Ebb & Flow

Last week saw two series D rounds go in opposite directions. Cancer play Nereus opted for a two-part financing, and maintains that having milestone-contingent money is important for discipline. On the flip side, drug delivery play Alexza says that having all the cash up front will let it focus on its business.

Nereus' round gives a glimpse at the types of milestones venture investors may require before they double down. The preclinical company raised $24.3 million in a first closing and hopes to tack on an additional $18.3 million. To do so, it will need to get two active INDs on file.

"There was lots of debate among both the board and among investors about how big the round should be," said President and CEO Kobi Sethna. The parties decided on a total that should last two to three years and take Nereus' lead compounds into Phase II trials.

"The tranched round is a fair concept," Sethna said. "The VCs get to manage their valuation risk, and from a management perspective it creates a discipline that's important to have."

Although the money is there if the milestone is met, Nereus isn't bound to take the second installment. "Under certain circumstances, such as a massive corporate deal, we may not have to take the second tranche," Sethna noted.

Nereus' first IND filing, expected early this year, will be for its NPI-2358 tumor vasculature disrupting agent. In the second half, the company plans to file an IND for NPI-0052, a second-generation proteasome inhibitor to treat multiple myeloma.

Investors in the D round included HBV BioVentures; HBM BioCapital; Advent; InterWest; Genavent; Red Abbey; Alta; Forward Ventures; GIMV; Novartis Bioventure Fund; Pacific Venture Group; FirstBio; and Lotus BioScience.

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