quarter of 2013 that raised more than $2.9 billion (see Figure 1), according to the Burrill analysis. In March 2014, alone, 15 companies completed IPOs on a global basis, raising $1.3 billion, with the 12 IPOs in the US raising $911 million, according to the Burrill analysis. That compares to just two IPOs in March 2013 that raised $145 million.

 Figure 1:  2014 First Quarter Biotech Financing
       
   Quarter 2014  Quarter 2013  Change
       
 Global Venture Capital  $3.294 billion  $2.705 billion  21.8%
 US Venture Capital  $2.570 billion  $2.025 billion  26.9%
       
 IPOs
 (41 IPOs in 2014  versus 7 in 2013)
 $3.007 billion  $2.893 billion  4.0%
 US IPOs
 (34 IPOs in 2014 versus 6 in 2013)
 $2.347 billion  $2.869 billion  -18.2%
       
 Global PIPEs  $2.007 billion  $770 million  160.7%
 US PIPEs  $757 million  $253 million  199.7%
       
 Global Follow-ons  $5.035 billion  $2.647 billion  90.2%
 US Follow-ons  $4.368 billion  $2.585 billion  69.0%
       
 Global Other Equity  $119 million  $328 million  -63.8%
 US Other Equity  $110 million  $271 million  -59.5%
       
 Global Debt Offerings  $7.781 billion  $8.817 billion  -11.8%
 US Debt  $7.049 billion  $7.005 billion  0.6%
       
 Global Other Debt  $2.083 billion  $3.771 billion  -44.8%
 US Other Debt  $552 million  $1.093 billion  -49.5%
       
 Total Global Public Financing  $20.032 billion  $19.226 billion  4.2%
 Total US Public Financing  $15.183 billion  $14.076 billion  7.9%
       
 Global Partnering  $12.069 billion  $8.922 billion  35.3%
 US Partner/Licenser  $7.333 billion  $6.963 billion  5.3%
       
 Global M&A  $47.482 billion  $16.352 billion  190.4%
 M&A, US Target  $43.174 billion  $6.834 billion  531.7%
       
 IPO is initial public offering. PIPE is private investment in public equity. M&A is mergers and acquisitions
 Source: Burrill Media, Press Release, April 1, 2014

 

The largest IPO in the first quarter was the $335.5 million raised on the London Stock Exchange by Circassia, a specialty biopharmaceutical company focused on developing immunotherapies. According to the Burrill analysis, this IPO was the largest biotech IPO ever on the London Stock Exchange. A second IPO on the London Stock Exchange was completed by Horizon Discovery, which is focused on gene-editing technology. The Burrill analysis noted that there 27 companies publicly on deck to complete a public offering in the United States at the end of the first quarter 2014, and four companies had filed in France.  

Globally, life-sciences companies raised $20 billion in new capital in the public market in debt and equity during the first quarter of 2014, 4.2% above the $19.2 billion raised in the year-ago period (see Figure 1), according to the Burrill analysis. Unlike the first quarter of 2013, however, the money raised through equity offerings was greater than the money raised through debt. Companies raised $10.2 billion globally in public equity in the first quarter of 2014, 53% more than the $6.6 billion raised through such issues during the same period last year, according to the Burrill analysis. 

At the same time, $9.8 billion was raised through debt issues in the first quarter of 2014, 21.6% less than the $12.6 billion raised through such issues in the first quarter in 2013. The Burrill analysis notes that a large portion of the differences is attributable to the surge in follow-on offerings. Life-science companies raised $5 billion globally through follow-on offerings during the first quarter of 2014, up 9% compared to the $2.6 billion raised in the first quarter of 2013 (see Figure 1).

Venture-capital funding strong
Venture-capital funding was strong on both a global and US basis. Global venture-capital funding increased 21.8% year over year from $2.7 billion in the first quarter of 2013 to nearly $3.3 billion in the first quarter of 2014, according to the Burrill analysis. US venture-capital funding was equally robust, increasing nearly 27% from $2.0 billion in the first quarter of 2013 to nearly $2.6 billion in the first quarter of 2014 (see Figure 1). Top financing deals with venture-capital funding in March 2014 include the $100-million launch funding of Adapt Pharma, a private equity-backed specialty pharmaceutical company based in Dublin, Ireland. Adapt Pharma is focused on the US market and is led by the same team that founded Azur Pharma, plc. Azur Pharma merged with Jazz Pharmaceuticals, plc in 2012.  Adapt Pharma was founded in November 2013.   

Other noteworthy deals include the $76.4 million raised by the German biotech company Glycotope. The Glycotope Group consists of Glycotope GmbH, based in Berlin, Germany and its 100% subsidiary, Glycotope Biotechnology, based in Heidelberg, Germany. Glycotope specializes in optimizing the glycosylation of biopharmaceuticals and is developing proprietary anticancer drugs using that technology as well as offers contract services. Another key deal in March was the $70-million launch of Human Longevity, a new company co-founded by Craig Venter, known for his contributions to the sequencing of the human genome, which will focus on developing personalized medicines to treat diseases of aging using genomic sequencing. 

M&A and partnering up
Mergers and acquisitions (M&A) were up globally and in the US. Global M&A activity increased 190% in the first quarter of 2014 comparative to the first quarter of 2013 from $16.3 billion in the first quarter of 2013 to nearly $47.5 billion in the first quarter of 2014 (see Figure 1), according to the Burrill analysis. For M&A activity with US targets, M&A increased more than 500% from $6.8 billion in the first quarter of 2013 to $43.1 billion in the first quarter of 2014. The total deal value, on both a global and US basis, was largely augmented by the $25-billion bid by Actavis for Forest Laboratories, which was announced in February 2014. The largest deal in March, according to the Burrill analysis, was Horizon Pharma's $660-million deal for specialty pharmaceutical company Vidara Therapeutics. Other noteworthy deals in the first quarter included Mallinckrodt's $1.4-billion acquisition of Cadence Pharmaceuticals and the $2.9-billion acquisition of Aptalis by Forest Laboratories. 

Global partnering disclosed deal values increased 35% to $12 billion in the first quarter of 2014 comparative $8.9 billion in the first quarter of 2013 (see Figure 1), according to the Burrill analysis. The analysis noted that although deal values were ahead of last year, deals with disclosed values were few in number and small in total deal value in March 2014, down 74% compared to March 2013. Partnering deals involving a US partner/licenser were up modestly in the first quarter of 2014, up 5.3% from nearly $7.0 billion in the first quarter of 2013 to $7.3 billion in the first quarter of 2014 (see Figure 1). 

The largest deal in March 2014 was the discovery collaboration in immunology between Five Prime Therapeutics with Bristol-Myers Squibb. In that deal, Five Prime will receive $20 million in an upfront payment and $9.5 million in research funding and is eligible to receive up to $300 million in milestone payments. Bristol-Myers Squibb also made a $21-million equity investment in the company.  

Another key deal from the first quarter 2014 was a second research collaboration and global licensing deal between the Belgian biopharmaceutical company Ablynx and Merck & Co. for cancer immunotherapies worth up to EUR 1.7 billion ($2.34 billion). Ablynix is a developer of proprietary therapeutic proteins based on single-domain antibody fragments called Nanobodies®. The deal focuses on the discovery and development of several predefined Ablynx nanobodies that target immune checkpoint regulators. Merck will pay Ablynx EUR 20 million ($27.5 million) upfront and EUR 10.7 million ($14.7 million) in research funding over the first three years. Ablynx is also eligible for up to $2.3 billion in development, regulatory, and commercial milestones, plus royalties.

In January 2014, Edison Pharmaceuticals formed a strategic alliance valued up to $4.295 billion with Dainippon Sumitomo Pharma Co., Ltd. (DSP) for
the development of drugs targeting cellular energy metabolism. Under the agreement, DSP—will gain select development and commercialization rights in Japan and North America to jointly
discovered drugs in exchange for $10 million upfront and a $40 million payment in R&D support. In addition, DSP—will fully fund the development of 10 new jointly discovered drugs through investigational new drug filing sand broaden its rights to EPI-589, a drug to treat central nervous system disorders and currently in Phase IB, to include North America. In exchange, Edison will be eligible to receive in total between $30 million and $105 million per indication associated with successful development of EPI-589 in North America; between $10 million and $30 million per indication in development milestones associated with successful development of jointly discovered compounds in Japan and North America; up to $3.86 billion in commercial milestone payments for jointly discovered compounds and EPI-589 in total; and double-digit royalties on commercial sales. DSP will also invest $50 million in Edison through a preferred stock purchase agreement. At the discretion of Edison, DSP shall invest an additional $50 million in the period between the first and fifth anniversaries of the initial equity closing. Edison's deal with Dainippon builds on an agreement signed between the companies in March 2013 for the development of EPI-589.

Reference
1. Burrill Media Inc., "Biotech's Boom Suffers a Setback in March" Press Release (April 1, 2014).

In January 2014, Edison Pharmaceuticals formed a strategic alliance valued up to $4.295 billion with Dainippon Sumitomo Pharma Co., Ltd. (DSP) for
the development of drugs targeting cellular energy metabolism. Under the agreement, DSP
will gain select development and commercialization rights in Japan and North America to jointly
discovered drugs in exchange for $10 million upfront and a $40 million payment in R&D support. In addition, DSP
will fully fund the development of 10 new jointly discovered drugs through investigational new drug filing sand broaden its rights to EPI-589, a drug to treat central nervous system disorders and currently in Phase IB, to include North America. In exchange, Edison will be eligible to receive in total between $30 million and $105 million per indication associated with successful development of EPI-589 in North America; between $10 million and $30 million per indication in development milestones associated with successful development of jointly discovered compounds in Japan and North America; up to $3.86 billion in commercial milestone payments for jointly discovered compounds and EPI-589 in total; and double-digit royalties on commercial sales. DSP will also invest $50 million in Edison through a preferred stock purchase agreement. At the discretion of Edison, DSP shall invest an additional $50 million in the period between the first and fifth anniversaries of the initial equity closing. Edison's deal with Dainippon builds on an agreement signed between the companies in March 2013 for the development of EPI-589 Reference 1. Burrill Media Inc., "Biotech's Boom Suffers a Setback in March" Press Release (April 1, 2014).