12:00 AM
 | 
Apr 05, 2004
 |  BioCentury  |  Finance

Ebb & Flow

Private investors continued their love affair with the life sciences, as Alta Partners raised $475 million for two funds last week, and - in a slight change of direction - all of the money will go to the life sciences.

When the firm started marketing the funds last year, it had planned to raise a later-stage biotech fund and a diversified IT early-stage biotech fund. But based on the response from investors, Alta changed the planned diversified fund to an early- stage biotech fund, according to general partner Farah Champsi.

Alta raised $180 million for the early- stage fund - Alta California Partners IV - and $300 million for the later-stage fund - Alta BioPharma Partners III. That exceeded its original goal of $150 million for the former and $250 million for the latter. Alta now plans to raise a separate IT fund next year.

Having gotten a few portfolio companies through the IPO window didn't hurt Alta's marketing efforts. "It helped to have five IPOs that have priced," Champsi noted. These include ophthalmic play Eyetech (EYET), cardiovascular company Corgentech (CGTK), cancer and infectious disease company Xcyte (XYCT), allergy/autoimmune drug developer Dynavax (DNVX) and CNS play Renovis (RNVS).

Alta has four more companies in the IPO queue: cardio-pulmonary in-licensor CoTherix, CNS companies Memory and Corcept and cancer company Cytokinetics.

Alta received substantial participation from existing LPs such as the California Public Employees' Retirement System; TIAA-CREF; Teachers' Merchant Bank; clients of Shott Capital Management; Adams Street Partners; Auda Ventures; Commonfund Capital; Diamond Capital Management (agent for the Dow Employees' Pension Plan); FLAG Capital Management and OMERS. Alta now manages seven venture funds totaling more than $1.5 billion.

Busy VCs

Indeed, VCs continued to put their money to work, with cancer companies doing especially well.

Eximias raised $63.5 million in a series D round co-led by Cross Atlantic Partners and Quaker BioVentures. The company expects to complete by year end enrollment of its Phase III trial of Thymitaq synthase inhibitor in liver cancer. Other investors included New Enterprise Associates; OrbiMed; Birchmere; Easton Hunt Capital; Cross Atlantic Capital; Pacific Rim Ventures; and Emerging Technology Partners. Ferghana Securities served as placement agent and advisor.

Salmedix raised $45 million in a series C round led by HIG Ventures. Other investors included OrbiMed; Easton Hunt; Hunt Ventures; Novo A/S; Quilvest Capital; Clariden Bank; InterWest; Versant; Alexandria Equities; CMEA; Delphi; ProQuest; Ventures West; Aberdare Partners; GeneChem; and BioFrontier Global Investment Partnership. The company's SDX-105 bendamustine alkylating agent is in Phase II/III testing to treat non-Hodgkin's lymphoma (NHL).

Kemia raised $33.5 million in a series B round led by JPMorgan. The company expects to start clinical trials early next year with its lead compound, a p38 kinase inhibitor. Other investors included Novo A/S; Hamilton

Apex; Alta Partners; Forward Ventures; Texas Pacific; TPG Ventures; and Novartis BioVentures.

RNAi company Nucleonics raised $40.9 million in a series B round led by New Enterprise Associates. The company plans to submit its first IND in 2005 for its expressed interfering RNA therapy, which is in development to treat chronic HBV and HCV. Other investors included HealthCap; Burrill & Co.; Anthem Capital; POSCO BioVentures; and S.R. One.

In Europe, Evotec Neurosciences, a subsidiary of Evotec OAI(FSE:EVT), raised E25 million ($30 million) in a series A round led by TVM Techno Venture Management. Other investors included 3i; MVM; Ventech; Star Ventures; and private individuals. Evotec Neurosciences recently in-licensed exclusive rights to NMDA receptor NR2B subtype selective antagonists from Roche (SWX:ROCZ) to treat CNS disorders (see Strategy, A7).

IPOs: Softness reigns

If VCs are busy filling the front end of the pipeline, most have to be less enthusiastic about their exit route, as most of the IPO news last week was sour. The one deal to get out - Santarus(SNTS) - did so well below its hoped-for valuation, following a trend seen over the two prior weeks.

The gastrointestinal company raised $54 million through the sale of 6 million shares at $9, giving it a post-money valuation of $255 million. That's $85 million below the $340 million valuation SNTS would have had if it had gone out at the mean price of $12. Its Rapinex powder-for-suspension omeprazole is under FDA review for GI bleeding, and the company expects agency action in June.

The market did like the pricing: SNTS gained $2.37 (26%) to close the week at $11.37. Banks were SG Cowen; UBS; Thomas Weisel Partners; and RBC Capital Markets.

Half-off sale

While SNTS priced $2 below its low end, Memorymay need a deeper cut to do the trick. After delaying its IPO the prior Thursday, the CNS drug developer cut the proposed price for its 5 million share deal to $7. That price would value the company at $136.5 million, 50% below the $273 million valuation that would have resulted from its previously proposed mean price of $14.

Memory is now slated to price today or tomorrow....

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