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12:00 AM
Jul 07, 2008
 |  BioCentury  |  Finance

Ebb & Flow

Fewer than one-fifth of the 660 or so VCs queried by the National Venture Capital Association and Thomson Reuters expect the IPO window to re-open this year.

That’s according to a survey of NVCA’s membership on the current IPO drought, embodied by a second quarter bereft of VC-backed offerings on U.S. exchanges.

The survey also found that two-thirds of VCs perceive venture-backed companies as less likely to want to go public than they were three years ago. And it seems, despite the hype, that M&A isn’t exactly picking up the slack.

In fact, Thomson Reuters & NVCA’s tally of 120 M&A deals completed for venture-backed companies in 1H08 is down 28% from the 169 transactions in 1H07.

Most VCs blamed the current lack of IPOs on skittish investors, the credit crunch and mortgage crisis, as well as Sarbanes-Oxley regulation.

There are 42 venture-backed companies in the U.S. IPO queue, off 40% from a three-year high of 72 companies in 3Q07. The median age of a venture-backed company from founding date to IPO also hit a 27-year high in 2007 - 8.6 years.

One in, one out

Autoimmune company Bayhill pulled its IPO due to market conditions, but ophthalmic company Alimera joined the queue despite them.

Bayhill filed in January to raise up to $86.3 million in an offering underwritten by Pacific Growth; Lazard; Merriman Curhan Ford; and Punk, Ziegel.

Last August, the company’s lead product candidate, BHT-3009, completed a Phase II trial to treat relapsing-remitting multiple sclerosis (RRMS), with a Phase IIb trial slated to begin in 4Q08. BHT-3009 is a plasmid encoding human myelin basic protein (MBP).

At Dec. 31, Bayhill had $33.1 million in cash and a 12-month operating loss of $18.8 million.

Alimera filed to raise up to $75 million through underwriters Credit Suisse; Citigroup; Cowen; and Leerink Swann.

Alimera’s lead candidate, Iluvien, is in Phase III testing to treat diabetic macular edema (DME). The company expects data for the fluocinolone acetonide (FA) intravitreal insert by YE09. The product, which also is known as Medidur FA, uses Medidur delivery technology from pSivida (ASX:PSD; NASDAQ:PSDV).

At March 31, the company had $33.1 million in cash and a 1Q operating loss of $33.4 million. Its FY07 operating loss was $11.4 million.

Alimera has raised $85.5 million since its inception in 2003. Investors include Scale Venture Partners (18.3%, pre-IPO); Domain Associates (18.3%); Intersouth Partners (18.3%); Polaris Venture Partners (18.3%); and Venrock Associates (14.8%).

Launching on credit

Another large equity line of credit from Deerfield Management, this time for $100 million, last week went to protein therapeutic company ZymoGenetics (NASDAQ:ZGEN).

The financing will support marketing of Recothrom (formerly rThrombin), which was approved in June and will be launched this half as a general aid to achieving hemostasis during surgery. CFO James Johnson told Ebb & Flow that he expects ZymoGenetics will invest about $40 million into Recothrom inventory.

Johnson expects the financing will take the company to profitability over the next three years or so.

The loan can be drawn in four tranches of $25 million by Jan. 27, 2010. Interest accrues at 4.9% compounded quarterly and is payable at the end of the five-year term. The company can prepay any time without penalty.

The main reason for choosing this approach, not surprisingly, was the depressed stock market. “Our stock price was...

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