Biotech still relying on friends for financing in 2012

If debt financing was all the rage last year for big pharma players, good old-fashioned tapping of existing and new shareholders remained the preferred method of filling the coffers for many mid-sized companies in 2012 (How Pharma learned to stop worrying and love the debt, January 21, 2013).

Although this form of financing tends to be more expensive it does not rely on companies actually coming up with money to pay off debt, making it perfect for biotechs. And as the likes of Sarepta Therapeutics and Puma Biotechnology have shown, it continues to be an excellent way of cashing in on good news (see tables below).  

The sums of money raised last year, topped by the $249m obtained by BioMarin, also reflected the health of the sector, which saw the Nasdaq Biotech Index produce one of its best performances in more than a decade, leaving many companies able to take advantage of their rising share prices.

Seize the day and the money…

For BioMarin in particular it was a case of making hay and some serious cash while the sun was shining. The group put out a surprise call to investors in May after its shares hit a three-year high. The gamble paid off following a series of positive data readouts including for its Morquio A syndrome treatment, GALNS, which have left the stock even higher at record levels (Event – BioMarin seeks stellar data to back up stellar valuation, August 2, 2012).

Sarepta, one of the runaway performers for last year (Sarepta joins the big league as best-performing 2012 share, January 9, 2013) owed its ability to replenish the coffers to positive phase IIb results from Duchenne muscular dystrophy drug, eteplirsen. After the data was published in October the shares tripled; Sarepta sensibly raised $118m in December. Infinity, which had a bad start to the year, also managed to raise $172m after positive phase I data for its blood cancer product IPI-145.

On the other side of the coin both Idenix Pharmaceuticals and Vivus showed great presence of mind – or perhaps luck – in getting their placings completed before their shares were hit by bad news. Idenix must have won few friends when it completed its $191m placing on August 2, and then announced a mere two weeks later that the FDA had slapped a partial hold on its lead product, IDX-184, causing its shares to fall 30% on the day.

After its February $202m fundraising Vivus saw its shares fall sharply thanks to failure to get European approval for its weight-loss drug, Qsymia, as well as investor disquiet over its US launch strategy.

Also included in the list of top follow-on financings are companies that might have saved their time drumming up investor interest. Amylin and Ardea saw the cash they raised folded into other treasuries following takeovers by AstraZeneca and Bristol Myers Squibb in the case of Amylin, and AstraZeneca alone in the case of Ardea.

Significant follow-on fundraisings of 2012
Rank Company Amount Raised ($m) Month
1 BioMarin Pharmaceutical 249 May
2 Amylin Pharmaceuticals 203 March
3 Vivus 202 February
4 Idenix Pharmaceuticals 191 August
5 Infinity Pharmaceuticals 172 December
6 Ardea Biosciences 166 February
7 Rigel Pharmaceuticals 136 October
8 Puma Biotechnology 129 October
9 Exelixis 127 August
10 Sarepta Therapeutics 118 December

Hitting the pipe

The strength of public equity placings in 2012 was matched by interest from private investors wanting to put their money into public companies.

Tellingly, three of the top 10 public investments in public equity, or Pipe fundraisings, were directed at Chinese companies last year, showing the growing interest in the region and the willingness of both domestic and foreign investors to tap this increasingly important market.

The two companies in third and fifth place for biggest Pipe funding both approached private investors to help them get their products closer to market. Their stories, however, are very different.

ThromboGenics suspended its usual rule of giving existing shareholders preferential rights to buy new shares in order to help it commercialise the vitreomacular adhesion (VMA) drug Jetrea and research additional indications. The drug was approved in October and is forecast to generate royalties of $86m by 2018 (Steady Thrombogenics must now deliver on Jetrea’s commercial promise, October 18, 2012).

In stark contrast, Mannkind’s long, tortuous struggle to get an inhaled insulin treatment, Afrezza, to the market meant that rather than stoking outside interest it was again largely left to its founder, Alfred Mann, to provide the company with its latest fundraising lifeline.

Mr Mann now owns more than 75.5 million of the group’s 246 million shares. Whether he will get any of his money back is debatable, and the insulin market is moving on rapidly, meaning that there might not be a sizable market for Afrezza even if it does get approved.

But even without Mr Mann’s faith in his product propping up the total of large Pipe fundraising last year, the continued strength of the whole sector meant that 2012 was certainly a good year for those trying to get money.

Significant Pipe fundraisings of 2012
Rank Company Amount Raised ($m) Month
1 Zhejiang Conba Pharma 276 May / December
2 Zhejiang Medicine 254 August
3 MannKind 194 February / October
4 Chongqing Huapont Pharmaceutical 148 March
5 ThromboGenics 103 March
6 Cell Therapeutics 100 May / October
7 Genmab 84 October
8 A.P. Pharma 54 July
9 Horizon Pharma 51 February
10 Algeta 45 February

To contact the writer of this story email Lisa Urquhart in London at lisau@epvantage.com or follow @LisaEPVantageon Twitter

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