Perkins' Pulmonx Raises Round

Rodney Perkins’ COPD company Pulmonx Inc. closed on a $20 million Series B financing, according to VentureWire Lifescience. Investors include New investors De Novo Ventures, which lead the round, Latterell Venture Partners and earlier investors Montreux Equity Partners and MedVenture Associates. For our comprehensive look at the COPD device space go here, and if you’d like the read more about Perkins check this piece.

Read More

BSX's Big Bite

Medical device VCs have been waiting patiently for Boston Scientific to fully digest the $27 billion combo meal that was Guidant, so it could resume investing and acquiring their portfolio companies at a meaningful pace. Unfortunately for those investors (and those investors' LPs), they will likely need to wait even longer than they’d anticipated.

The Natick, Mass-based medical giant made a few significant announcements this week that will surely gum up the works. First, it said it was bidding adieu to CFO Larry Best, who managed the company’s corporate venturing program. Best is retiring to become a “private investor” (which will create another interesting storyline to follow). He’ll be replaced by Sam R. Leno, the outgoing finance chief at orthopedics leader Zimmer Holdings.

A day later COO Paul LaViolette told the crowd at the Morgan Stanley Health Care Conference that BSCI is undertaking an extensive “efficiency improvement program,” and is considering selling off some of its non-core businesses.

The Wall Street Journal first reported on the comments, and WSJ.com’s Health Blog correctly identifies stents and implantable defibrillator businesses as the most likely core businesses that won't be for sale. The $10.8 billion acquisition of Biomet by a syndicate of private equity investors shows there will be some interested buyers. No doubt, hedge funds and well heeled VCs will also be browsing the Boston Scientific store.

The implementation of the "efficienty improvement program" (or perhaps EIP for short) plus the potential sale of spare parts suggests that Boston Scientific's absorption of Guidant might not be going as smoothly as indicated by CEO Jim Tobin. But the company clearly has a plan to build on its sizable cardiovascular business. It's just that plans take time, so VCs hoping to see a step up in BSX's investing and buying will just have to wait.

Read More

Denosumab: Outclast by Reclast?

Just when things couldn't look any gloomier for Amgen. After a series of setbacks the Big Biotech is relying heavily on the future success of its late-stage denosumab osteoporosis therapy. One of the main attractions of the antibody therapy is its convenient route of administration: the drug will only have to be infused twice a year--a big improvement over weekly pill-taking that can lead to poor patient compliance.

Too little too late?

In a three-year study of nearly four thousand patients, Novartis' once-a-year infusion Reclast (a.k.a. Aclasta, a.k.a. Zometa) was shown to decrease bone turnover and improve bone density at 12 months in postmenopausal women with osteoporosis. Results were published yesterday, in this week's New England Journal of Medicine.

Analysts have predicted the drug could be approved in that indication later this year. Although side effects included a higher rate of atrial fibrillation in the treatment group, the drug is on the market for other conditions, such as Paget's disease and the A-fib wasn't seen by observers as a deal breaker in osteoporosis either.

Amgen shares were down nearly two percent yesterday. Denosumab--currently being tested in a handful of late-stage trials, comprising a variety of oncology and bone-related indications--won't hit the market for postmenopausal osteoporosis until at least 2009. We'll take a look at Amgen's post-EPO R&D prospects in the May IN VIVO.

Read More

IPO Cabal? Not Really.

"Everybody knows," one prominent VC told us, "that biotech IPOs are controlled by six people.”

He may be stretching a point (not everybody knows it; there might be slightly fewer, or a couple more, fund managers in control; and control is a highly relative concept)—but, in broad strokes, no one in the financial world really disagrees. To get public, most biotechs need to convince at least some of these investors to buy in—and because they need to do so, these investors can keep the price low—in a very narrow band of market value.

So who are these investors? Among 'em are Kris Jenner of T. Rowe Price, Bill Slattery of Deerfield, les frères Baker from Baker Biotech, and Adam Koppel of Bain. But the point is--the list ain't long. (More on this in the May issue of Start-Up).

So if there are billions of dollars washing around in the market, why are there so few biotech IPO investors that matter?

One reason--somewhat counterintuitive--is that biotech IPOs look less like public venture capital than they used to. In the old days, and particularly in the gravity-defying genomics-enamored market of 2000, companies could go public with very early-stage assets. Trying to figure out whether they'd succeed was an almost complete crap shoot, and so due diligence was comparatively less important. Good for uncovering fraud; or managerial incompetence, perhaps. But not much help with figuring out whether a drug would work, or whether doctors would prescribe it if it did. In 2000, the average fund manager--indeed, the average individual investor--wasn't at a huge informational disadvantage to the knowledgeable investor (there were other disadvantages, of course--like whether he could get a piece of a hot IPO, which would be generally reserved for favored fund managers).

No more. Biotechs virtually can't go public without late stage assets--and those are ripe for due diligence. The usual IPO roadshow -- 20 minutes with the management per investor -- doesn't allow for any real understanding, which leaves just a few experienced investors that anyone who wants to go public must spend time with, and who have probably seen plenty of similar companies come down the pike. In this world, experience counts. And can be used to keep IPO prices down.

Some companies are trying to get around this problem by packing so-called crossover investors -- who can invest in both private and public companies -- into their mezzanine rounds, giving them time to get to know them and thereby seeding the IPO with long-oriented investors who can make their money both on the private-to-public step-up as well as on further public appreciation. But there aren't a lot of those opportunities.

In the first place, some venture investors don't want to bring in crossovers into their mezzanine rounds when their object is to sell the company, not take it public.

And high-quality companies that could go public have sometimes put themselves into positions where they can't. Take Perlegen, which just yanked its IPO filing (and shook up its management team): it had plenty of crossovers among its investor group. But it couldn't pull of the offering, most importantly because its lead drug/diagnostic didn't work. And yet it wasn't getting much traction anyway. The company had raised $256 million privately and, in a world where pre-money IPO valuations are averaging $150-200 million, no one wanted to take that kind of haircut on price.

In short, there may be an IPO cabal. But the peculiarities of biotech keep it in business.

Read More

GSK's War of Succession

It's GlaxoSmithKline's turn to find a new chief executive, after incumbent JP Garnier retires next May. Apparently there's no shortage of internal candidates: three senior executives are battling for the position, according to the UK's Daily Telegraph.

Like a roman emperor--or, a more contemporary analogy, The Apprentice's Donald Trump--JP has chosen to watch the three wannabes fight it out in the corporate ring over the next year.

David Stout, president of global pharmaceuticals, is tasked with re-thinking supply-chain management. Chris Viehbacher, head of US pharmaceuticals, must work out how to improve GSK's public image, and Andrew Witty, Viehbacher's European counterpart, needs to sort out marketing; he's testing "new selling models" in a dozen world markets, according to an insider.

They’re big tasks, requested on top of the day job. But it’s a big reward, too—not just the kudos of running one of the largest drug firms (and, according to analysts, one with an above-average pipeline), but large pay-checks. One of the many controversies around JP’s reign was his fat-cat pay package, famously thrown out in 2003 by irate investors—the first such embarrassment for a FTSE-100 company chief.

It’s an unusual way of selecting a successor--AstraZeneca, Merck and Pfizer (which picked a relative outsider) apparently didn't have such a choice of candidates when they appointed new CEOs over the last year or so--but one which has merits. Each of the tasks is important to GSK’s future, and this is one sure way of making sure they’re tackled. And whoever wins will be able to build on the output of all three projects.

When the candidates enter the boardroom on judgment day, one of them will be hired. It’s unlikely that the other two will stick around to see their projects through, however.

Source: Telegraph

Read More

Celtic and Novartis: Nic Fix

You probably could have predicted it.

First, Cytos Biotech announced last week that Novartis was paying SF35m ($29m) upfront, and promising another SF565m ($468m) in clinical and sales milestones, to buy rights to the Swiss biotech's anti-smoking vaccine. Cytos' project is a Phase II antibody that binds nicotine, making it too big to cross the blood-brain barrier, thus removing the kick from smoking -- and, with any luck, the craving.

A few days later, Celtic Pharma issued a press release on the filing of an IND for its anti-smoking vaccine program -- likewise an antibody that binds nicotine, making it too big to cross...etc. etc. Celtic's vaccine comes from the now vanished British biotech Xenova, who'd done some human testing and found it safe, at least, and with hints of efficacy. Certainly efficacious by analogy. And in any event, not far in development timeline behind the Cytos project. Who'll open the bidding?

In all this smoke, there's a faint whiff of the erectile-dysfunction wars, when Pfizer's PDE-5 Viagra was followed by ED drugs from Bayer and Icos/Lilly...only to see the market, driven by huge DTC spending, suddenly stall. (sorry, no pun. -ed.)

But there's a better analogy: the boom-bust cycle of the nicotine patches of the early 1990s. Produced by drug-delivery companies Alza, Elan, Cygnus and LTS Lohmann, and licensed to Big Pharmas Marion Merrell Dow, Lederle, Warner-Lambert and Novartis-predecessor Ciba-Geigy, analysts envisioned a huge market of wannabe quitters. Indeed, initial sales soared--and then just as suddenly plunged as smokers found that the nicotine patches offered no easy solutions. One assumes that Novartis still has a few ex-Ciba marketers who remember the story and its lessons.

Of course, if the vaccines work brilliantly, they might defy history--and Novartis will have gotten itself a bargain. Meanwhile, Celtic Pharma--effectively a private equity group which buys compounds and hopes to sell them off at a significant profit--may not have to worry too much about the drug's eventual sales if the deal it can sign provides it a healthy enough exit. Celtic, in short, may not have to worry about repeating history, if it can just avoid it.

Read More

Locking the Sample Cabinet

Maybe nothing lasts forever
not the mountains or the sea
but the times we had together
they will always be with me
- The Samples “Nothing Lasts For Long”

It's a potent weapon in pharma's arsenal. But is drug sampling on the way out?

The New York Times has a story today about a handful of leading academic medical centers and physician practices restricting or eliminating drug samples. While the drug industry--or more specifically, the drug industry information providers IMS and Verispan--yesterday prevailed in its quest to overturn New Hampshire law forbidding gathering of physician prescription data there, knowing which docs prescribe which drugs and how often will be of less use if reps can't drop in and drop off drug samples.

This isn't necessarily news: the University of Michigan Health System has banned drug samples since 2002. The upshot? Docs and students there practice "without the influence of drug samples, encouraging them to prescribe higher cost brand name medications when a generic or lower cost brand would work as well." But sampling proponents contend that (among other benefits), freebies can be helpful for patients concerned about costs--after all, a free drug costs less than a drug that's, well, not free.

And a new Booz Allen survey published in IN VIVO shows that it's not just the poorest patients who are affected. As more consumers take on much bigger shares of the health costs, say the consultants, they've started to focus on price, including the price of drugs--often going so far as to reject their doctors' recommendations to save money.

So, sampling is good? Maybe, in some cases. But in general sampling is designed to make money for pharmaceutical companies over the long haul, whether or not it saves patients a few bucks at the outset of treatment. Sadly, there's no such thing as a free drug, most of the time.

Despite a few locked cabinets here and there, drug sampling isn't going away quite yet. But these sampling skirmishes are another issue for primary care drug marketers to worry about. Another reason why the appeal of specialty drugs continues to grow.

Read More