Ebb & Flow

Venture capitalists demonstrated their appetite for public biotech companies last week by dropping more than $160 million into three companies. Cadence (NASDAQ:CADX) scooped up $86.6 million in a placement of 12 million shares at $7.13, Affymax (NASDAQ:AFFY) raised $42 million in a placement of 2.8 million shares at $11.25 and 650,000 units at $15.33, while Norway's Algeta (OSE:Algeta) said that it was raising $35 million in a private placement at NOK11.

All three deals were significantly below the biotechs' IPOs: Cadence went public in October 2006 at $9, Affymax went public in December 2006 at $25 and Algeta went public in March 2007 at NOK47.

Balance building

Neurology company Cadence more than doubled its cash in a deal led by new investor Venrock Associates and including Bay City Capital, Domain Associates, Frazier Healthcare Ventures, T. Rowe Price Associates and New Enterprise Associates. NEA is also new to the company.

Cadence had about $61 million in cash at the end of 3Q08, up from $55 million at the start of 2008 after raising $49.3 million last February.

"It was well known that we would have to do a financing in 2009," CFO Bill LaRue told Ebb & Flow. But when the company began looking at its options, the public market was firmly closed.

"We also wanted to raise more than the $60 million we had on the shelf so we decided to take this route," he said.

While a few other companies have been able to complete follow-on offerings this year, in most cases the size of the deals has been smaller than what Cadence needs to advance its programs.

In the past few weeks, cancer company Seattle Genetics (NASDAQ:SCGN) raised $55.8 million, stem cell company Geron (NASDAQ:GERN) collected $56.3 million, pulmonary company InterMune (NASDAQ:ITMN) picked up $62.9 million. Vertex (NASDAQ:VRTX) is the notable exception in terms of deal size, raising $320 million in its follow-on last week (see below).

Cadence, which priced its transaction at the market rate last week, has seen its shares rise 10% since Dec. 17 after reporting data from a pair of Phase III trials of Acetavance, an IV formulation of acetaminophen. Study 304 to treat post-operative pain following abdominal laparoscopic surgery met the primary endpoint of a statistically significant reduction in pain. In Study 351, the

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