Overview^*

 

Markets

Funds flow data as of December 2011 (excluding ETFs) showed a net of $199.7M flowing into healthcare globally, while $383.44M flowed into the U.S. healthcare sector specifically. After several months of outflows, this could be the beginning of a positive trend.

The BTK Index (^BTK) saw a big uptick in January, closing the month up 21.1% from the close of December 2011. However, this was down 14.7% in comparison to January 2011. The Dow and S&P 500 did not see nearly as much action, up only 3.4% and 4.4% respectively from December.

 

Industry Trends

VC Model Still Alive and Well. Despite some handwringing over the closure of some prominent biotech venture capital funds in 2011 (notably Prospect), some of the “haves” in the VC community have been successful in raising substantial new funds, including Canaan Partners ($600 million) and Flagship (oversubscribed at $270 million).

Drug Approvals. 2012 is a big year for approvals, with a large number of PDUFA dates coming up. January was already quite a busy month for the FDA, who granted companies several new drug approvals, some well ahead of schedule, including Stern IR clients Alkermes (BYDUREON^TM) and Curis (Erivedge^TM).

IPOs. January is historically a slow month for IPOs, with an average of approximately one IPO each January over the past 10 years. Despite last week’s Verastem IPO, only marquee early-stage IPOs are contemplated.

 

JPMorgan Recap

The buzz at JPMorgan was reasonably optimistic, with both industry and Wall Street arriving ready to do business. M&A seemed to be on people’s minds throughout the week, and the Inhibitex acquisition by Bristol was the talk of the town.

While Big Biotech yielded the big stock performance winners in 2011, the buzz was that the Smid cap space is where value lies in 2012. On the communications side, we think that social media is beginning to have a real impact on the financial community groupthink. The ubiquitous and opinionated (and respected) TheStreet.com reporter Adam Feuerstein was the nexus of Twitter traffic at JPMorgan. Atlas Venture’s Bruce Booth blogged about his analysis showing that biotech venture cap yielded significant returns over the past several years, due in large part to significant M&A premiums.

And mark your calendars! The JPMorgan 31^st Annual Healthcare Conference will be held on January 7-10, 2013 at the Westin St. Francis in San Francisco!

 

M&A

2012 is looking like a huge year for M&A. January has already kicked-off this trend, with HCV in particular garnering high prices (dare we say “froth”?) and creating a lot of excitement for the industry in general. Highlights of last month’s major deals include:

• Amgen (AMGN) to buy Micromet (MITI) for $1.16B in cash.
• AngioDynamics (ANGO) to acquire Navilyst Medical (private) for $372M.
•  Bristol-Myers Squibb (BMS) to acquire Inhibitex (INHX) for $26 per share in cash, or $2.5B.
•  Celgene (CELG) is acquiring Stern IR client Avila Therapeutics (private) for $350M, plus $575M in milestones.
• Cornerstone (CRTX) acquired Cardiokine (private) for $27.3M in cash up front and eligibility for up to $137M in sales milestones.
• Courtagen Life Sciences (private) acquired Medicinal Genomics (private) for an undisclosed sum.
• Cutera (CUTR) to acquire the aesthetics business unit of Iridex (IRIX) for approximately $5.1M.
• Sigma-Aldrich (SIAL) to acquire BioReliance (private) for $350M.
• Watson (WPI) acquired Ascent Pharmahealth (private) for AU $375M.

 

Financing Updates

Financings

Financings raised 7% more capital in January 2012 than in December 2011 ($1.0B vs. $965.7M globally). However, total equity raised year-to-date is only 45% of the amount raised by the end of January 2011 ($1.0B vs. $2.3B).

• Verastem was January’s only IPO, raising $55M and pricing at $11 per share. January 2011 saw only 1 IPO as well, Tibet, which raised only $16.5M and priced at $5.50.
• Follow-on offerings raised a total of $449.3M in January 2012, which is up 9% from the amount raised in December 2011 ($449.3M vs. $413.7M). However, this figure is down 45% from the amount raised in January of last year ($449.3M vs. $812.1M). The number of offerings in each month was roughly the same (one more in January 2011 vs. January 2012), so it’s clear that follow-ons were raking in much more capital a year ago than today – the average follow-on in January 2011 raised $62.1M versus $44.9M in January 2012.
• PIPE financings raised a total of $94.9M last month, up 23% from the amount raised in the month prior ($94.9M vs. $77.4M). As with follow-ons, companies in January 2012 were able to raise only 10% of the amount raised in January 2011 ($94.9M vs. $973.4M). Unlike follow-ons however, this drop was largely due to a decrease in the number of PIPEs last month compared to January 2011. In fact, January 2012 PIPEs raised more equity on average ($9.5M vs. $8.5M), but there were only 10 completed compared to 24 in January 2011.
• Private financings raised $433.3M in January, down slightly from the amount raised in December 2011 ($433.3M vs. $468.1M). This figure is also down 12% from the amount raised in January 2012 ($433.3M vs. $494.1M).

 

Client Events/Updates

 

News Announcements

Kicking off the new year, Stern IR clients made several clinical and corporate announcements last month:

 

• Presentations/Publications:
  • Allos presented interim results from its Phase 1 combination study of FOLOTYN® and bexarotene in patients with relapsed or refractory cutaneous T-cell lymphoma at the Annual T-cell Lymphoma Forum on January 28th in San Francisco. The combination treatments demonstrated encouraging activity in heavily pre-treated patients.
  • Alnylam presented positive preliminary results from its ongoing clinical trial of ALN-PCS, an RNAi therapeutic targeting PCSK9 for the treatment of severe hypercholesterolemia, at the Brigham and Women’s Hospital in Boston. The data demonstrated statistically significant RNAi silencing of PCSK9 and reductions in levels of LDL cholesterol, a clinically validated endpoint. The results highlight major potency improvements of the Company’s second-generation lipid nanoparticle platform in man.
  • Infinity presented updated data from the Phase 1b portion of an ongoing Phase 1b/2 clinical trial of saridegib in combination with gemcitabine in patients with previously untreated, metastatic pancreatic cancer at the ASCO Gastrointestinal Cancers Symposium in San Francisco. Data from the Phase 1b study showed that saridegib in combination with gemcitabine was well-tolerated and clinically active.
  • Millennium and partner Seattle Genetics presented interim results from a Phase 1 clinical trial of ADCETRIS administered in combination with or sequentially with chemotherapy for the treatment of newly diagnosed systemic anaplastic large cell lymphoma and other CD30-positive mature T-cell lymphoma patients at the T-Cell Lymphoma Forum on January 26-28 in San Francisco. A Phase 3 trial is planned in front-line mature T-cell lymphomas.

 

• Clinical Development/Milestones:
  • Alkermes and partner Amylin announced that the FDA approved BYDUREON, the first once-weekly treatment for type 2 diabetes, which will be available in pharmacies nationwide in February.
  • Alkermes announced the initiation of a pilot study of VIVITROL in prisoners with a pre-incarceration history of opioid dependence, designed to assess the utility of treatment with VIVITROL in reducing incidence of re-arrest among adult criminal offenders with a prior history of opioid dependence who are seeking treatment. Results from the study are expected in mid-calendar 2013.
  • Alkermes also announced positive topline results from its Phase 1/2 study of ALKS 5461, a novel drug compound for major depressive disorder (MDD) in patients who have an inadequate response to standard therapies for clinical depression. The study showed a significant reduction in the severity of depression in patients treated with ALKS 5461 and that ALKS 5461 was generally well tolerated.
  • Allos announced that the EMA Committee for Medicinal Products for Human Use (CHMP) issued an opinion recommending against conditional approval of FOLOTYN for the treatment of patients with peripheral T-cell lymphoma whose disease has progressed after at least one prior systemic therapy. The company later submitted a request to the EMA for a re-examination, which could be issued by the EMA within four to five months.
  • Alnylam filed a Clinical Trial Application with the U.K. Medicines and Healthcare products Regulatory Agency to initiate a Phase 1 clinical trial with ALN-TTR02, an RNAi therapeutic targeting transthyretin (TTR) for the treatment of TTR-mediated amyloidosis. Following clearance of the CTA, Alnylam expects to initiate the study in the first half of 2012 with data expected to be reported in 3Q12.
  • Curis announced that Erivedge(vismodegib) capsule was approved by the FDA for the treatment of adults with basal cell carcinoma whose cancer has spread to the other parts of the body, has come back after surgery, or that their healthcare provider decides cannot be treated with surgery or radiation. Erivedge is being developed and will be commercialized by Roche and Genentech under a collaboration agreement with Genentech, for which Curis has earned a $10M milestone payment and is also entitled to receive royalties on future sales of the product.
  • Infinity announced interim data from its Phase 2 study comparing saridegib in combination with gemcitabine to placebo plus gemcitabine in patients with previously untreated, metastatic pancreatic cancer. Preliminary analysis of data from the study showed a difference in survival favoring the placebo plus gemcitabine arm due to a higher rate of progressive disease in the saridegib plus gemcitabine arm. Based on this interim analysis, Infinity is voluntarily stopping the trial and expects to present the final data after the analyses are complete.
  • Mesoblast announced that the company received clearance from the FDA to begin a Phase 2 clinical trial of its proprietary stem cell therapy for the treatment of Type 2 diabetes. The company’s off-the-shelf adult stem cell product for Type 2 diabetes is its first biologic therapy to be delivered via IV injection.
  • Millennium, with its parent company Takeda, announced that the FDA has approved an sNDA for VELCADE®, which updates the label to include the subcutaneous method of administration in all approved indications: multiple myeloma and mantle cell lymphoma after at least one prior therapy. The approval was based on results from a Phase 3 non-inferiority trial in bortezomib-naïve patients with relapsed multiple myeloma.
  • Rexahn announced that it has secured Hungarian Regulatory Authority and Ethics Committee approval for its initial Clinical Trial Application. This allows Rexahn to initiate an exploratory first-in-human Phase 1 clinical trial of RX-3117, a small molecule antimetabolite for the treatment of solid tumors.

 

• Corporate News:
  • Alnylam provided key 2012 goals for its RNAi therapeutics pipeline, notably that the company plans to focus its near-term ‘Alnylam 5×15’ efforts on the highest value opportunities, in transthyretin-mediated amyloidosis and hemophilia, with accelerated clinical development. In addition, the Company aims to advance its additional pipeline programs with existing alliances and new partnerships. Alnylam also announced that it intends to implement a strategic corporate restructuring, including an approximate 33% reduction in its workforce, as it aligns its resources to focus on these high value opportunities.
  • Alnylam announced that the U.S. Patent and Trademark Office issued the company a Notice of Allowance for a patent application covering its proprietary second generation lipid nanoparticle (LNP) platform, including the “MC3” lipid. The newly allowed patent application includes 30 claims covering composition of matter and formulations of MC3, as well as methods of using these compositions and formulations.
  • Alnylam also filed a patent infringement lawsuit against Tekmira Pharmaceuticals in the U.S. District Court of Massachusetts, based upon Tekmira’s research activities providing lipid nanoparticle (LNP)-formulated siRNA molecules to a pharmaceutical collaborator. As alleged in the complaint, Tekmira’s activities have infringed a number of issued patents related to siRNA and LNP technologies.
  • Alnylam and Arrowhead Research Corporation announced that they have entered into a collaboration and joint licensing agreement, under which Arrowhead received a license that enables its discovery, development, and commercialization of an RNAi therapeutic targeting the hepatitis B virus. In addition, Alnylam received a license to utilize Arrowhead’s Dynamic Polyconjugate delivery technology for an RNAi therapeutic product. Alnylam and Arrowhead are each eligible to receive milestone payments and royalties on sales of product resulting from the license they granted to the other.
  • ImmunoGen announced the addition of Kristine Peterson and Dean Mitchell to the company’s Board of Directors. Ms. Peterson is currently CEO of Valeritas and Mr. Mitchell is President and CEO of Lux Biosciences.
  • Ironwood and Bionomics Limited announced that they entered into a collaboration, research, and licensing agreement that will enable Ironwood to develop and commercialize Bionomics’ investigational anti‐anxiety compound BNC210 and other related compounds. The companies will collaborate on initial research and Ironwood will be responsible for worldwide development and commercialization of all products. Pending the achievement of certain development and regulatory milestones, Bionomics could receive up to $345M in upfront and milestone payments and research funding, as well as royalties on sales of products resulting from the license.
  • Millennium announced that it has been named among the 100 Best Companies to Work For in the U.S. by FORTUNE Magazine. The company is ranked number 35, and this is its second consecutive year on the list.
  • Momenta announced that the U.S. Court of Appeals for the Federal Circuit granted Amphastar, Watson and International Medical Systems’ motion for a stay of a preliminary injunction, pending appeal, which enjoined the companies from offering to sell or selling their generic Lovenox.
  • Rexahn announced that it has decided to focus in the near term on its oncology program after evaluating how best to apply the Company’s resources in order to realize near term value appreciation for its shareholders. The company plans to accelerate the development of its potent anti-cancer compounds and is exploring options for further development of Serdaxin and Zoraxel, including out-licensing or divesture of the compounds, entering a co-development partnership, and continuation of clinical trials.
  • SkinMedica announced it acquired Colorescience, a leading, science-based mineral makeup company that is widely adopted in physician-based aesthetics practices and is highly regarded among dermatologists for color correction, sun protection and comfortable, post-procedure coverage. Josie Juncal, who has more than 10 years of experience in sales, sales management, marketing and education, will lead the new Colorescience subsidiary as VP, New Commercial Operations.
  • Tengion announced it has completed the relocation of its corporate headquarters from East Norriton, PA to the company’s existing facility in Winston-Salem, NC. The relocation is part of Tengion’s previously announced restructuring, designed to fund the company’s lead development programs through key milestones in 2012 while reducing anticipated cash utilization.

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Calendar^**

 

There are 9 conferences coming up in February, providing little down time after JPMorgan:

• Canaccord Genuity Musculoskeletal Conference (7 February, San Francisco)
• UBS 22^nd Annual Global Healthcare Services Conference (7-8 February, New York)
• 14^th Annual BIO CEO & Investor Conference (13-14 February, New York)
• Leerink Swann Global Healthcare Conference (15-16 February, New York)
• Leerink Swann Pyramis/ Fidelity Healthcare Event (27 February, Rhode Island)
• Citi Global Healthcare Conference (27-29 February, New York)
• RBC Capital Markets Healthcare Conference (28-29 February, New York)
• Credit Suisse Global Healthcare One-on-One Conference (29 February-2 March, London)
• Lazard Capital Markets 4^th Annual Medical Technology Snowbird Conference (29 February-2 March, Snowbird, UT)
• Collins Stewart Orphan Drug Day (27 February, New York)

 

February is lighter on medical meetings:

• 71^st Annual Stem Cell Summit (21 February, New York)

 

Personnel Updates

 

There were only a handful of personnel moves in January, including:

Buyside

• Eric Trepanier left OSS Capital Management and its TBD where he will land (New York)
• Haibo Yu left Plural Investments to join Boodell & Company (New York)
• Mena Bellini left Green Arrow Capital Management and its TBD where she will land (New York)
• Sandeep Bhatia left Silvant Capital Management to join RidgeWorth Capital Management (Atlanta)
• Scott Hirsch left Plural Investments to join Surveyor Capital (New York)
• Vincent Xiang recently joined Burrill & Co. after leaving Franklin Advisers back in December 2011 (San Francisco).

 

Sell-side

• Avik Roy left Monness, Crespi, Hardt & Co. and its TBD where he will land (New York)
• Brian Lian left Global Hunter to join SunTrust Robinson Humphrey (New York)
• Joel Sendek officially started at Stifel Nicolaus Weisel after leaving Lazard Capital Markets back in October 2011 (New York)

 

Happy Groundhog Day!

Lilian, Stephanie, Sarah, Paul, Rachel and Renée

 

**Please visit our website at www.sternir.com to see complete investor conferences, earnings and medical meetings calendars.

*All figures reflect data as of January 31, 2012 (AMC)